<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 94-3248701
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
DOUGLAS S. SINCLAIR
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
400 SOUTH EL CAMINO REAL, SUITE 1275 400 SOUTH EL CAMINO REAL, SUITE 1275
SAN MATEO, CALIFORNIA 94402 SAN MATEO, CALIFORNIA 94402
(415) 548-0808 (415) 548-0808
(Address, including zip code, and (Name, address, including zip code, and
telephone number, including area code, telephone number, including area code,
of registrant's principal executive of agent for service)
offices)
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COPY TO:
Brooks Stough, Esq.
Gunderson Dettmer Stough
Villeneuve Franklin and Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, California 94304
(415) 843-0500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration number for
the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
14% Senior Secured
Discount Notes due
2001.................. $196,720,000 35.43% $65,573,334 $22,612
</TABLE>
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(1) In accordance with Rule 457(f)(2), the registration fee is calculated
based on one-third of the principal amount, which has been computed as of
September 1, 1996, of the outstanding 14% Senior Secured Discount Notes
due 2001 of International Wireless Communications Holdings, Inc.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 13, 1996
PROSPECTUS
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS 14% SENIOR SECURED DISCOUNT
NOTES DUE 2001 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH
$1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING14% SENIOR SECURED DISCOUNT NOTES
DUE 2001
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED.
----------
International Wireless Communications Holdings, Inc., a Delaware corporation
(the "Company"), hereby offers to exchange (the "Exchange Offer") its new 14%
Senior Secured Discount Notes due 2001 (the "Exchange Notes") for its
outstanding 14% Senior Secured Discount Notes due 2001 (the "Old Notes"and,
together with the Exchange Notes, the "Notes") that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). The Old Notes have an aggregate principal
amount of approximately $196.7 million and, based upon the allocation of the
purchase price between the Old Notes and the Warrants (as defined) in the Unit
Offering (as defined), were initially offered and sold to certain institutional
and accredited investors at a price of 35.43% of the principal amount thereof.
The terms of the Exchange Notes are substantially identical (including
principal amount, interest rate, maturity, security and ranking) to the terms
of the Old Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes (i) are freely transferable by holders
thereof (except as provided below) and (ii) are not entitled to certain
registration rights and certain additional interest provisions which are
applicable to the Old Notes under the Registration Rights Agreement (as
defined). The Exchange Notes will be issued under the Indenture governing the
Old Notes (the "Indenture"). See "Risk Factors--Financing Risks--Ability to
Realize on Collateral; No Assurance as to Value of Assets." The Exchange Notes
will be, and the Old Notes are, senior secured obligations of the Company,
secured by a pledge of the capital stock and Intercompany Notes (as defined) of
International Wireless Communications, Inc. ("IWC"), a wholly owned subsidiary
through which the Company holds all of its existing assets. Lenders under a
Permitted Bank Facility (as defined) will have the right to share on a pari
passu basis in any proceeds from the sale of the collateral securing the Notes.
The Exchange Notes will rank, and the Old Notes rank, pari passu in right of
payment with all senior Indebtedness of the Company and will rank, and the Old
Notes rank, senior in right of payment to all future subordinated Indebtedness
of the Company. The Exchange Notes will be, and the Old Notes are, effectively
subordinated to all Indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries and affiliated companies. Upon
completion of the Exchange Offering, the Company is expected to have no
indebtedness for borrowed money outstanding other than the Notes. As of June
30, 1996, IWC's subsidiaries and operating affiliates had indebtedness for
borrowed money of approximately $117.2 million. The Indenture limits the
ability of the Company and its Restricted Subsidiaries (as defined) and
Restricted Affiliates (as defined) to incur additional Indebtedness (as
defined). For a complete description of the terms of the Exchange Notes,
including provisions relating to the ability of the Company to create
indebtedness that is senior or pari passu to the Exchange Notes, see
"Description of Exchange Notes." There will be no cash proceeds to the Company
from the Exchange Offer.
The Exchange Notes will accrete at a rate of 14%, compounded semi-annually.
There will be no scheduled interest payments on the Exchange Notes.
(Continued on Next Page)
----------
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE 22 OF THIS PROSPECTUS PRIOR TO MAKING AN INVESTMENT
DECISION WITH RESPECT TO THE EXCHANGE OFFER.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
(Cover Page Continued)
The Notes are not redeemable at the option of the Company prior to maturity.
Upon a Change of Control (as defined), the Company will be required to make an
offer to repurchase the Exchange Notes at a price equal to 101% of the
Accreted Value (as defined) thereof to the date of repurchase. In addition,
subject to certain conditions, the Company will be obligated to make an offer
to repurchase the Exchange Notes at 100% of the Accreted Value thereof to the
date of repurchase with the net cash proceeds of certain Asset Sales (as
defined). See "Description of Exchange Notes--Repurchase at the Option of
Holders."
The Old Notes were originally issued and sold on August 15, 1996 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon its
view of interpretations provided by the staff of the Securities and Exchange
Commission (the "Commission"), the Company believes that Exchange Notes will
be freely transferable by holders thereof other than affiliates of the Company
after the Exchange Offer without further registration under the Securities Act
if the holder of the Exchange Notes represents that it is acquiring the
Exchange Notes in the ordinary course of business, that it has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Notes and that it is not an affiliate of the Company, as such terms
are interpreted by the Commission; provided that Participating Broker-Dealers
(as defined) receiving Exchange Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to resales of the Exchange Notes.
The Commission has taken the position that the Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to the
Exchange Notes (other than a resale of an unsold allotment from the original
sale of the Old Notes) with this Prospectus. The Letter of Transmittal that is
filed as an exhibit to the Registration Statement of which this Prospectus is
a part (the "Letter of Transmittal") states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Broker-dealers
who acquired Old Notes, as a result of market making or other trading
activities, may use this Prospectus, as supplemented or amended, in connection
with resales of the Exchange Notes. The Company has agreed that, for a period
of 180 days after this Registration Statement is declared effective by the
Commission, it will make this Prospectus available to any broker-dealer and
other persons, if any, with similar prospectus delivery requirements for use
in connection with any such resale. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
and any other holder that cannot rely upon such interpretations must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction.
The Old Notes were issued in the form of a single global note that was
deposited with the Depositary Trust Company, as depository ("DTC"), and
registered in the name of a nominee of DTC. The Exchange Notes exchanged for
Old Notes represented by the global note will be issued in the form of a
single global Exchange Note that will be deposited with DTC and registered in
the name of a nominee of DTC. Exchange Notes issued in exchange for Old Notes
held by Non-Global Purchasers (as defined) will be issued certificated notes
registered in the name of DTC or its nominee and deposited with or on behalf
of DTC. See "Book-Entry; Delivery and Form."
The Old Notes and the Exchange Notes constitute new issues of securities
with no established public trading market. Any Old Notes not tendered and
accepted in the Exchange Offer will remain outstanding. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Old Notes could be adversely affected. Following consummation
of the Exchange Offer, the holder of any remaining Old Notes will continue to
be subject to the existing restrictions on transfer thereof and the Company
will have no further obligation to such holders to provide for the
registration under the Securities Act of the Old Notes except under certain
limited circumstances. See "Old Notes Registration Rights" and "Old Notes
Transfer Restrictions." No assurance can be given as to the liquidity of the
trading market for either the Old Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1996, unless extended (the
"Expiration Date"). The date of acceptance for exchange of the Old Notes (the
"Exchange Date") will be the first business day following the Expiration Date,
upon surrender of the Old Notes. Old Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date; otherwise
such tenders are irrevocable.
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement") under the Securities Act with respect
to the Exchange Notes being offered hereby. This Prospectus, which forms a
part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement, certain items of which are omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Exchange Notes, reference is
hereby made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, where such contract or other document is an exhibit
to the Registration Statement, each such statement is qualified in all
respects by the provisions in such exhibit, to which reference is hereby made.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon the
effectiveness of the Registration Statement or, if earlier, the Shelf
Registration Statement (as defined), the Company will become subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file all reports and other information required by the Commission. The
Registration Statement as well as periodic reports, proxy statements and other
information filed by the Company with the Commission may be inspected at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices located
at 5670 Wilshire Blvd., 11th Floor, Los Angeles, California, 90036-3648 and
Seven World Trade Center, Suite 1300, New York, New York 10048. In addition,
registration statements and certain other documents filed with the Commission
through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system
are publicly available through the Commission's site on the Internet's World
Wide Web, located at http://www.sec.gov. The Registration Statement, including
all exhibits thereto and amendments thereof, has been filed with the
Commission through EDGAR. Copies of the Registration Statement, periodic
reports, proxy statements and other information also can be obtained
from the Company upon request. Any such request should be addressed to the
Company's principal office at 400 South El Camino Real, Suite 1275, San Mateo,
California, 94402 Attention: Secretary (telephone number (415) 548-0808).
The Company's obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Notes are held of record
by fewer than 300 holders at the beginning of any fiscal year of the Company,
other than the fiscal year in which the Registration Statement or the Shelf
Registration Statement becomes effective. However, the Company has agreed,
pursuant to the Indenture that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any Notes remain
outstanding, it will furnish to the holders of such securities and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including for each a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
independent certified public accountants and (ii) all current reports that
would be required to be filed on Form 8-K if the Company were required to file
such reports. In addition, for as long as any of the Notes remain outstanding,
the Company has agreed to make available to any prospective purchaser of the
Notes or beneficial owner of any such securities, in connection with any sale
thereof, the information required by Rule 144A(d)(4) under the Securities Act.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE BY
THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER TO SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
3
<PAGE>
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. As used herein, the term the "Company"
refers to International Wireless Communications Holdings, Inc. ("IWC Holdings")
and its subsidiaries, including International Wireless Communications, Inc.
("IWC"), unless the context otherwise requires or unless otherwise expressly
stated. An operating company refers to a wireless communications company in
which the Company has invested that commenced providing wireless communications
service on a commercial basis. A developmental stage project refers to a
wireless communications company or project in which the Company has made or
proposes to make an investment, but which has not commenced providing service
or with respect to which the Company's current participation is both limited in
scope and in its initial stages. Reference to "dollars" and "$" refer to United
States dollars, unless otherwise expressly stated. Certain of the demographic
and statistical data appearing in this Prospectus have been derived from the
sources set forth under "Business--Background--Demand For Communications
Services In Developing Countries."
THE COMPANY
The Company is a leading developer, owner and operator of wireless
communications companies and projects in emerging markets in Asia and Latin
America. These companies and projects provide or are developing a variety of
wireless communications services, including cellular telephone, wireless local
loop ("WLL"), enhanced capacity trunked radio ("ECTR"), paging and wireless
cable television. The Company currently has interests in seven operating
companies in Brazil, Indonesia, Malaysia, Mexico, New Zealand and the
Philippines. In addition, the Company has interests in seven developmental
stage projects in China, India, Indonesia, Mexico, Pakistan, Peru, Taiwan and
Thailand and is actively pursuing other development and acquisition
opportunities. As of June 30, 1996, the Company's operating companies had
licenses covering an estimated 370 million people ("POPs") which, based on the
Company's equity interests in these operating companies, represented an
estimated 90 million equity POPs. As of June 30, 1996, the Company's operating
companies, which are generally in the early stages of operating and expanding
their networks, served approximately 50,000 subscribers.
The Company operates primarily in countries in Asia and Latin America where
there exists substantial unmet demand for communications services, attractive
license opportunities and political and regulatory environments which encourage
foreign investment in private communications companies. These markets are
generally characterized by substantial populations, growing economies and
inadequate local land-line telephone service. According to industry data, in
many of the countries where the Company has established operating companies or
is pursuing developmental stage projects, there were less than 10 telephone
lines per 100 POPs in 1994 (compared to 59 telephone lines per 100 POPs in the
United States) and significant waiting times for installation of land-line
telephone service. The Company believes that existing and emerging wireless
technologies generally offer comparable functionality to, and lower
construction costs and more rapid deployment than, land-line technologies. As a
result, the Company believes that wireless communications services will
frequently be used in these markets as a substitute for traditional land-line
telephone service.
A large and growing number of wireless technologies are available to address
communications needs in the Company's target markets. The Company's operating
companies and developmental stage projects provide or are developing the
following services: cellular telephone, using both analog and digital
technologies; WLL, which provides wireless cellular-like transmission from the
home or business into the local telephone network; ECTR, which combines the
attributes of cellular and dispatch radio; paging; and wireless cable
television, which uses multi-point, multi-channel distribution system ("MMDS")
technology. Once the Company enters a market with a wireless communications
service, it generally seeks to develop additional wireless communications
services. This strategy is expected to allow the Company to build on its
expertise in the host country as well as to achieve cost savings and operating
efficiencies through the sharing of cell sites, microwave transmission networks
and marketing and administrative functions.
5
<PAGE>
OWNERSHIP AND MANAGEMENT
Vanguard Cellular Systems, Inc. (together with its wholly owned operating
company, "Vanguard"), one of the largest independent cellular operators in the
United States, is the Company's principal strategic partner as well as its
largest stockholder. As of August 31, 1996, Vanguard beneficially owned
approximately 39% of the Company's equity on an as-converted basis. Vanguard
has provided and continues to provide a number of services relating to the
formation, development and operation of the Company's wireless communications
businesses, including identification and evaluation of wireless communications
opportunities, review of business and technical plans, and assistance in
training operating company personnel. Haynes G. Griffin, Chairman of the Board
of Directors of the Company, is President, Chief Executive Officer and a
director of Vanguard. In addition, as of August 31, 1996, the six senior
executive officers of the Company beneficially owned approximately 12% of the
Company's equity, on an as-converted basis.
The Company's senior management has extensive experience in developing and
operating wireless communications networks and managing international
operations. Collectively, the six members of the Company's senior management
have over 75 years of experience in the wireless communications industry and
over 65 years of experience conducting business in the Company's existing
markets.
RECENT OPERATING DEVELOPMENTS
Since June 30, 1996, the Company has initiated five of its seven
developmental stage projects, including the Taiwan National ECTR project, the
India, Indonesia, Taiwan and Thailand paging projects, the China Regional
Cellular project, the Pakistan National ECTR project and the Mexico National
WLL project. In July 1996, the Company acquired the 50% interest in TeamTalk
Limited ("TeamTalk"), its New Zealand national ECTR operating company, that it
did not already own for a purchase price of approximately $3.2 million.
In July 1996, the Malaysian government announced that it did not intend to
proceed with its previously announced program of consolidating the Malaysian
telecommunications industry. As a result, the Malaysian government ceased
efforts to cause the sale of the Company's Malaysia national WLL operating
company to another Malaysian telecommunications company. See "Risk Factors--
Project Level Risks--Risks Inherent in Foreign Investment."
In August 1996, the Company acquired a 70% interest in Mainstream Limited, a
company to be renamed Star Telecom Overseas (Cayman Islands) Limited, ("STOL"),
which holds minority equity interests in paging projects in India and Taiwan
and which is currently pursuing additional paging opportunities in Indonesia
and Thailand, for an aggregate purchase price of $13.5 million. The Company's
partner in STOL is Star Telecom Holdings Limited, a company that owns one of
the largest paging operators and Internet service providers in Hong Kong.
6
<PAGE>
BUSINESS STRATEGY
The Company's principal business objective is to become a pre-eminent
provider of wireless communications services in selected developing countries.
Key elements of the Company's strategy for achieving this objective include:
Develop Long-Term Relationships With Strong Local Partners. The Company seeks
to develop long-term relationships with financially strong and strategically
well-positioned local partners. These partners often own or have access to an
existing telecommunications asset base (such as cell sites and microwave/fiber
optic transmission networks) that can be used by the Company's operating
companies to reduce capital expenditures, operating costs and deployment time.
Local partners frequently play an active role in securing licenses and
obtaining necessary regulatory approvals, assisting in arranging and providing
local financing and identifying opportunities for additional wireless projects.
Obtain Licenses With Broad Frequency Ranges and Substantial Geographic
Coverage. The Company seeks to obtain licenses with broad frequency ranges,
substantial geographic coverage and flexible operating terms. The Company
believes that continuing advances in wireless technologies will allow numerous
technologies to provide services with similar functionality. As a result, the
Company believes that market opportunities for such services will be determined
predominantly by license terms rather than by technological factors. Licenses
with broad frequency allocation and flexible operating terms also enable the
Company to provide additional services and facilitate the adoption of new
technologies. In addition, the ability to provide service over a broad
geographic area is frequently an important selling point for users of services
such as cellular telephone and ECTR.
Offer Multiple Wireless Services in Existing Markets. The Company seeks to
expand by developing multiple wireless services in those countries where it has
existing operations. This strategy is intended to allow the Company to build on
its expertise in the host country as well as to achieve cost savings and
operating efficiencies through the sharing of cell sites, microwave
transmission networks and marketing and administrative functions. For example,
in Indonesia and Mexico, the Company initially established a national or large
regional ECTR business that is providing opportunities for developing
additional services, such as cellular, WLL and/or wireless cable television
services.
Remain Technology and Vendor Independent. The Company seeks to obtain
licenses that do not stipulate the type of technology to be used in the
provision of a particular communications service. This flexibility allows the
Company to match appropriate technology to a given business opportunity on the
basis of cost, capacity, reliability, functionality and availability. It also
allows operating companies to migrate to superior technologies as they develop.
Where possible, the operating companies use non-proprietary or open-standard
technologies with multiple vendor sources, thereby reducing their dependence on
any single supplier.
Pursue Low Cost Structure. The Company pursues strategies designed to allow
its operating companies to reduce capital expenditures and operating costs.
First, it seeks to form partnerships with local partners that have existing
telecommunications assets, including licenses, that can be used to reduce the
costs of developing and operating its wireless networks. Second, where
appropriate, the Company seeks to obtain initial or additional licenses through
private negotiation, rather than competitive bidding. Third, the Company seeks
to provide multiple wireless services within an existing market to generate
economies of scale. Fourth, when a common technology is selected for multiple
operating companies, the Company seeks to secure global purchasing discounts
with selected vendors.
Actively Manage Operating Companies. The Company typically plays an active
role in the development and management of its operating companies. Its local
country managers and corporate staff provide technical, financial and
administrative support to most of these companies, including serving as senior
executives of operating companies and/or serving on the boards of directors of
these companies. Moreover, shareholder agreements generally provide the Company
with the right to approve key decisions at the operating company level,
including approval of operating budgets, business plans and major corporate
transactions.
7
<PAGE>
Promote Flexible Management Structure. The Company relies heavily on local
country managers to develop existing operating companies and identify new
wireless communications opportunities. These managers are often natives of the
local country with significant managerial and operating experience. Although
Company employees, they typically serve as senior executives of operating
companies. They are supported by a corporate staff located primarily in the
United States with extensive experience in wireless communications and
international operations. The Company believes that the use of local country
managers, supported by the Company's experienced corporate staff, allows it to
rapidly and effectively respond to operational matters, develop and maintain
close working relationships with local partners and capitalize on wireless
communications opportunities.
FINANCING STRATEGY AND HISTORY
The Company generally seeks to finance its operating companies and
developmental stage projects at the project level. Initial funding is typically
provided by equity contributions from the Company and its project partners.
During the initial construction and expansion of the wireless network, debt
financing may be provided by equipment vendors, commercial banks and other
third parties. Such financing may be guaranteed by the Company and its local
partners. Once the project becomes operational, the Company seeks to obtain
long-term project financing with limited or no recourse to the Company or its
partners. In addition, shareholder agreements for many of the Company's
projects provide for raising public equity at the operating company level,
subject to market conditions and the status of the project.
As of August 31, 1996, the Company had directly raised an aggregate of
approximately $132.5 million in equity capital through private placements,
including approximately $250,000 in March 1992, $780,000 in May 1993, $3.9
million in January and February 1994, $14.6 million in September and October
1994, $7.5 million in July 1995 and $50.2 million in December 1995. This amount
also includes approximately $25.0 million of value which the Company has
allocated to assets contributed by an affiliate of Vanguard in connection with
the Vanguard Exchange (as defined) in December 1995 and approximately $30.3
million that the Company has allocated to the issuance of Warrants (as defined)
in August 1996 included in the Unit Offering (as defined).
On August 15, 1996, the Company completed the offer and sale (the "Unit
Offering") of 196,720 Units (the "Units") consisting of $196,720,000 aggregate
principal amount of 14% Senior Secured Discount Notes due 2001 (the "Old
Notes") and 196,720 Warrants (the "Warrants") to purchase in the aggregate
2,289,428 shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"), representing the right to purchase approximately 10% of the
Common Stock outstanding on August 15, 1996 on a fully diluted basis. On or
after the occurrence of an Exercise Event (as defined), each Warrant entitles
the holder thereof to purchase 11.638 shares of Common Stock. In the event that
a Threshold Initial Public Offering (as defined) or a Qualified Reorganization
(as defined) has not occurred on or prior to the IPO Contingency Date (as
defined), each unexercised Warrant will entitle the holder thereof to purchase,
on or after the occurrence of an Exercise Event, 14.283 shares of Common Stock,
which will represent the right to purchase (assuming no Warrants have been
previously exercised) in the aggregate 2,809,752 shares of Common Stock, or
approximately 12% of the Common Stock outstanding on August 15, 1996 on a fully
diluted basis.
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer............ The Company is offering to exchange up to
$196,720,000 aggregate principal amount of Ex-
change Notes for up to $196,720,000 aggregate
principal amount of the Old Notes. The Old
Notes were initially offered and sold by BT Se-
curities Corporation, Toronto Dominion and Sal-
omon Brothers Inc as the initial purchasers of
the Old Notes (the "Initial Purchasers"), to
certain "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act)
and institutional accredited investors at a
price of 35.43% of the principal amount there-
of, based upon the allocation of the purchase
price for the Units between the Old Notes and
the Warrants. The form and terms of the Ex-
change Notes are substantially identical (in-
cluding principal amount, interest rate, matu-
rity, security and ranking) to the form and
terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, ex-
cept that the Exchange Notes are freely trans-
ferable by holders thereof except as provided
herein (see "The Exchange Offer--Terms of the
Exchange" and "Terms and Conditions of the Let-
ter of Transmittal") and are not entitled to
certain registration rights and certain addi-
tional interest provisions which are applicable
to the Old Notes under a registration rights
agreement dated as of August 15, 1996 (the
"Registration Rights Agreement") between the
Company and the Initial Purchasers. See "Old
Notes Registration Rights."
Based upon its view of interpretations provided
by the staff of the Commission, the Company be-
lieves that Exchange Notes will be freely
transferable by holders thereof other than af-
filiates of the Company after the Exchange Of-
fer without further registration under the Se-
curities Act if the holder of the Exchange
Notes represents that it is acquiring the Ex-
change Notes in the ordinary course of busi-
ness, that it has no arrangement or understand-
ing with any person to participate in the dis-
tribution of the Exchange Notes and that is its
not an affiliate of the Company, as such terms
are interpreted by the Commission; provided
that Participating Broker-Dealers receiving Ex-
change Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to
resales of the Exchange Notes. See "The Ex-
change Offer--Terms of the Exchange."
Minimum Condition.............
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered or accepted for exchange.
Expiration Date............... The Exchange Offer will expire at 5:00 p.m, New
York City time, on , unless extended.
Exchange Date.................
The first date of acceptance for exchange for
the Old Notes will be the first business day
following the Expiration Date.
9
<PAGE>
Conditions to the Exchange The obligation of the Company to consummate the
Offer........................ Exchange Offer is subject to certain condi-
tions. See "The Exchange Offer--Conditions to
the Exchange Offer." The Company reserves the
right to terminate or amend the Exchange Offer
at any time prior to the Expiration Date upon
the occurrence of any such condition.
Withdrawal Rights.............
Tenders of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. Any Old Notes not accepted for
any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Procedures for Tendering Old See "The Exchange Offer--How to Tender."
Notes........................
Federal Income Tax The exchange of Old Notes for Exchange Notes by
Consequences................. tendering holders will not be a taxable ex-
change for federal income tax purposes, and
such holders should not recognize any taxable
gain or loss as a result of such exchange. See
"Certain Income Tax Considerations."
Use of Proceeds...............
There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange Of-
fer.
Effect on Holders of Old As a result of the making of this Exchange Of-
Notes........................ fer, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the
terms of this Exchange Offer, the Company will
have fulfilled a covenant contained in the
terms of the Old Notes and the Registration
Rights Agreement, and accordingly, the holders
of the Old Notes will have no further registra-
tion or other rights under the Registration
Rights Agreement, except under certain limited
circumstances. See "Old Note Registration
Rights." Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer
will continue to hold such Old Notes and will
be entitled to all the rights and limitations
applicable thereto under the Indenture. All
untendered, and tendered but unaccepted, Old
Notes will continue to be subject to the re-
strictions on transfer provided for in the Old
Notes and the Indenture. See "Old Note Transfer
Restrictions." To the extent that Old Notes are
tendered and accepted in the Exchange Offer,
the trading market, if any, for the Old Notes
not so tendered could be adversely affected.
See "Risk Factors--Financing Risks--Conse-
quences of Failure to Exchange Old Notes."
TERMS OF THE EXCHANGE NOTES
Securities Offered............
$196,720,000 aggregate principal amount of 14%
Senior Secured Discount Notes due 2001.
Issuer........................ International Wireless Communications Holdings,
Inc.
10
<PAGE>
Maturity Date................. August 15, 2001.
Accretion and Interest
Payments..................... The Exchange Notes will accrete at a rate of
14%, compounded semi-annually. There will be no
scheduled cash interest payments on the Ex-
change Notes.
Ranking....................... The Exchange Notes will be senior secured obli-
gations of the Company and will rank pari passu
in right of payment with all existing and fu-
ture senior Indebtedness of the Company and se-
nior to all subordinated Indebtedness of the
Company. The Exchange Notes will be effectively
subordinated to all Indebtedness and other lia-
bilities (including trade payables) of the
Company's subsidiaries and affiliated compa-
nies. As of June 30, 1996 the Company's subsid-
iaries and operating affiliates had Indebted-
ness for borrowed money of approximately $117.2
million. See "Risk Factors--Financing Risks--
Holding Company Structure; Limitations on Ac-
cess to Cash Flow of Operating Companies."
Security......................
The collateral securing the Exchange Notes will
consist of a pledge of all of the capital stock
and Intercompany Notes of IWC, a wholly owned
subsidiary through which the Company holds all
of its existing assets. The Indenture will pro-
hibit the Company from making any Investment
(as defined) other than through IWC. The Inden-
ture provides that lenders under a Permitted
Bank Facility will have the right to share on a
pari passu basis in any proceeds from the sale
of the collateral securing the Notes.
Sinking Fund.................. None.
Change of Control............. Upon the occurrence of a Change of Control,
each holder of the Exchange Notes will have the
option to require the Company to repurchase all
or a portion of such holder's Exchange Notes at
101% of the Accreted Value thereof to the date
of repurchase. There can be no assurance that
the Company will have the financial resources
necessary to repurchase the Exchange Notes upon
a Change of Control. See "Description of Ex-
change Notes--Repurchase at the Option of Hold-
ers."
Certain Covenants.............
The Indenture contains certain covenants that,
among other things, will limit the ability of
the Company, its Restricted Subsidiaries and
its Restricted Affiliates to incur additional
Indebtedness; limit the ability of the Company
to merge, consolidate or sell all or
substantially all of its assets; and limit the
ability of the Company and its Restricted
Subsidiaries to make Investments. In addition,
the Indenture prohibits the Company and its
Restricted Subsidiaries from making any
Restricted Payments (as defined) and from
creating certain Liens (as defined). Under
certain circumstances, the Company will be
required to offer to purchase the Exchange
Notes at a price equal to 100% of the Accreted
Value thereof to the date of
11
<PAGE>
repurchase with the proceeds of certain Asset
Sales. As of August 31, 1996, only IWC,
TeamTalk and New Zealand Wireless Limited
constituted Restricted Subsidiaries or
Restricted Affiliates. Accordingly, none of the
Company's remaining operations are conducted
through entities that are subject to the
covenants contained in the Indenture. See
"Description of Senior Notes--Certain
Covenants."
Original Issue Discount.......
For federal income tax purposes, Exchange Notes
will be treated as having been issued with
"original issue discount" equal to the differ-
ence between the issue price of the Old Notes
and the stated redemption price of the Exchange
Notes at maturity. Each holder of an Exchange
Note will be required to include in gross in-
come for federal income tax purposes a portion
of such original issue discount for each day
during the accrual period in which a Note is
held in advance of receipt of cash payments on
the Notes to which income is attributable, even
though no cash payments will be received until
maturity. See "Risk Factors--Financing Risks--
Classification of Exchange Notes as Debt; Orig-
inal Issue Discount" and "Certain Income Tax
Considerations."
RISK FACTORS
Holders of Old Notes should consider carefully the specific factors set forth
under "Risk Factors," as well as the other information set forth in this
Prospectus, before making an investment decision with respect to the Exchange
Offer.
12
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data as of and for the years
ended December 31, 1993, 1994 and 1995 have been derived from the Company's
consolidated financial statements which have been audited by KPMG Peat Marwick
LLP, independent public accountants, whose report indicated a reliance on other
auditors relative to certain amounts relating to the Company's investment in PT
Rajasa Hazanah Perkasa ("RHP") as of and for the year ended December 31, 1995.
The audited financial statements of RHP as of and for the year ended December
31, 1995, together with the independent auditors' report thereon, are included
elsewhere in this Prospectus. The summary consolidated financial data as of and
for the year ended December 31, 1992 were derived from financial statements
which have been audited by other auditors. The Company was incorporated in
January 1992. The following summary consolidated financial data as of June 30,
1996 and for the six-month periods ended June 30, 1995 and 1996 have been
derived from unaudited financial statements that, in the opinion of management
of the Company, reflect all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial data for such periods
and as of such date. The unaudited pro forma consolidated financial data for
the year ended December 31, 1995 and for the six months ended June 30, 1996,
give effect to the Unit Offering and the acquisitions and mergers as described
in "Unaudited Pro Forma Consolidated Condensed Financial Statements" included
elsewhere in this Prospectus as if such transactions had occurred on January 1,
1995 for purposes of the statement of operations data and as of June 30, 1996
for purposes of the balance sheet data. The unaudited pro forma financial data
do not purport to represent what the Company's results of operations would have
been if the Unit Offering had in fact occurred as of the beginning of the
period or on the date indicated, as applicable, or to project the Company's
financial position or results of operations for any future date or period.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the entire year. The data set
forth below are qualified by reference to and should be read in conjunction
with the consolidated financial statements and notes thereto included elsewhere
in this Prospectus and also with "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- -----------------------------
PRO FORMA PRO FORMA
1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
----- ----- ------- -------- ----------- ------- ------- -----------
(IN THOUSANDS) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $ -- $ -- $ -- $ -- $ 369 $ -- $ 183 $ 465
Cost of sales........... -- -- -- -- 785 -- 180 518
----- ----- ------- -------- -------- ------- ------- --------
Gross margin............ -- -- -- -- (416) -- 3 (53)
General and
administrative
expenses............... 169 809 2,481 6,365 8,729 2,073 6,353 7,118
Equity in losses of
affiliates............. -- -- -- 3,756 5,503 525 2,986 2,633
----- ----- ------- -------- -------- ------- ------- --------
Loss from operations.... (169) (809) (2,481) (10,121) (14,648) (2,598) (9,336) (9,804)
----- ----- ------- -------- -------- ------- ------- --------
Interest income......... 5 2 106 232 232 112 424 424
Interest expense........ -- (33) (115) (1,354) (17,469) (201) (201) (9,725)
Other expense........... -- (1) (13) (28) (28) (10) (13) (13)
----- ----- ------- -------- -------- ------- ------- --------
Net loss................ $(164) $(841) $(2,503) $(11,271) $(31,913) $(2,697) $(9,126) $(19,118)
===== ===== ======= ======== ======== ======= ======= ========
Ratio of earnings to
fixed charges(2)....... -- -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE
AS OF DECEMBER 31, 30,
--------------------------------- -----------------------
PRO FORMA
1992 1993 1994 1995 1996 1996(1)
----- ------- ------- -------- ----------- -----------
(IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $ 536 $ 2,640 $18,424 $ 95,643 $ 87,007 $194,609
Long-term debt.......... -- -- -- -- -- 69,702
Redeemable convertible
preferred stock........ -- -- 19,446 98,254 100,306 100,306
Total stockholders'
equity (deficit)....... 486 425 (3,022) (14,168) (23,253) 7,047
Working capital......... (46) (1,514) 10,580 15,294 1,076 95,240
</TABLE>
- -------
(1) Pro forma financial data for the year ended December 31, 1995 and for the
six months ended June 30, 1996 give effect to the Unit Offering and the
acquisitions and mergers as described in "Unaudited Pro Forma Consolidated
Condensed Financial Statements" included elsewhere in this Prospectus, as
if such transactions had occurred on January 1, 1995 for purposes of the
statement of operations data and as of June 30, 1996 for purposes of the
balance sheet data. Pro forma adjustments to statement of operations data
for the year ended December 31, 1995 and for the six months ended June 30,
1996 include (i) adjustments to interest expense reflecting the addition of
interest expense associated with the Unit Offering; (ii) amortization of
debt issuance costs associated with the Unit Offering, (iii) the
consolidation of Teamtalk, (iv) the amortization of licenses for
consolidated subsidiaries, (v) the amortization of the excess of the cost
of the Company's investments over its proportionate interest in the net
assets in entities accounted for by the equity method, and (vi) the
additional equity in net losses of STW and RHP assuming the Company's
investments for current ownership interest of 30% and 25%, respectively,
had been made on January 1, 1995. Pro forma adjustments to balance sheet
data as of June 30, 1996 include (i) an addition to cash for the net
proceeds of the Unit Offering; (ii) an addition to debt issuance costs to
defer the associated costs of the Unit Offering; (iii) an addition to long-
term debt for the net liability associated with the Unit Offering; and (iv)
an addition to additional paid-in capital to record the value of the
Warrants attached to the Unit Offering.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
(i) net loss before income tax expense and fixed charges plus (ii) the
losses recognized in an entity of which less than 50% is owned by the
Company and is accounted for under the equity method when there is no
guarantee, directly or indirectly, to service the debt of such entities.
Fixed charges consist of interest expense, including such portion of rental
expense that is attributed to interest. The ratio of earnings to fixed
charges was less than 1.0 to 1.0 for each of the Company's last four fiscal
years and for the six months ended June 30, 1995 and 1996. Earnings
available for fixed charges were thus inadequate to cover fixed charges.
The coverage deficiency for the years ended December 31, 1992, 1993, 1994
and 1995 was $164,000, $841,000, $2,503,000 and $11,128,000 respectively.
The coverage deficiency for the six months ended June 30, 1995 and 1996 was
$2,436,000 and $10,195,000, respectively. The coverage deficiency for the
1995 and 1996 pro forma periods are $32,277,000 and $20,519,000,
respectively.
13
<PAGE>
OPERATING COMPANIES AND DEVELOPMENTAL STAGE PROJECTS
As of June 30, 1996, the Company had direct or indirect interests in seven
operating companies and seven developmental stage projects in eight countries
in Asia, three countries in Latin America and in New Zealand. The following
table indicates the country, project type and the Company's actual or proposed
equity interest in these operating companies and developmental stage projects.
The information set forth below is qualified by reference to and should be read
in conjunction with the more complete descriptions of the operating companies
and developmental stage projects set forth under "Business--Operating
Companies" and "--Developmental Stage Projects."
<TABLE>
<CAPTION>
ACTUAL
EQUITY
OPERATING COMPANY INTEREST
----------------- --------
<S> <C>
Malaysia National WLL (STW)....................................... 30.0%(1)
Indonesia National Cellular (Mobisel)............................. 17.5%
Indonesia National ECTR (Mobilkom)................................ 15.0%
Philippines Regional ECTR (UTS)................................... 19.0%(2)
New Zealand National ECTR (TeamTalk).............................. 100%(3)
Brazil Regional ECTR (Via 1)...................................... 65.1%(4)
Mexico Regional ECTR (Mobilcom Mexico)............................ 2.3%(5)
</TABLE>
- --------
(1) Does not give effect to an option held by a bank syndicate that has
provided project financing to STW that, if exercised in its entirety, would
reduce the Company's interest in STW to 27.6%.
(2) Assumes the completion of certain technical formalities in connection with
the Company's acquisition of approximately 6% of the UTS stock, and
excludes an additional 2.0% of UTS' stock which will vest upon completion
of certain performance milestones.
(3) Effective April 30, 1996, the Company acquired the remaining 50% of
TeamTalk. See "--Recent Operating Developments".
(4) Reflects the Company's anticipated equity interest in Via 1, a joint
venture to be formed. Does not give effect to exercise of options presently
being negotiated with the Company's local partners that, if exercised in
their entirety, would reduce the Company's interest in Via 1 below 50%.
(5) Does not give effect to options held by another shareholder of Mobilcom
Mexico that, if exercised in their entirety, would reduce the Company's
interest in Mobilcom Mexico to approximately 1.8%.
<TABLE>
<CAPTION>
PROPOSED
DEVELOPMENTAL EQUITY
STAGE PROJECT INTEREST(6)
------------- -----------
<S> <C>
Taiwan National ECTR.......................................... 20.0%
India (Regional), Indonesia (National), Taiwan (National) and
Thailand Paging.............................................. 70.0%(7)
China Regional Cellular....................................... 25.0%(8)
Pakistan National ECTR........................................ 90.0%(9)
Mexico WLL.................................................... 40.0%(10)
Peru National ECTR............................................ 88.0%(11)
Peru National Paging.......................................... 34.0%(11)
</TABLE>
- --------
(6) The developmental stage projects are typically governed by memoranda of
understanding ("MOUs") rather than definitive agreements and are generally
subject to ongoing negotiations, compliance with local law, receipt of
necessary governmental licenses and approvals and receipt of necessary
corporate and other third party approvals. Accordingly, the Company's
proposed equity interest and investment in the developmental stage
projects, as well as the nature and scope of the projects themselves, are
subject to change. Likewise, there can be no assurance that necessary
licenses and other approvals will be received for these developmental stage
projects, and the Company otherwise may elect not to pursue one or more of
these developmental stage projects.
14
<PAGE>
(7) Represents the Company's equity interest in this developmental stage
project, which in turn owns or proposes to own a 10%, 25%, 20% and 25%
interest in paging businesses in India, Indonesia, Taiwan and Thailand,
respectively. Pursuant to an agreement with its local partner, the
Company's interest in this developmental stage project may be reduced to
approximately 57.1%. See "Business--Developmental Stage Projects."
(8) The Company has entered into a letter of intent to purchase a 49% interest
in this developmental stage project. The Company intends to retain a 25%
interest in this developmental stage project and to invite a third party to
purchase the remaining 24% interest.
(9) Reflects the anticipated sale of a 10% interest in this developmental stage
project to the Company's local partner.
(10) Under the terms of an MOU, the Company's proposed equity interest in this
developmental stage project may be increased to 49%.
(11) Reflects a proposed exchange of a 10% interest in the Peru National ECTR
Project for a 34% interest in the Peru National Paging Project.
15
<PAGE>
SUMMARY OF OPERATING COMPANIES
The Company has ownership interests in seven operating companies. The
following briefly describes these operating companies and sets forth the amount
of the Company's investment and its equity interest in the operating companies
as of June 30, 1996, and its anticipated additional investment in the operating
companies through December 31, 1997. See "Use of Proceeds." The aggregate
amount of the Company's investment in the following operating companies
includes Preferred Stock with an aggregate liquidation preference of
$19.1 million that was issued by the Company to acquire equity interests in
such operating companies pursuant to the Vanguard Exchange (as defined). See
"Certain Transactions--The Vanguard Exchange." This summary is qualified by
reference to, and should be read in conjunction with, the more complete
descriptions of the operating companies set forth below in "Business--Operating
Companies." The actual additional amount invested by the Company may vary
significantly from the anticipated amount indicated below. See "Risk Factors--
Project Level Risks."
<TABLE>
<CAPTION>
ANTICIPATED
ADDITIONAL
COMPANY COMPANY
INVESTMENT INVESTMENT
AS OF THROUGH
OPERATING JUNE 30, DECEMBER 31, DESCRIPTION OF
COMPANY 1996 1997 OPERATING COMPANY
- --------- ---------- ------------ --------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Syarikat Telefon $22.2 $ 2.8 The Company holds a 30% equity
Wireless (M) SDN interest in STW, a provider of WLL
BHD ("STW") communications services in Malaysia.
(Malaysia National The Company's partners, Shubila
WLL) Holding SDN BHD and Laranda SDN BHN,
own 60% and 10% of STW, respectively.
STW holds a national license to
provide telephone services in
Malaysia. STW commenced operations in
Northern Malaysia in late 1993 and, as
of June 30, 1996, served approximately
3,500 subscribers.
PT Mobile Selular $25.5 $ 0 Through its 25% interest in PT Rajasa
Indonesia Hazanah Perkasa ("RHP"), the Company
("Mobisel") owns a 17.5% equity interest in
(Indonesia National Mobisel, a provider of cellular
Cellular) services in Indonesia. RHP was formed
in 1985 to provide cellular services
in Indonesia and, in 1995, RHP
contributed its cellular operations to
Mobisel in return for a 70% interest
in Mobisel. The Company's partners in
Mobisel include PT (Persero)
Telekomunikasi Indonesia ("Telkom
Indonesia"), the state-owned
telecommunications company. Mobisel
holds a provisional license covering
all of Indonesia, one of the most
populous countries in the world. As of
June 30, 1996, Mobisel served
approximately 20,400 subscribers.
PT Mobilkom Telekomindo $ 1.5 $ 0 The Company indirectly owns a 15%
("Mobilkom") equity interest in Mobilkom, a
(Indonesia National provider of ECTR services in
ECTR) Indonesia. The Company's partners in
Mobilkom include PT Telekomindo Prima
Bhakti, the investment subsidiary of
Telkom Indonesia, PT Inka Forindo
Jaya, an Indonesian
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED
ADDITIONAL
COMPANY COMPANY
INVESTMENT INVESTMENT
AS OF THROUGH
OPERATING JUNE 30, DECEMBER 31, DESCRIPTION OF
COMPANY 1996 1997(1) OPERATING COMPANY
- --------- ---------- ------------ --------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
telecommunications and engineering
company, and Jasmine International
Public Company Limited, a Thai
telecommunications company with
operations throughout Asia. Mobilkom's
five-year license covers all of
Indonesia and its ECTR system is
operational in the three largest
cities of Java, including Jakarta.
Mobilkom commenced operations in
September 1995 and, as of June 30,
1996, had over 2,000 subscribers.
Universal $1.5 $ 2.2 The Company owns a 19% beneficial
Telecommunications interest in UTS, a provider of ECTR
Service, Inc. services in the Philippines. The
("UTS") Company's partners in UTS include
(Philippines Marsman-Drysdale Corporation, a large
Regional ECTR) Philippine company in the
agribusiness, food processing, tourism
and communications businesses, and
Filinvest Development Corporation, a
large Philippine real estate
investment company. UTS operates under
a provisional license permitting it to
provide ECTR services in the Visayas
and Mindanao regions of the country
and has applied for the authority to
extend its provisional license and
expand service into other parts of the
country, including metropolitan
Manila. UTS commenced its operations
in July 1996.
TeamTalk Limited $5.0 $ 3.8 The Company provides ECTR services in
(New Zealand New Zealand through TeamTalk.
National ECTR)
Effective April 30, 1996, the Company
acquired the remaining 50% of TeamTalk
which it did not already own for a
purchase price of approximately
$3.2 million, which amount is included
in the Company's Anticipated
Additional Investment through December
31, 1997. The licenses under which
TeamTalk operates permit ECTR coverage
in the major population centers
throughout the North Island of New
Zealand as well as in the city of
Christchurch, the largest city on the
South Island. TeamTalk commenced
operations in the North Island of New
Zealand in 1994 and, as of June 30,
1996, served approximately 3,400
subscribers.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED
ADDITIONAL
COMPANY COMPANY
INVESTMENT INVESTMENT
AS OF THROUGH
OPERATING JUNE 30, DECEMBER 31, DESCRIPTION OF
COMPANY 1996 1997(1) OPERATING COMPANY
- --------- ---------- ------------ --------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Via 1 $12.8 $ 3.7 The Company has the right to acquire a
(Brazil Regional ECTR) 65.1% equity interest in Via 1, a
joint venture to be formed to hold and
develop certain existing ECTR
operations in Brazil. The Company's
primary partner is Rede Brasil Sul
("RBS"), one of Brazil's largest media
companies, with operations in
television and radio broadcasting and
newspaper publishing. The licenses
under which Via 1 will operate cover
major cities in Southern and Central
Brazil, including Rio de Janeiro,
Curitiba and Sao Paulo.
Corporacion Mobilcom, $ 2.1 $ 0 The Company owns a 2.3% equity
S.A. de C.V. ("Mobilcom interest in Mobilcom Mexico, a
Mexico") provider of ECTR services in Mexico.
(Mexico Regional ECTR) The Company's partners in Mobilcom
Mexico include Grupo Comuniciones San
Luis S.A. de C.V. and NEXTEL
Communications, Inc. ("NEXTEL"), one
of the largest ECTR operators in the
world. Mobilcom Mexico operates under
licenses covering the major cities in
Northern Mexico and Central Mexico,
including Mexico City. Mobilcom Mexico
commenced commercial service in 1993
and, as of June 30, 1996, served
approximately 22,000 subscribers.
</TABLE>
18
<PAGE>
SUMMARY OF DEVELOPMENTAL STAGE PROJECTS
The Company is currently involved in seven developmental stage projects. The
following summarizes the status of these projects, the Company's proposed
equity interest as of June 30, 1996 and the amount of the Company's proposed
investment in these projects through December 31, 1997. This summary is
qualified by reference to, and should be read in conjunction with, the more
complete descriptions of the developmental stage projects set forth below in
"Business--Developmental Stage Projects." The Company's developmental stage
projects are typically governed by MOUs rather than definitive agreements and
are generally subject to ongoing negotiations, compliance with local law,
receipt of necessary licenses and governmental approvals and receipt of
necessary corporate and other third party approvals. Accordingly, the Company's
proposed equity interest and investment in the developmental stage projects, as
well as the nature and scope of the projects themselves, are subject to change.
Likewise, there can be no assurance that necessary licenses and other approvals
will be received for these developmental stage projects and the Company
otherwise may elect not to pursue one or more of these developmental stage
projects.
<TABLE>
<CAPTION>
PROPOSED
COMPANY
INVESTMENT PROPOSED
THROUGH COMPANY
DECEMBER 31, EQUITY
PROJECT 1997 INTEREST STATUS OF DEVELOPMENTAL STAGE PROJECT
- ------- ------------- -------- -------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Taiwan National ECTR.... $ 3.0(1) 20.0% The Company and its Taiwanese partner are
preparing a joint application for a variety
of voice and data licenses to provide
national ECTR services in Taiwan. License
awards are expected to be announced in the
first quarter of 1997. Based on its
experience in providing ECTR services, the
Company believes that it is well-positioned
to receive a number of these licenses,
although there can be no assurance in this
regard. Taiwan's 1995 GDP per capita of
approximately $12,485 is one of the highest
in Southeast Asia.
India (Regional),
Indonesia (National),
Taiwan (National) and
Thailand Paging........ $13.5(2) 70.0%(3) In August 1996, the Company acquired a 70%
interest in Mainstream Limited, a company to
be renamed Star Telecom Overseas (Cayman
Islands) Limited ("STOL"). STOL has developed
and is pursuing projects with strategic
partners throughout Asia, including in India,
Indonesia, Taiwan and Thailand. As of June
30, 1996, the India regional paging project
provided service to approximately 30,000
subscribers. In Indonesia, STOL has entered
into an MOU with an Indonesian company which
has obtained a license to provide national
paging services in Indonesia. In Taiwan and
Thailand, STOL, together with its local
partners, is pursuing additional paging
licenses. The Company believes that its
investment in STOL will provide it with an
attractive opportunity to build a
transnational paging business.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PROPOSED
COMPANY
INVESTMENT PROPOSED
THROUGH COMPANY
DECEMBER 31, EQUITY
PROJECT 1997 INTEREST STATUS OF DEVELOPMENTAL STAGE PROJECT
- ------- ------------- -------- -------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
China Regional $28.3 25.0% The Company has entered into a letter of
Cellular............... intent to acquire a 49% equity interest in
Star Digitel Limited ("SDL"), a Hong Kong
corporation engaged in cellular projects
throughout China, for $56.5 million. The
Company intends to retain a 25% interest in
SDL and invite a third party to purchase the
remaining 24% interest. SDL has advised the
Company that it has entered into agreements
with the People's Liberation Army to provide
equipment and certain services relating to
the development and operation of a cellular
network in several major provinces of China,
covering over 200 million POPS.
Pakistan National ECTR..
$12.8(4) 90.0% The Company's subsidiary, Mobilcom (Private)
Limited ("Mobilcom Pakistan"), has been
awarded a national license to provide ECTR
services in Pakistan. The Company intends to
build regional networks covering most of the
major population centers of the country,
including Karachi, Lahore and Islamabad.
Pakistan has a population of approximately
130 million.
Mexico WLL.............. $18.5 40.0% The Company has entered into an MOU with a
prominent Mexican businessperson (the
"Mexican Partner") to provide national WLL
services in Mexico. It is the parties' intent
to operate the WLL business in alliance with
an existing telecommunications business of
the Mexican Partner, whereby the Company
believes it will be able to realize
operational and marketing advantages.
Peru National ECTR...... $17.6 88.0% The Company currently owns a 98% equity
interest in PeruTel S.A. ("PeruTel"), which
has been awarded a national license to
provide ECTR services in Peru. The Company is
currently negotiating an agreement to
exchange 10% of its interest in PeruTel for
an interest in the Peru national paging
project described below. With a population of
approximately 24 million, real GDP growth of
6.6% during the year ended December 31, 1995
(according to industry data) and one of the
least developed telephone networks in Latin
America, the Company believes there exists a
significant opportunity to provide ECTR
services in Peru.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PROPOSED
COMPANY
INVESTMENT PROPOSED
THROUGH COMPANY
DECEMBER 31, EQUITY
PROJECT 1997 INTEREST STATUS OF DEVELOPMENTAL STAGE PROJECT
- ------- ------------- -------- -------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Peru National Paging.... $ 5.1 34.0% The Company is currently negotiating an
agreement to exchange 10% of its equity
interest in PeruTel for a 34% equity interest
in the paging business of Promociones
Telefonicas S.A. ("Protelsa"), the Company's
minority partner in PeruTel. Protelsa has
recently been awarded a national paging
license in Peru and has commenced
construction of its paging network.
</TABLE>
- --------
(1) As of June 30, 1996, as part of the application process and in accordance
with applicable regulations, the Company had deposited its proposed
investment in a Taiwanese bank account to support the joint application
discussed above.
(2) Represents $13.5 million paid by the Company to purchase its 70% interest
in STOL on August 30, 1996.
(3) Represents the Company's current equity interest in STOL which in turn owns
or proposes to own a 10%, 25%, 20% and 25% interest in paging businesses in
India, Indonesia, Taiwan and Thailand, respectively. Pursuant to an
agreement with its local partner, the Company's interest in STOL may be
reduced to approximately 57.1% upon the exercise, in their entirety, of
certain options held by the Company's local partner and that may in the
future be granted to members of the senior management of STOL.
(4) Includes Preferred Stock with an aggregate liquidation preference of $5.4
million that was issued by the Company to acquire its interest in this
developmental stage project pursuant to the Vanguard Exchange. See "Certain
Transactions--The Vanguard Exchange."
OTHER
IWC was incorporated in Delaware in January 1992. In July 1996, IWC Holdings
was formed as a holding company with no business operations of its own. Its
primary asset consists of all of the outstanding capital stock of IWC, its
wholly owned subsidiary. The Company's principal executive offices are located
at 400 South El Camino Real, Suite 1275, San Mateo, California 94402. Its
telephone number at this address is (415) 548-0808. The Company also has
offices in Sao Paulo, Brazil; Jakarta, Indonesia; Kuala Lumpur, Malaysia;
Singapore and Hong Kong.
All information contained in this Prospectus about the number of issued and
outstanding shares and share prices gives effect to the conversion of each
share of IWC capital stock into forty (40) shares of the corresponding class
and series of IWC Holdings capital stock in August 1996.
21
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Old Notes for the Exchange Notes offered hereby, holders of
Old Notes should consider carefully the following factors, which may be
generally applicable to the Old Notes as well as to the Exchange Notes:
PROJECT LEVEL RISKS
Early Stage of Development of Wireless Projects
Most of the Company's wireless projects are in the early stages of
development. Only the seven operating companies, Mobilcom Mexico, Mobilkom and
Mobisel in Indonesia, STW in Malaysia, TeamTalk in New Zealand, UTS in the
Philippines and Via 1 in Brazil, currently provide wireless communications
services on a commercial basis, and most of these operating companies have
only recently initiated providing such commercial service and generally have a
limited number of subscribers. Although memoranda of understanding ("MOUs")
have been signed with strategic partners in most of the operating companies
and developmental stage projects, in many cases definitive joint venture and
shareholder agreements have not been prepared or signed, definitive legal
entities have not been formed and/or required equity and debt financing has
not been secured. Even where an MOU or definitive joint venture or shareholder
agreement has been signed, there can be no assurance that the terms of the
Company's participation in an operating company or developmental stage project
will not be modified in a manner that is materially adverse to the Company,
particularly because the Company usually holds a minority interest. The
successful development and commercialization of these projects will depend on
a number of significant financial, logistical, technical, marketing, legal and
other factors, the outcome of which cannot be predicted. Virtually all of the
operating companies are, and in the future will be, newly-formed entities that
have a limited operating history and that operate at a loss for a substantial
period of time. These operating companies will require significant amounts of
additional financing to fund capital expenditures, working capital
requirements and other cash needs, including the costs of obtaining additional
licenses. In addition, there can be no assurance that these projects will not
encounter engineering, design or other operational problems. There can be no
assurance that the Company can successfully develop any of its existing or
planned developmental stage projects or that any of these projects or any of
its operating companies will achieve commercial success. Further, the
Company's current and anticipated ownership interests in the operating
companies and developmental stage projects are subject to modification and may
even be eliminated completely due to the occurrence of certain events such as
the re-negotiation of existing MOUs and/or agreements, changes in foreign laws
or regulations affecting foreign ownership, government expropriation,
financing contingencies and other factors. Likewise, the Company may
voluntarily withdraw from one or more operating companies or developmental
stage projects.
Risks Inherent in Foreign Investment
The Company has invested substantial resources outside of the United States
and plans to continue to do so in the future. Governments of many developing
countries have exercised and continue to exercise substantial influence over
many aspects of the private sector. In some cases, the government owns or
controls companies that are or may in the future become competitors of the
Company or companies (such as national telephone companies) upon which the
operating companies and developmental stage projects may depend for required
interconnections to land-line telephone networks and other services.
Accordingly, government actions in the future could have a significant effect
on economic conditions in a developing country and otherwise have a material
adverse effect on the Company and its operating companies and developmental
stage projects. Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other developments could
materially adversely affect the Company's interest in operating companies and
developmental stage projects in particular developing countries.
For example, in early 1996 the Malaysian government announced a program
designed to consolidate the Malaysian telecommunications industry which, if
completed, would have forced the sale of STW, the Company's
22
<PAGE>
Malaysian operating company, to one of a limited number of surviving
telecommunications companies. Although the Malaysian government announced in
July 1996 that it did not intend to proceed with this program, there can be no
assurance that the Malaysian government will not initiate similar programs in
the future. Further, there can be no assurance that the Malaysian national
telephone company will not otherwise impose restrictions on STW, including
restrictions on the ability of STW to interconnect its wireless network with
the national telephone company's system, which could have a material adverse
effect on the Company. See "Business--Operating Companies--Malaysia National
WLL." Moreover, there can be no assurance that other countries where the
Company has operating companies or developmental stage projects will not
initiate similar programs or impose other restrictions, which could have a
material adverse effect on the Company.
The Company also may be adversely affected by political or social unrest or
instability in foreign countries. There can be no assurance that unrest or
instability resulting from political, economic, social or other conditions in
foreign countries would not have a material adverse effect on the Company.
The Company does not have political risk insurance in the countries in which
it currently conducts business. Moreover, applicable agreements relating to
the Company's interests in its operating companies are frequently governed by
foreign law. As a result, in the event of a dispute, it may be difficult for
the Company to enforce its rights. Accordingly, the Company may have little or
no recourse upon the occurrence of any of these developments or if any of its
partners seek to re-negotiate existing or future MOUs and/or other agreements.
To the extent that any of the operating companies seeks to make a dividend or
other distribution to the Company, or to the extent that the Company seeks to
liquidate its investment in an operating company or developmental stage
project and repatriate monies from a relevant country, local taxes, foreign
exchange controls or other restrictions may effectively prevent the transfer
of funds to the Company or the exchange of local currency for U.S. dollars.
Technological Risk; Risk of Obsolescence
The Company's operating companies and developmental stage projects generally
use new and emerging technologies. For example, the MPT 1327 technology
selected by a number of the Company's ECTR operating companies is currently
operational in many countries but has had limited deployment for public use in
developing countries. Although many of the technologies currently in use and
to be used in the future by the Company have been developed by international
telecommunications companies such as Nokia, Philips, Motorola, Ericsson,
Lucent Technologies and Nortel, most are generally advanced technologies which
have only recently been developed and commercially introduced. There can be no
assurance that the operating companies and developmental stage projects will
not experience technical problems in the commercial deployment of these
technologies, particularly because they are being introduced in developing
countries. In addition, the technology used in wireless communications is
evolving rapidly and one or more of the technologies currently utilized or
planned by the Company may not be preferred by its customers or may become
obsolete, which in either case would likely have a material adverse effect on
the Company. There can be no assurance that the Company will be able to keep
pace with ongoing technological changes in the wireless telecommunications
industry.
Risk of Modification or Loss of Licenses; Uncertainty as to the Availability,
Cost and Terms of Licenses; Restrictions on Licenses
The Company's ability to retain and exploit its existing telecommunications
licenses and to renew them when they expire, and to obtain new licenses in the
future, is essential to the Company's operations. However, these licenses are
typically granted by governmental agencies in developing countries, and there
can be no assurance that these governmental agencies will not seek to
unilaterally limit, revoke or otherwise adversely modify the terms of these
licenses in the future, any of which could have a material adverse effect on
the Company, and the Company may have limited or no legal recourse if any of
these events were to occur. In addition, there can be no assurance that
renewals to these licenses will be granted or, if renewed, that the renewal
terms will not be substantially less favorable to the Company than the
original license terms, any of which could
23
<PAGE>
have a material adverse effect on the Company. Likewise, many of the Company's
operating companies and developmental stage projects have not yet obtained all
of the licenses necessary for their proposed operations, and no assurance can
be given that any such licenses will be obtained. The failure to obtain such
licenses would have a material adverse effect on such operating companies and
developmental stage projects.
The Company believes that the opportunity to acquire substantial new
wireless licenses in developing countries will exist only for a limited time.
Further, although the Company's operating companies and developmental stage
projects have, to date, obtained many of their operating licenses through
private negotiations without having to participate in competitive bidding
processes, the Company anticipates that governments of developing countries
will increasingly discover the value of new wireless technologies and may
require bidding for licenses, which would likely increase the cost of these
licenses, perhaps substantially. In addition, the operating companies and
developmental stage projects may be required to purchase licenses from other
license holders in certain circumstances, including, for example, to gain
network capacity or to increase geographic coverage. Furthermore, relevant
governmental authorities may grant telecommunications licenses covering the
same geographical areas as the operating companies' and developmental stage
projects' licenses and otherwise grant licenses which allow other companies to
compete directly with such operating companies and developmental stage
projects for wireless subscribers. Although the availability of only limited
frequency ranges may provide some protection against the issuance of competing
licenses, there can be no assurance that such competitive licenses will not be
granted or that they will not have a material adverse effect on the Company.
In addition, licenses may be subject to significant operating restrictions or
conditions, including restrictions on interconnection to the public telephone
system or requirements that the operating companies or developmental stage
projects complete construction or commence commercial operation of the
networks by specified deadlines, which conditions, if not satisfied, may
result in loss or revocation of the license. Accordingly, there can be no
assurance that even if an operating company or developmental stage project is
able to obtain a required license, such operating conditions will be satisfied
and, as a result, that such license will not be lost or revoked or that the
restrictions imposed upon such license will permit the commercial exploitation
of such license, which could have a material adverse effect on the Company.
Dependence on Other Telecommunications Providers
The success of the Company's wireless systems will in many cases depend upon
services provided by other telecommunications providers, some of which are
competitors of the Company, the operating companies and/or the developmental
stage projects. For example, the Company's operating companies and
developmental stage projects generally require interconnection agreements with
national or regional telephone companies in order for its wireless systems to
connect with land-line telephone systems, and may require the use of other
microwave or fiber optic networks to link its wireless systems. Although a
number of operating companies have entered into required interconnection
agreements or have interconnection arrangements in place, the revocation, loss
or modification of any of these existing agreements or arrangements or the
failure to obtain necessary agreements and/or arrangements in the future could
have a material adverse effect on the Company.
Dependence on Partners
The Company will generally continue to depend on its local partners to
obtain required licenses in all of its wireless projects. In addition, the
Company will be dependent on strategic partners with resources beyond those of
the Company to pursue, among other things, WLL and MMDS projects. In WLL
projects, the Company requires the participation of a larger
telecommunications company possessing the substantial capital and operating
resources required to finance and deploy a WLL system. In MMDS television
projects, the Company requires the participation of a television programming
company capable of providing the television content required for wireless
cable television. The failure of the Company to identify and enter into
relationships with strong partners, or the failure of those partners to
provide these resources, would have a material adverse effect on the Company.
24
<PAGE>
Construction Risks
The operating companies and developmental stage projects in which the
Company invests typically require substantial construction of new wireless
networks and additions to existing wireless networks. Construction activity
will require the operating companies and developmental stage projects to
obtain qualified subcontractors and necessary equipment on a timely basis, the
availability of which varies significantly from country to country.
Construction projects are subject to cost overruns and delays not within the
control of the operating company or the developmental stage project or its
subcontractors, such as those caused by acts of governmental entities,
financing delays and catastrophic occurrences. Delays also can arise from
design changes and material or equipment shortages or delays in delivery.
Accordingly, there can be no assurance that the operating companies or
developmental stage projects will be able to complete current or future
construction projects for the amount budgeted or within the time periods
projected, or at all. Failure to complete construction for the amount budgeted
or on a timely basis could jeopardize subscriber contracts, franchises or
licenses and could have a material adverse effect on the Company. In
particular, telecommunications licenses often are granted on the condition
that network construction be completed or commercial operations be commenced
by a specified date. Failure to comply with these deadlines could result in
the loss or revocation of the licenses. In that regard, a number of the
operating companies have failed to meet such deadlines in the past and,
although such failures have not to date led to the loss of any licenses, there
can be no assurance that the relevant governmental authorities will not seek
to revoke licenses as a result of these past defaults or that similar defaults
will not occur in the future, which could have a material adverse effect on
the Company.
Operating Losses and Negative Cash Flow; Dependence on Additional
Financing/Capital
Most of the existing operating companies have generated operating losses and
negative cash flow from operations, and the Company expects that most of its
operating companies will continue to generate operating losses and negative
cash flow from operations for the foreseeable future. The business of the
operating companies and developmental stage projects, particularly WLL
projects, is capital intensive and, in light of such anticipated negative cash
flow from operations, will require continuing sources of outside financing to
fund working capital needs, capital expenditures and other cash requirements.
The Company's strategy is for such additional financing to be obtained by the
operating companies primarily from third parties and not from the Company or
its strategic partners. However, there can be no assurance that the operating
companies and developmental stage projects will be able to obtain the
financing required to make planned capital expenditures, provide working
capital or meet other cash needs. Failure to obtain such financing could have
a material adverse effect on the Company and, among other things, could result
in the loss or revocation of licenses held by the operating companies or
developmental stage projects or require that certain planned projects be
delayed or abandoned. In particular, at August 31, 1996 a substantial majority
of the Company's investments had been made in two operating companies (namely
STW, which is developing a national WLL system in Malaysia; and Mobisel, which
is developing a national cellular system in Indonesia), and both of these
operating companies will be required to obtain substantial additional
financing in order to complete planned capital expenditures.
In most cases, under agreements with its local partners, the Company may be
required to make additional equity investments in operating companies or
developmental stage projects, and the Company's inability or unwillingness to
do so could result in the dilution of the Company's equity interest or a
significant impairment or loss of the value of its investment. Moreover, the
Company and its other strategic partners have in the past been required, and
in the future likely will be required, to guarantee and/or pledge its equity
interest to secure certain indebtedness of the operating companies and
developmental stage projects and otherwise to provide certain assurances to
their lenders. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Liquidity and Capital Resources." The
Indenture contains certain restrictions on the ability of the Company to make
investments in, or guarantee the indebtedness of, the operating companies and
developmental stage projects that are designated as Unrestricted Subsidiaries
or Unrestricted Affiliates. See "Description of Exchange Notes--Certain
Covenants."
In addition, there can be no assurance that the operating companies or
developmental stage projects will be able to pay their indebtedness or other
liabilities when due. Any failure to pay such indebtedness or other
25
<PAGE>
liabilities when due could have a material adverse effect on the Company. See
"--Company Level Risks--Negative Operating Cash Flow; Dependence on Additional
Financing; No Commitments For Additional Financing" below.
To date, most of the debt financing obtained by the operating companies has
been secured by assets of the respective operating companies, and it is likely
that any debt financing the operating companies or developmental stage
projects obtain in the foreseeable future will also be secured. The pledge of
assets to secure debt financing may limit the operations of the operating
companies and make it substantially more difficult to obtain additional
financing from other sources.
Substantial Leverage
As discussed above, the business of the operating companies and
developmental stage projects will require continuing sources of additional
financing. Certain of the operating companies have substantial indebtedness
and, to the extent that additional debt financing is available, other
operating companies or developmental stage projects may in the future incur
substantial indebtedness, in relation to their respective equity capital. To
the extent that any of the operating companies or developmental stage projects
now has or in the future incurs a high level of indebtedness, such
indebtedness will have important consequences to holders of the Exchange
Notes, including that (i) such entity's ability to pay dividends or make other
distributions to the Company may be restricted, (ii) such entity's ability to
obtain additional debt financing may be limited and (iii) such entity's
ability to react to changes in the industry and economic conditions generally
may be impaired.
Competition
Although the implementation of advanced wireless technologies is in the
early stages of deployment in most developing countries, the Company believes
that its business will become increasingly competitive, particularly as
businesses and foreign governments realize the market potential of these
wireless technologies. A number of large American, Japanese and European
companies, including U.S.-based regional Bell operating companies ("RBOCs")
and large international telecommunications companies, are actively engaged in
programs to develop and commercialize wireless technologies in developing
countries. In many cases, the Company will also compete against land-line
carriers, including government-owned telephone companies. Most of these
companies have substantially greater financial and other resources, research
and development staffs and technical and marketing capabilities than the
Company. The Company anticipates that there will be increasing competition for
additional licenses and increased competition to the extent such licenses are
obtained by others. Although the Company intends to employ relatively new
technologies, there will be a continuing competitive threat from even newer
technologies which may render the technologies employed by the Company
obsolete.
Regulation
The wireless services of the Company's operating companies and developmental
stage projects are subject to governmental regulation, which may change from
time to time. There can be no assurance that material and adverse changes in
the regulation of the Company's existing or future operating companies or
developmental stage projects will not occur in the future. To date, certain
operating companies and developmental stage projects have been subject to
service requirements, restrictions on interconnection of wireless systems to
government-owned or private telephone networks, subscriber rate-setting and
construction requirements, among others. These regulations may be difficult to
comply with, particularly given demographic, geographic or other issues in a
particular market. Further, changes in the regulatory framework may limit the
ability to add subscribers to developing systems. An operating company's or
developmental stage project's failure to comply with applicable governmental
regulations or operating requirements could result in the loss of licenses or
otherwise could have a material adverse effect on the Company.
26
<PAGE>
Inflation; Currency Devaluations and Fluctuations
Many developing countries have experienced substantial, and in some periods
extremely high, rates of inflation and resulting high interest rates for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain developing countries and could have an adverse effect on the operating
companies and developmental stage projects in those countries, including an
adverse effect on their ability to obtain financing.
The value of the Company's investment in an operating company or
developmental stage project is partially a function of the currency exchange
rate between the dollar and the applicable local currency. In addition, the
operating companies will report their results of operations in the local
currency and, accordingly, the Company's results of operations will be
affected by changes in currency exchange rates between those currencies and
U.S. dollars. In general, the Company does not hedge against foreign currency
exchange rate risks. As a result, the Company may experience economic loss
with respect to its investments and fluctuations in its results of operations
solely as a result of currency exchange rate fluctuations. For example, the
Company experienced a significant decline in the value of its investment in
Mobilcom Mexico, its ECTR operating company in Mexico, as a result of the 1994
devaluation of the Mexican peso and the resulting economic instability in
Mexico. Many of the currencies of developing countries have experienced steady
devaluations relative to the U.S. dollar, and major adjustments have been made
in the past and may again occur in the future, any of which could have a
material adverse effect on the Company.
To the extent that the operating companies commence or have commenced
commercial operations, any revenues they generate will generally be paid to
the operating companies in the local currency. By contrast, many significant
liabilities of the operating companies (such as liabilities for the financing
of telecommunications equipment) may be payable in U.S. dollars or in
currencies other than the local currency. As a result, any devaluation in the
local currency relative to the currencies in which such liabilities are
payable could have a material adverse effect on the Company.
Foreign Corrupt Practices Act
The Company is subject to the Foreign Corrupt Practices Act ("FCPA"), which
generally prohibits U.S. companies and their intermediaries from bribing
foreign officials for the purpose of obtaining or keeping business or licenses
or otherwise obtaining favorable treatment. Although the Company has taken
precautions to comply with the FCPA, there can be no assurance that such
precautions will protect the Company against liability under the FCPA,
particularly as a result of actions which may in the past have been taken or
which may be taken in the future by agents and other intermediaries for whose
actions the Company may be held liable under the FCPA. In particular, the
Company may be held responsible for actions taken by its strategic or local
partners even though such strategic or local partners are themselves typically
foreign companies which are not subject to the FCPA; and the Company has no
ability to control such strategic or local partners. Any determination that
the Company has violated the FCPA could have a material adverse effect on the
Company.
International Tax Risks
Distributions of earnings and other payments received from the Company's
operating subsidiaries and affiliates are likely to be subject to withholding
taxes imposed by the jurisdictions in which such entities are formed or
operating. In general, a United States corporation may claim a foreign tax
credit against its federal income tax expense for such foreign withholding
taxes and foreign taxes paid directly by corporate entities in which the
Company owns 10% or more of the voting stock. The ability to claim such
foreign tax credits and to utilize net foreign losses is, however, subject to
numerous limitations, and the Company may incur incremental tax costs as a
result of these limitations or because the Company is not in a tax paying
position in the United States.
Special U.S. tax rules apply to U.S. taxpayers that own stock in a "passive
foreign investment company" (a "PFIC") that could also increase the Company's
effective rate of taxation. In general, a non-U.S. corporation
27
<PAGE>
will be treated as a PFIC if at least 75 percent of its income is "passive
income" or if at least 50 percent of its assets are held for the production of
"passive income." A non-U.S. corporation that owns 25 percent or more of the
stock of a non-U.S. subsidiary is treated as receiving a proportionate share
of the income of, and as owning a proportionate share of the assets of, such
subsidiary.
It is possible that certain operating companies in which the Company owns an
equity interest are PFICs. Generally, except to the extent the Company makes
an election to treat a PFIC in which it owns stock as a "qualified electing
fund" (a "QEF") in the first taxable year in which the Company owns the PFIC's
stock, (i) the Company would be required to allocate gain recognized upon the
disposition of stock in the PFIC and income recognized upon receiving certain
dividends ratably over the Company's holding period for the stock in the PFIC,
(ii) the amount allocated to each year other than the year of the disposition
or dividend payment would be taxable at the highest U.S. tax rate applicable
to corporations, and an interest charge for the deemed deferral benefit would
be imposed with respect to the tax attributable to each year, and (iii) gain
recognized upon disposition of PFIC shares would be taxable as ordinary
income.
If the Company were to make the QEF election, as described above, the
Company would be required in each year that the PFIC qualification tests are
met to include its pro rata share of the QEF's earnings as ordinary income and
its pro rata share of the QEF's net capital gain as long-term capital gain,
whether or not such amounts are actually distributed. The Company has not made
any QEF election with respect to any non-U.S. corporation in which it holds
stock.
The Company may also be required to include in its income for U.S. income
tax purposes its proportionate share of the earnings of those foreign
corporate subsidiaries that are classified as "controlled" foreign
corporations without regard to whether distributions have been received from
such companies.
Reporting Standards; Financial Statements of Operating Companies; Timely
Compliance with Informational and Filing Requirements
Companies in developing countries are subject to accounting, auditing and
financial standards and requirements that differ, in some cases significantly,
from those applicable to U.S. companies. In addition, there may be
substantially less publicly available information about companies in a
developing country than there is about U.S. companies. The Company's ability
to comply with the informational and filing requirements of the Indenture and
the Exchange Act to which it is or will be subject will depend on the timely
receipt of accurate and complete financial and other information from the
Company's operating companies and developmental stage projects. The failure to
receive such information on a timely basis could have a material adverse
effect on the Company, including preventing it from satisfying the
informational and filing requirements of the Indenture and the Exchange Act.
COMPANY LEVEL RISKS
Limited Operating History; Continuing Losses
The Company has a limited operating history. Since its inception in January
1992, the Company's activities have been concentrated primarily on the early
stage development of its wireless projects, including the selection of local
partners, the formation of operating companies and the pursuit of operating
licenses. The Company has incurred net losses since its inception and had an
accumulated stockholders' deficit of approximately $23.9 million at June 30,
1996. The Company anticipates that its net losses will increase significantly
in the foreseeable future, and there can be no assurance as to whether or when
the Company's operations will become profitable. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
28
<PAGE>
Negative Operating Cash Flow; Dependence on Additional Financing; No
Commitments for Additional Financing
The Company has generated negative cash flow from operations of $11.1
million for the six months ended June 30, 1996 and $2.0 million for the year
ended December 31, 1995, and expects such negative cash flows to continue and
likely increase in the foreseeable future. Because of such negative cash flow
and the capital intensive nature of the Company's business, the Company will
require continuing sources of outside debt and equity financing to fund its
working capital needs, investments and other cash requirements.
Moreover, although the Company anticipates that its cash balance is
sufficient to meet its cash requirements for approximately 12 months, there
can be no assurance that the Company will not require additional financing
prior to such time. In addition, the Company intends to pursue aggressively
additional investment opportunities for wireless projects and anticipates that
it will require additional sources of financing in order to pursue those
investments. However, the Company has no commitments or arrangements for
additional financing, and there can be no assurance that any additional debt
or equity financing will be available to the Company on acceptable terms when
required by the Company or at all. If adequate sources of additional financing
are not available, the Company will be forced to delay, scale back or
eliminate one or more of its projects or to liquidate one or more of its
investments, may be unable to repay the Exchange Notes or other liabilities as
they become due, and may be unable to meet its working capital and other cash
requirements. Accordingly, the Company's inability to obtain such additional
financing would have a material adverse effect on the Company.
Restrictions on Transfer of Ownership Interests
The Company's ability to sell or transfer its ownership interests in its
operating companies and developmental stage projects is generally subject to
(i) limitations contained in the agreements between the Company and its local
partners including, in certain cases, complete prohibitions on sales or
transfers for a period of years, co-sale rights and/or rights of first refusal
and (ii) provisions in local operating licenses and local governmental
regulations that, in certain cases, prohibit or restrict the transfer of the
Company's ownership interests in such operating companies and developmental
stage projects. Moreover, the Company and its local partners have in the past
been required to pledge their capital stock in certain operating companies to
secure credit facilities obtained by those operating companies, and the
Company may be prohibited from transferring or otherwise disposing of such
capital stock so long as it is pledged as collateral for those credit
facilities. In addition, none of the operating companies or developmental
stage projects currently has any publicly traded securities and there can be
no assurance that there will in the future be either a public or private
market for the securities of the Company's operating companies or
developmental stage projects. As a result, the Company's ability to liquidate
any or all of its investments may be substantially limited and there can be no
assurance that the Company will be able to do so in a timely manner or at all
in the event of an acceleration of the Exchange Notes prior to their maturity
or in order to satisfy its obligations in respect of such securities in the
event of a Change of Control or to repay the Exchange Notes upon their
maturity. Moreover, even if any sales are completed, the prices realized on
those sales could be less than the Company's investment, and there may be
substantial local taxes imposed on the Company in the case of any such sales
and, in any event, there can be no assurance that there will not be
substantial taxes or other restrictions on the ability of the Company to
repatriate any amounts realized upon the sale of any such investments. In
addition, certain of the operating companies and developmental stage projects
are or may be parties to credit agreements that restrict their ability to pay
dividends or make other distributions to their equity investors, and the
Company's local partners, by virtue of their majority ownership interest in
the operating companies and developmental stage projects, generally have the
right to determine the timing and amount of any such dividends or
distributions.
Lack of Control of Operating Companies and Developmental Stage Projects
The Company anticipates that it will often have a minority interest in its
operating companies and developmental stage projects, in part because
applicable laws often limit foreign investors to minority equity positions.
Although the Company is actively involved in the management of most of the
operating companies
29
<PAGE>
and developmental stage projects in which it has an ownership interest and
intends to invest in the future in operating companies and developmental stage
projects in which it can participate in management, its minority voting
positions may preclude it from controlling such entities and implementing
strategies that it favors, including strategies involving the expansion or
development of projects or the pursuit of certain financing alternatives. In
addition, the Company may be unable to access the cash flow, if any, of its
operating companies. See "--Financing Risks--Holding Company Structure;
Limitations on Access to Cash Flow of Operating Companies."
Risks Inherent in Growth Strategy
The Company has grown rapidly since inception, and as of August 31, 1996 had
operating companies or developmental stage projects in 12 foreign countries.
Subject to the availability of additional financing, the Company anticipates
that it will make additional investments in wireless projects in other foreign
countries and is actively seeking and evaluating new investment opportunities
in foreign countries where it currently has operating companies or
developmental stage projects. The growth strategy presents the risks inherent
in assessing the value, strengths and weaknesses of development opportunities,
in evaluating the costs and uncertain returns of building and expanding the
facilities for operating systems and in integrating and managing the
operations of additional operating systems. The Company's growth strategy will
place significant demands on the Company's operational, financial and
marketing resources. Any failure to manage the Company in an efficient manner
would have a material adverse effect on the Company.
Risk of Registration Under Investment Company Act of 1940
Because the Company often acquires minority ownership positions in operating
companies and development stage projects, there is a risk that it could be
characterized as an investment company under the Investment Company Act of
1940 (the "Investment Company Act"). The Company believes that it is not an
investment company and intends to continue its business and conduct its
operations so as not to become subject to the Investment Company Act. If the
Commission or its staff were to take the position, or if it were otherwise
asserted, that the Company is an investment company, the Company could be
required either (i) to liquidate its investments in one or more operating
companies or developmental stage projects and change the manner in which it
conducts its operations to avoid being required to register as an investment
company or (ii) to register as an investment company. If the Company were
required to register under the Investment Company Act, it would be subject to
substantive regulations with respect to capital structure, operations,
transactions with affiliates and other matters. In addition, a determination
that the Company is subject to the Investment Company Act would constitute an
event of default under the Indenture and permit acceleration of the Notes. If
the Company were found to be an investment company but was not registered
under the Investment Company Act, the Company would be prohibited from, among
other things, conducting public offerings in the United States or engaging in
interstate commerce in the United States, would be subject to monetary
penalties and injunctive relief in an action brought by the Commission, and
might render contracts to which the Company is a party (including the
Indenture and the Notes) unenforceable or subject to rescission by either
party thereto. As a result, any determination that the Company is an
investment company would have a material adverse effect on the Company.
Control of the Company; Conflicts of Interest
At August 31, 1996, Vanguard beneficially owned approximately 39% of the
Company's equity on an as converted basis. Vanguard has provided and continues
to provide a number of services to the Company relating to the formation,
development and operation of wireless communications services, including
identification and evaluation of wireless communications opportunities, review
of business and technical plans and assistance in training operating company
personnel. Vanguard has the right to elect three directors to the Company's
Board of Directors and has three representatives on such Board, including
Haynes G. Griffin, Chairman of the Board of Directors. As a result, Vanguard
may have the ability to effectively control the Company and direct its
business and affairs. Moreover, although the Company acquired substantially
all of Vanguard's interests in its
30
<PAGE>
international wireless projects in December 1995, Vanguard is not precluded
from competing with the Company by itself or through affiliates by developing,
owning and/or operating international wireless communications businesses,
including businesses that use the same or similar technologies or provide the
same services as the Company's existing and future operating companies.
Although the directors designated by Vanguard may abstain from voting on
matters in which the interests of the Company and Vanguard are in conflict,
they are not obligated to do so, and the presence of potential or actual
conflicts could affect the process or outcome of Board deliberations. There
can be no assurance that such conflicts of interest will not materially
adversely affect the Company. See "Business--Strategic Relationships,"
"Certain Transactions--Private Placement Transactions--The Series F Financing"
and "Description of Capital Stock."
Dependence on Key Personnel
The success of the Company and its growth strategy depends in large part on
the ability of the Company to attract and retain key management, marketing and
operating personnel, both at the Company and operating company and
developmental stage project levels. There can be no assurance the Company will
continue to attract and retain the qualified personnel needed for its
business, particularly because of the amount of international travel required
of the Company's managers and because experienced local managers are often
unavailable. In addition, the loss of the services of one or more members of
its senior management team, particularly John D. Lockton or Hugh B. L.
McClung, could have a material adverse effect on the Company.
FINANCING RISKS
Consequences of Failure to Exchange Old Notes
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act and
applicable state securities laws, or pursuant to an exemption therefrom.
Except under certain limited circumstances, the Company does not intend to
register the Old Notes under the Securities Act. In addition, any holder of
Old Notes who tenders in the Exchange Offer for the purpose of participating
in a distribution of the Exchange Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Old Notes are tendered
and accepted in the Exchange Offer, the trading market, if any, for the Old
Notes not so tendered could be adversely affected. See "The Exchange Offer,"
"Old Notes Registration Rights" and "Old Notes Transfer Restrictions."
Holding Company Structure; Limitations on Access to Cash Flow of Operating
Companies
The Exchange Notes will be the exclusive obligation of the Company, which is
a holding company with no business operations of its own. All of the
operations of the Company are conducted through its subsidiaries and
affiliated companies, which are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any amounts due pursuant to the
Exchange Notes or to make any funds available to the Company to enable it to
make payments on the Exchange Notes or make investments in operating companies
or developmental stage projects, meet working capital needs or other
liabilities of the Company, or for any other reason. In addition, most of the
operating companies have generated negative cash flow from operations, and the
Company expects that most operating companies will continue to generate
negative cash flow from operations in the foreseeable future. Further, to the
extent that any of the operating companies generates positive cash flow, the
Company may be unable to access such cash flow because (i) its owns 50% or
less of the equity of most of such entities and, therefore, does not have the
requisite control to cause such entities to pay dividends to their equity
holders; (ii) certain of such entities are currently or may become parties to
credit or other borrowing agreements that restrict or prohibit the payment of
dividends, and such entities are likely to continue to be subject
31
<PAGE>
to such restrictions and prohibitions for the foreseeable future; (iii) the
Company expects that its operating companies will generally reinvest all of
their cash flow in development opportunities for the foreseeable future; and
(iv) some of the countries in which such entities conduct business tax the
payment and repatriation of dividends or otherwise restrict the repatriation
of funds. As a result, the Company does not expect that it will be able to
generate any significant cash through dividends or other distributions from
the operating companies in the foreseeable future, and there can be no
assurance that the Company will be able to generate any significant cash flow
from the operating companies at any time in the future.
Effective Subordination
The Company's assets consist primarily of its ownership interests in its
operating companies. The Exchange Notes will be effectively subordinated to
all existing and future indebtedness and other liabilities of the Company's
subsidiaries and affiliated companies because the Company's right to receive
the assets of any such entities upon their liquidation or reorganization will
be effectively subordinated to the claims of such entities' creditors
(including trade creditors), except to the extent that the Company is itself
recognized as a creditor of any such entity, in which case the claims of the
Company would still be subordinated to any indebtedness of such entity that is
senior in right of payment to the Company's claim or that is secured by the
assets of any such entity. The operating companies have substantial
indebtedness and other liabilities.
Restrictive Covenants
The covenants set forth in the Indenture governing the Exchange Notes impose
restrictions affecting, among other things, the ability of the Company and its
Restricted Subsidiaries, Restricted Affiliates and Restricted Subsidiaries or
Restricted Affiliates to incur additional indebtedness, create liens on
assets, make loans or other investments and effect other corporate actions.
However, the covenants set forth in the Indenture are not generally be
applicable to most of the operating companies because such entities will not
be deemed to be "Restricted Subsidiaries" or "Restricted Affiliates" for
purposes of the Indenture. As a result, the ability of such operating
companies to incur additional indebtedness, to impose restrictions on their
ability to pay dividends to the Company, to sell assets or to engage in other
transactions that may be detrimental to the interests of creditors of the
Company, including the holders of Exchange Notes, is not restricted. In
addition, under certain limited circumstances, the Company will be entitled to
designate certain of its Restricted Subsidiaries and Restricted Affiliates as
Unrestricted Subsidiaries and Unrestricted Affiliates, respectively, which are
not subject to many of the restrictions set forth in the Indenture. However,
the Company's ability to make future Investments in Unrestricted Subsidiaries
and Unrestricted Affiliates are limited by the Indenture. See "Description of
Exchange Notes--Certain Covenants."
Substantial Leverage; Inability to Cover Fixed Charges
The Company is highly leveraged and has indebtedness that is substantial in
relation to its stockholders' equity. In addition, the Indenture permits the
Company to incur additional indebtedness in the future, including indebtedness
to which the Exchange Notes will be effectively subordinated and indebtedness
ranking pari passu with the Exchange Notes. The high level of the Company's
indebtedness will have important consequences to holders of the Exchange
Notes, including (i) the Company's ability to obtain additional debt financing
in the future may be limited, and (ii) the Company's level of indebtedness
could limit its flexibility in reacting to changes in the industry and
economic conditions generally. In addition, most of the existing operating
companies and developmental stage projects will not be subject to any
limitations under the Indenture on the incurrence of additional indebtedness,
and, to the extent that the Company is successful in its strategy of obtaining
additional financing at the operating company or developmental stage project
level, the amount of such indebtedness could increase substantially, which
will have consequences similar to those described in clauses (i) and (ii)
above with respect to the Company.
For the year ended December 31, 1995 and the six months ended June 30, 1996,
the Company's earnings were insufficient to cover fixed charges by $11.1
million and $10.2 million, respectively (computed as described
32
<PAGE>
in note 2 to "Prospectus Summary--Summary Historical and Unaudited Pro Forma
Consolidated Financial Data"). The Company anticipates that its earnings will
continue to be insufficient to cover fixed charges for the foreseeable future.
See "--Company Level Risks--Limited Operating History; Continuing Losses."
No Assurance of Repayment of Exchange Notes at Maturity
For each of the three years ended December 31, 1995 and the six months ended
June 30, 1996, the Company had net losses and did not generate positive cash
flow from operations and, as discussed above under "Holding Company Structure;
Limitations on Access to Cash Flow of Operating Companies," the Company does
not expect that it will generate positive cash flow from operations for the
foreseeable future. Accordingly, the Company's ability to repay the Exchange
Notes at maturity will be dependent on developing one or more sources of cash
prior to the maturity of the Exchange Notes. The Company may, among other
things, (i) seek to refinance all or a portion of the Exchange Notes at
maturity through sales of additional debt or equity securities of the Company,
(ii) seek to sell all or a portion of its interests in one or more of its
operating companies or developmental stage projects (subject to the
restrictions described above under "--Company Level Risks--Restrictions on
Transfer of Ownership Interests") or (iii) negotiate with its financial and
strategic partners to permit the cash, if any, produced by the operating
companies to be distributed to equity holders. There can be no assurance that
(i) there will be a market for the debt or equity securities of the Company in
the future, (ii) the Company will be able to sell assets in a timely manner or
on commercially acceptable terms or in an amount that will be sufficient to
repay the Exchange Notes when due, (iii) the Company will be able to obtain
the consents and approvals required in order to sell its interests in its
operating companies or developmental stage projects or (iv) that the operating
companies will in fact generate positive cash flow or that any such cash flow
will be distributed to equity holders (particularly since the Company expects
that its operating companies will generally reinvest all of their cash flow in
development opportunities for the foreseeable future). In addition, default
under the Exchange Notes could in turn permit lenders under STW's $36.4
million credit facility, and possibly under other debt instruments of the
operating companies, to declare borrowings outstanding thereunder to be due
and payable pursuant to cross-default clauses, permitting the lenders under
such debt instruments to proceed against any collateral pledged as security
therefor. See "Operating Companies--Malaysia National WLL--Investment and
Budgeted Capital Expenditures." Any failure by the Company to repay the
Exchange Notes when due would have a material adverse effect on the Company.
Ability to Realize on Collateral; No Assurance as to Value of Assets
The collateral securing the Exchange Notes will consist solely of all of the
issued and outstanding capital stock of IWC, which owns equity interests in
the Company's operating subsidiaries and affiliates, and any Intercompany
Notes of IWC. The ability of the holders of the Exchange Notes to realize upon
such collateral may be limited and subject to substantial delays. In certain
instances, the foreclosure by the Collateral Agent (as defined) on its
security interest in the capital stock of IWC may require the prior approval
of local government regulatory authorities and agreements to which the
Company, IWC or the operating companies are parties. For example, a
foreclosure could implicate transfer restrictions contained in agreements
between IWC or the Company and its operating company partners. See "--Company
Level Risks--Restrictions on Transfer of Ownership Interests." In addition,
under many of the credit and other agreements of the operating companies, the
foreclosure by the Collateral Agent on its security interest in capital stock
of IWC, would cause such operating companies to be in default of such credit
agreements. If any event of default occurs with respect to the Exchange Notes,
there can be no assurance that the liquidation of the Collateral securing the
Exchange Notes would produce proceeds in an amount sufficient to pay the
Accreted Value of the Exchange Notes. In addition, the Indenture provides that
the lenders under a Permitted Bank Facility will be entitled to share, on a
pari passu basis, in any proceeds from any foreclosure upon the Collateral
securing the Exchange Notes. See "Description of Exchange Notes--Certain
Covenants."
33
<PAGE>
Certain Bankruptcy Considerations
The right of the Collateral Agent, as agent for the holders of the Exchange
Notes, to repossess and dispose of the collateral securing the Exchange Notes
(the "Collateral") upon the occurrence of an Event of Default is likely to be
significantly impaired by the Bankruptcy Code (as defined) if a bankruptcy
proceeding were to be commenced by or against the Company prior to the
Collateral Agent's having disposed of the Collateral. Under the Bankruptcy
Code, a secured creditor, such as the Collateral Agent, is prohibited from
disposing of security repossessed from a debtor in a bankruptcy case without
bankruptcy court approval. Moreover, bankruptcy law prohibits a secured
creditor from disposing of collateral even though the debtor is in default
under the applicable debt instruments if the secured creditor is given
"adequate protection." The meaning of the term "adequate protection" may vary
according to circumstances, but this concept is intended in general to protect
the value of the secured creditor's interest in the collateral and this term
may include cash payments or the granting of additional security, if and at
such times as the court in its discretion determines, to compensate for any
diminution in the value of the collateral as a result of the stay of
disposition during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Exchange Notes could be delayed following commencement
of a bankruptcy case, whether or when the Collateral Agent could dispose of
the Collateral or whether or to what extent holders of Exchange Notes would be
compensated for any delay in payment or loss of value of the Collateral
through the requirement of "adequate protection." See "Description of Exchange
Notes--Ranking and Security." Furthermore, in the event a bankruptcy court
determines that the value of the Collateral is not sufficient to repay all
amounts due on the Exchange Notes, the holders of the Exchange Notes would
hold "undersecured claims." Applicable bankruptcy laws do not permit the
payment and/or accrual of interest, costs and attorneys' fees for
"undersecured claims" during the debtor's bankruptcy case.
Risk of Inability to Finance a Change of Control Offer
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to purchase all of the outstanding Exchange Notes at a price
equal to 101% of the Accreted Value to the date of repurchase. The Company's
failure to purchase the Exchange Notes would result in a default under the
Indenture. In the event of a Change of Control, there can be no assurance that
the Company would have sufficient assets to satisfy all of its obligations
under the Indenture. Future debt of the Company may also contain prohibitions
of certain events or transactions which would constitute a Change of Control
or require the obligations thereunder to be retired upon a Change of Control.
See "Description of Exchange Notes--Repurchase at the Option of Holders--
Change of Control."
Classification of Exchange Notes as Debt; Original Issue Discount
Although the Company intends to treat the Exchange Notes as debt for all
purposes, there can be no assurance that the Internal Revenue Service will
agree that the Exchange Notes qualify as debt for federal income tax purposes.
If the Exchange Notes are not respected as debt for such purposes, they would
likely be recharacterized as an equity interest in the Company and the
interest that accretes on the Exchange Notes would not be deductible by the
Company when accrued or paid. Loss of such interest deductions would increase
income taxes ultimately payable by the Company, and thus, reduce cash flow
otherwise available to repay the Exchange Notes, which would have a material
adverse effect on the Company. Recharacterization of the Exchange Notes as
equity could also adversely affect non-corporate holders as well as non-United
States holders (as that term is defined in "Certain Income Tax
Considerations") of the Exchange Notes.
Assuming the Exchange Notes are respected as debt for federal income tax
purposes, they will be subject to the original issue discount provisions of
the Code because they will have been issued at a non-de minimis discount from
their principal amount. Consequently, the holders of the Exchange Notes
generally will be required to include amounts in gross income for federal
income tax purposes in advance of receipt of the cash payments to which the
income is attributable. For more detailed discussion of the federal income tax
consequences of the
34
<PAGE>
exchange of Old Notes pursuant to the Exchange Offer and ownership and
disposition of the Exchange Notes, see "Certain Income Tax Considerations."
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code after the issuance of the Exchange Notes, the claim of
a holder of any of the Exchange Notes with respect to the principal amount
thereof may be limited to an amount equal to the sum of (i) the initial
offering price allocable to the Exchange Notes and (ii) that portion of the
original issue discount which is not deemed to constitute "unmatured interest"
for purposes of the Bankruptcy Code. Any original issue discount that was not
amortized as of any such bankruptcy filing would constitute "unmatured
interest."
Absence of Public Market for Exchange Notes
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in August 1996 to a small number of
institutional investors and are eligible for trading in the Private Offerings,
Resale and Trading through Automatic Linkages (PORTAL) Market.
The Company does not intend to apply for a listing of the Exchange Notes on
a securities exchange. There is currently no established market for the
Exchange Notes and there can be no assurance as to the liquidity of markets
that may develop for the Exchange Notes, the ability of the holders of the
Exchange Notes to sell their Exchange Notes or the price at which such holders
would be able to sell their Exchange Notes. If such markets were to exist, the
Exchange Notes could trade at prices that may be lower than the initial market
values thereof depending on many factors, including prevailing interest rates,
the markets for similar securities, and the financial performance of the
Company and its subsidiaries. Although there is currently no market for the
Exchange Notes, the Initial Purchasers have advised the Company that they
currently intend to make a market in the Exchange Notes. However, the Initial
Purchasers are not obligated to do so, and any such market making with respect
to the Exchange Notes may be discontinued at any time without notice. In
addition, such market-making activities will be subject to the limits imposed
by the Securities Act and the Exchange Act and may be limited during the
Exchange Offer or the pendency of an applicable Shelf Registration Statement
(as defined).
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading market
independent of the financial performance of, and prospects for, the Company.
35
<PAGE>
USE OF PROCEEDS
There will be no cash proceeds to the Company resulting from the Exchange
Offer. The net proceeds from the Unit Offering were approximately $94.2
million after deduction of placement agent fees and offering expenses. As of
August 31, 1996, the Company had used portions of such net proceeds and its
existing cash and cash equivalents (i) to repay in full on August 15, 1996 all
borrowings, interest and fees under the 1996 TD Loan Agreement, which totalled
$7.4 million, (ii) to make investments in its existing operating companies and
developmental stage projects; and (iii) for general corporate purposes. The
remaining balance of the net proceeds from the Unit Offering will be used to
make investments in its existing operating companies and developmental stage
projects and for general corporate purposes that may include investments in
additional development and acquisition opportunities.
The following table summarizes the Company's anticipated remaining
investments in its operating companies and its proposed investments in
developmental stage projects through December 31, 1997, based on its current
estimate of funding requirements of such operating companies and developmental
stage projects as of June 30, 1996. Because of the Company's operating losses,
the proceeds from the Unit Offering plus cash on hand will not be sufficient
to make all of the investments in the full amounts set forth below. To fully
fund its anticipated future investments, the Company will be required to find
additional sources of capital. Although the Company currently anticipates
funding the amounts set forth below, there can be no assurance that the
Company's investments will not vary significantly from the currently
anticipated amounts. In particular, it may be necessary for the Company to
make additional capital contributions to the operating companies and
developmental stage projects. See "Risk Factors--Company Level Risks--Negative
Operating Cash Flow; Dependence on Additional Capital Financing; No
Commitments for Additional Financing." The covenants set forth in the
Indenture will, however, significantly limit the Company's ability to make
investments in operating companies or developmental stage projects that
constitute Unrestricted Subsidiaries or Unrestricted Affiliates, including any
investments made from the net proceeds of the Unit Offering. See "Description
of Exchange Notes--Certain Covenants--Restricted Payments."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------------------------------------
REMAINING
ANTICIPATED
ADDITIONAL
TOTAL ANTICIPATED COMPANY
COMPANY COMPANY INVESTMENT
INVESTMENT INVESTMENT THROUGH
THROUGH AS OF DECEMBER 31,
LOCATION TYPE OF PROJECT DECEMBER 31, 1997(1) JUNE 30, 1996(1) 1997
- -------- --------------- -------------------- ---------------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Operating Company:
Malaysia National WLL $ 25.0 $22.2 $ 2.8
Indonesia National Cellular 25.5 21.5 4.0
Indonesia National ECTR 1.5 1.5 0.0
Philippines Regional ECTR 3.7 1.5 2.2
New Zealand National ECTR 8.8 5.0(2) 3.8(2)
Brazil Regional ECTR 16.5 12.8 3.7
Mexico Regional ECTR 2.1 2.1 0.0
Developmental Stage
Project:
Taiwan National ECTR 3.0 3.0 0.0
India (Regional)
Indonesia (National)
Star Telecom Overseas Taiwan (National)
(Paging) Thailand 13.5 0.0(3) 13.5(3)
China Regional Cellular 28.3 0.0 28.3
Pakistan National ECTR 12.8 5.4 7.4
Mexico WLL 18.5 0.0 18.5
Peru National ECTR 17.6 0.1 17.5
Peru National Paging 5.1 0.0 5.1
------ ----- ------
Total........... $181.9 $75.1 $106.8
====== ===== ======
</TABLE>
- -------
(1) Includes Preferred Stock with aggregate liquidation preferences of $19.1
million and $5.4 million that was issued by the Company to acquire
interests in certain operating companies and one developmental stage
project, respectively, pursuant to the Vanguard Exchange. See "Certain
Transactions--The Vanguard Exchange."
(2) Effective April 30, 1996, the Company acquired the remaining 50% of
TeamTalk that it did not already own for a purchase price of $3.2 million,
which was paid for in July 1996.
(3) In August 1996, the Company acquired a 70% equity interest in STOL for an
aggregate purchase price of $13.5 million.
36
<PAGE>
Pending use of the net proceeds from the Unit Offering as described above,
the Company intends to hold such proceeds in short-term investments.
The business of the Company and its operating companies and developmental
stage projects is capital intensive and will require continuing sources of
outside financing. There can be no assurance that the Company or the operating
companies or developmental stage projects will be able to obtain any such
additional financing on acceptable terms or at all. See "Risk Factors--Project
Level Risks--Operating Losses and Negative Cash Flow; Dependence on Additional
Financing/Capital" and "--Company Level Risks--Negative Operating Cash Flow;
Dependence on Additional Financing; No Commitments for Additional Financing."
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the registration of the Old Notes.
The Old Notes were originally issued and sold on August 15, 1996 (the "Issue
Date"). Such sales were not registered under the Securities Act in reliance
upon the exemption provided by Section 4(2) of the Securities Act and Rule
144A promulgated under the Securities Act. In connection with the sale of the
Old Notes, the Company agreed, for the benefit of the holders of the Old
Notes, that it would, at its own cost, (i) within 45 days after the Issue
Date, file a registration statement (the "Exchange Offer Registration
Statement") with the Commission with respect to the Exchange Offer Exchange
Notes which would have terms substantially identical in all material respects
to the Old Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions), (ii) use its best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 90 days after the Issue Date, (iii) use its best efforts
to consummate the Exchange Offer within 135 days after the Issue Date, and
(iv) upon the Exchange Offer Registration Statement being declared effective,
offer the Exchange Notes in exchange for surrender of the Old Notes. If
(i) because of any change in law or in currently prevailing interpretations of
the Staff, the Company is not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 135 days of the Issue Date, (iii) any
holder of Private Exchange Notes (as defined) so requests at any time within
one year after the consummation of the Private Exchange, (iv) the holders of
not less than a majority in aggregate principal amount of the Old Notes
reasonably determine that the interests of the holders of Old Notes would be
materially adversely affected by consummation of the Exchange Offer or (v) in
the case of any holder of Old Notes that participates in the Exchange Offer,
such holder of Old Notes does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such holder of Old
Notes as an affiliate of the Company) then the Company shall promptly deliver
written notice thereof (the "Shelf Notice") to the Trustee and in the case of
clauses (i), (ii) and (iv), all Holders, in the case of clause (iii), the
holders of the Private Exchange Notes and in the case of clause (v), the
affected Holder, and shall file with the Commission a registration statement
(the "Shelf Registration Statement") to cover resales of the Old Notes. In the
event that (i) the Company fails to file the Registration Statement, (ii) the
Registration Statement or, if applicable, the Shelf Registration Statement, is
not declared effective by the Commission, or (iii) the Exchange Offer is not
consummated or the Shelf Registration Statement ceases to be effective, in
each case within specified time periods, Additional Interest shall accrue and
be paid according to the terms and conditions of the Registration Rights
Agreement. See "Old Notes Registration Rights."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying the
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Old Notes. The terms of the Exchange Notes are
substantially identical to the terms of the Old Notes for which
37
<PAGE>
they may be exchanged pursuant to this Exchange Offer, except that the
Exchange Notes will generally be freely transferable by holders thereof, and
the holders of the Exchange Notes (as well as remaining holders of any Old
Notes) are not entitled to certain registration rights and certain additional
interest provisions which are applicable to the Old Notes under the
Registration Rights Agreement. The Exchange Notes will evidence the same debt
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder, including Rule 14e-1, to the extent applicable.
Based on its view of interpretations provided by the staff of the
Commission, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes will be freely transferable by
holders thereof other than affiliates of the Company after the Exchange Offer
without further registration under the Securities Act if the holder of the
Exchange Notes represents that it is acquiring the Exchange Notes in the
ordinary course of business, that it has no arrangement or understanding with
any person to participate in the distribution of the Exchange Notes and that
it is not an affiliate of the Company, as such terms are interpreted by the
Commission; provided that Participating Broker-Dealers receiving Exchange
Notes in the Exchange Offer will have a prospectus delivery requirement with
respect to resales of the Exchange Notes. Any broker-dealer that resells
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging, and by delivering a prospectus, a broker-dealer will not be
deemed to admit that is an "underwriter" within the meaning of the Securities
Act. Broker-dealers who acquired Old Notes as a result of market making or
other trading activities may use this Prospectus, as supplemented or amended,
in connection with resales of the Exchange Notes. The Company has agreed that,
for a period of 180 days after the Registration Statement is declared
effective, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
or any other holder that cannot rely upon such interpretations must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction.
Tendering holders of Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1996 unless the Company in
its sole discretion extends the period during which the Exchange Offer is
open, in which event the term "Expiration Date" means the latest time and date
on which the Exchange Offer, as so extended by the Company, expires. The
Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to Bankers
Trust Company (the "Exchange Agent") and by timely public announcement
communicated by no later than 5:00 p.m. on the next business day following the
Expiration Date, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
Exchange Offer, all Old Notes previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
38
<PAGE>
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Old Notes for any reason,
including if any of the events set forth below under "Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Old Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and
will either issue a press release or give written notice to the holders of the
Old Notes as promptly as practicable. Unless the Company terminates the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Company will exchange the Exchange Notes for Old Notes on the Exchange
Date.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Old Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Old Notes.
HOW TO TENDER
The tender to the Company of Old Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures
A holder of an Old Note may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Old Notes being tendered and any required
signature guarantees (or a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") pursuant to the procedure described below), to the
Exchange Agent at its address set forth on the back cover of this Prospectus
on or prior to the Expiration Date or (ii) complying with the guaranteed
delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note
register for the Old Notes, the signature on the Letter of Transmittal must be
guaranteed by an Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender Old Notes should contact such holder promptly and instruct such holder
to tender Old Notes on such beneficial owner's behalf. If such beneficial
owner wishes to tender such Old Notes himself, such beneficial owner must,
prior to completing and executing the Letter of Transmittal and delivering
such Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or follow the procedures
described in the immediately preceding paragraph. The transfer of record
ownership may take considerable time.
39
<PAGE>
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after receipt of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address specified on
the back cover of this Prospectus on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide a taxpayer identification number (social security number or
employer identification number, as applicable) and certify that such number is
correct. Each tendering holder should complete and sign the main signature
form and the Substitute Form W-9 included as part of the Letter of
Transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proved
in a manner satisfactory to the Company and the Exchange Agent.
Guaranteed Delivery Procedures
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received
as its office listed on the Letter of Transmittal on or prior to the
Expiration Date a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
principal amount of the Old Notes being tendered, the names in which the Old
Notes are registered and, if possible, the certificate numbers of the Old
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Old Notes, in proper form for transfer, will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Old Notes being tendered by the above-described method (or a timely Book-Entry
Confirmation) are deposited with the Exchange Agent within the time period set
forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), the Company may, at its option,
reject the tender. Copies of a Notice of Guaranteed Delivery which may be used
by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal
(and any other required documents) and the tendered Old Notes (or a timely
Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding.
40
<PAGE>
The Company reserves the absolute right to reject any or all tenders not in
proper form or the acceptances for exchange of which may, in the opinion of
counsel to the Company, be unlawful. The Company also reserves the absolute
right to waive any of the conditions of the Exchange Offer or any defect or
irregularities in tenders of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders. Neither the
Company, the Exchange Agent nor any other person will be under any duty to
give notification of any defects or irregularities in tenders or shall incur
any liability for failure to give any such notification. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The
Transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Old Notes, and that, when
the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The Transferor also warrants that it will, upon request, execute and deliver
any additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes. All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering Old Notes and executing the Letter of Transmittal, the
Transferor certifies that (a) it is not an Affiliate of the Company, that it
is not a broker-dealer that owns Old Notes acquired directly from the Company
or an Affiliate of the Company, that is acquiring the Exchange Notes offered
hereby in the ordinary course of such Transferor's business and that such
Transferor is not engaged in and does not intend to engage in and has no
arrangement with any person to participate in the distribution of such
Exchange Notes, (b) that it is an Affiliate of the Company or of the initial
purchaser of the Old Notes in the Offering and that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extend applicable to it, or (c) that it is a broker dealer which is a
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker dealer in the Exchange Offer (a "Participating
Broker-Dealer") and that it will deliver a prospectus in connection with any
resale of such Exchange Notes. By tendering Old Notes and executing a Letter
of Transmittal, the Transferor further certifies that it is not engaged in and
does not intend to engage in a distribution of the Exchange Notes.
WITHDRAWAL RIGHTS
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be
withdrawn, a statement that such holder is withdrawing his election to have
such Old Notes exchanged, and the name of the registered holder of such Old
Notes, and must be signed by the holder in the same manner as the original
signature on the Letter of Transmittal (including any required signature
41
<PAGE>
guarantees) or be accompanied by evidence satisfactory to the Company that the
person withdrawing the tender has succeeded to the beneficial ownership of the
Old Notes being withdrawn. The Exchange Agent will return the properly
withdrawn Old Notes promptly following receipt of notice of withdrawal. All
questions as to the validity of notices of withdrawals, including time of
receipt, will be determined by the Company, and such determination will be
final and binding on all parties.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted
for exchange validly tendered Old Notes when, as and if the Company had given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old Notes
for the purposes of receiving Exchange Notes from the Company and causing the
Old Notes to be assigned, transferred and exchanged. Upon the terms and
subject to conditions of the Exchange Offer, delivery of Exchange Notes to be
issued in exchange for accepted Old Notes will be made by the Exchange Agent
promptly after acceptance of the tendered Old Notes. Old Notes not accepted
for exchange by the Company will be returned without expense to the tendering
holders (or in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
procedures described above, such non-exchanged Old Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) promptly
following the Expiration Date or, if the Company terminates the Exchange Offer
prior to the Expiration Date, promptly after the Exchange Offer is so
terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange
Notes in respect of any properly tendered Old Notes not previously accepted
and may terminate the Exchange Offer (by oral or written notice to the
Exchange Agent and by timely public announcement communicated by no later than
5:00 p.m. on the next business day following the Expiration Date, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service) or, at its option, modify or otherwise amend the
Exchange Offer, if (a) there shall be threatened, instituted or pending any
action or proceeding before, or any injunction, order or decree shall have
been issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain or
prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, (ii) assessing or seeking any
damages as a result thereof or (iii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of the
Old Notes pursuant to the Exchange Offer; (b) any statute, rule, regulation,
order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgement of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (a)(i) or (ii) above or, in the reasonable judgement of
the Company, might result in the holders of Exchange Notes having obligations
with respect to resales and transfers of Exchange Notes which are greater than
those described in the interpretations of the Staff referred to on the cover
page of this Prospectus, or would otherwise make it inadvisable to proceed
with the Exchange Offer; or (c) a material adverse change shall have occurred
in the business, condition (financial or otherwise), operations, or prospects
of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in
whole or in part at any time or
42
<PAGE>
from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights will not be deemed a waiver of
any such right, and each right will be deemed an ongoing right which may be
asserted at any time or from time to time. In addition, the Company has
reserved the right, notwithstanding the satisfaction of each of the foregoing
conditions, to terminate or amend the Exchange Offer prior to the Expiration
Date.
Any determination by the Company concerning the fulfillment or
nonfulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes tendered
and no Exchange Notes will be issued in exchange for any such Old Notes, if at
such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
EXCHANGE AGENT
Bankers Trust Company has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at:
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Mail or Courier:
BT Services
Tennessee,
Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization
Unit Corporate Trust and Agency Group Corporate Trust and Agency Group
P.O. Box
292737 Receipt & Delivery Window Reorganization Unit
Nashville, TN
37229-2737 123 Washington St., 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
Confirm: (615) 835-3572
Fax: (615) 835-3701
</TABLE>
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Company will, however, pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and
expenses of the Exchange Agent and printing, accounting, legal fees and
miscellaneous expenses will be paid by the Company and are estimated to be
approximately $235,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Old Notes in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
However, the Company may, at its discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Old Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky
43
<PAGE>
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or
more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes by tendering holders should not
be a taxable exchange for federal income tax purposes, and such holders should
not recognize any taxable gain or loss as a result of such exchange. See
"Certain Income Tax Considerations."
OTHER
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in the terms of the Old Notes
and the Registration Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for any such rights under the
Registration Rights Agreement which by their terms terminate or cease to have
further effect as a result of the making of this Exchange Offer. See
"Description of Exchange Notes." All untendered Old Notes will continue to be
subject to the restriction on transfer set forth in the Indenture. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for any remaining Old Notes could be adversely
affected. See "Risk Factors--Consequences of Failure to Exchange Old Notes"
and "Old Note Registration Rights."
Subject to the restrictions contained in the Indenture, the Company may in
the future seek to acquire untendered Old Notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. The
Company has no present plan to acquire any Old Notes which are not tendered in
the Exchange Offer.
44
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization as of June 30,
1996, and as adjusted to give effect to the sale of Old Notes and Warrants in
the Unit Offering.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long-term debt(1)........................................ $ -- $ 69,702
Redeemable convertible preferred stock, $0.01 par value
per share; 21,541,480 shares designated; 15,973,200
shares issued and outstanding; net of note receivable
from stockholder of $26(2).............................. $100,306 $100,306
Stockholders' deficit:
Convertible preferred stock, $0.01 par value per share;
1,200,000 shares designated, issued and outstanding... 12 12
Common stock, $0.01 par value per share; 26,000,000
shares authorized; 328,000 shares issued and
outstanding(3)........................................ 3 3
Additional paid-in capital(1).......................... 749 31,049
Note receivable from stockholder....................... (152) (152)
Cumulative translation adjustment...................... 40 40
Accumulated deficit.................................... (23,905) (23,905)
-------- --------
Total stockholders' equity (deficit)................. (23,253) 7,047
-------- --------
Total capitalization............................... $ 77,053 $177,055
======== ========
</TABLE>
- --------
(1) Reflects (i) the completion of the Unit Offering in which the Company sold
196,720 Units, each consisting of a $1,000 principal amount Old Note and a
warrant initially entitling the holder to purchase 11.638 shares of Common
Stock, and (ii) the allocation of the aggregate purchase price of the
Units to the Old Notes and the Warrants. Does not reflect any additional
shares of Common Stock that will be issuable in respect of the Warrants in
the event that the Company does not complete a Threshold Public Offering
or Qualified Reorganization on or prior to the IPO Contingency Date. See
"Prospectus Summary--Financing Strategy and History."
(2) Excludes 1,173,280 shares of Preferred Stock issuable upon the exercise of
outstanding warrants. See "Management--Compensation Committee Interlocks
and Insider Participation" and "Certain Transactions--Private Placement
Transactions."
(3) Excludes 1,752,960 shares of Common Stock issuable upon the exercise of
stock options outstanding as of June 30, 1996, pursuant to the Company's
1994 Stock Option/Stock Issuance Plan (the "Stock Plan"). Subsequent to
June 30, 1996, the Company granted options to purchase an additional
170,000 shares of Common Stock pursuant to the Stock Plan. Further, in
March 1996, the Board of Directors of the Company approved the automatic
grant of options to purchase an aggregate of 100,000 shares of Common
Stock to certain service providers of the Company upon the next
anniversary of their employment with the Company. See "Management--1994
Stock Option/Stock Issuance Plan" and "Certain Transactions--Transactions
with Founders." Also excludes the 2,289,428 shares of Common Stock
initially issuable upon the exercise of the Warrants.
45
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed financial
statements have been prepared by the Company's management from its historical
financial statements included in this Prospectus. The unaudited pro forma
consolidated condensed statements of operations for the year ended December
31, 1995 and the six months ended June 30, 1996 reflect adjustments as if the
Company had (i) closed the Unit Offering as of January 1, 1995; and (ii),
acquired or merged with the entities described in the accompanying notes as of
January 1, 1995. The Unit Offering has been reflected in the unaudited pro
forma consolidated condensed balance sheet as if it had occurred as of
June 30, 1996. Acquisitions or mergers, other than the acquisition of an
interest in Mainstream Limited, a company to be renamed Star Telecom Overseas
(Cayman Islands) Limited, have been fully reflected in the Company's
historical balance sheet as of June 30, 1996.
The unaudited pro forma consolidated condensed financial statements should
be read in conjunction with the notes included herewith, the Company's audited
consolidated financial statements and notes thereto as of December 31, 1994
and 1995 and for the three years ended December 31, 1995, the Company's
unaudited consolidated condensed financial statements as of and for the six
months ended June 30, 1996 ("First Six Months"), "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
statements of significant 50% or less owned affiliates included elsewhere in
the Prospectus.
The unaudited pro forma consolidated condensed financial statements do not
purport to represent what the Company's results of operations or financial
position would have been had the Unit Offering or acquisitions and mergers
indicated occurred on the dates specified, or to project the Company's results
of operations or financial position for any future period or date. The pro
forma adjustments are based upon available information and certain assumptions
that management believes are reasonable under the circumstances. In the
opinion of management, all adjustments have been made that are necessary to
present fairly the pro forma data. Final amounts could differ from those set
forth below.
46
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-------------------------------------------------------
UNIT OFFERING ACQUISITION
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 5,249 $ 96,364 (ai) $101,613
Accounts receivable.... 197 197
Notes receivable from
affiliates............ 1,433 1,433
Note receivable........ 3,106 3,106
Advance to affiliate... 102 102
Other receivables...... 515 515
Other current assets... 428 428
-------- -------- --------
Total current
assets.............. 11,030 96,364 107,394
Property and equipment,
net..................... 11,051 11,051
Investments in
affiliates.............. 47,524 47,524
Telecommunication
licenses, net........... 13,389 $5,400 (di) 18,789
License deposit.......... 3,042 3,042
Deferred debt issuance
costs................... -- 5,838 (aii) 5,838
Other assets............. 971 971
-------- -------- ------ --------
Total assets......... $ 87,007 $102,202 $5,400 $194,609
======== ======== ====== ========
<CAPTION>
LIABILITIES, REDEEMABLE
CONVERTIBLE
PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable and
accrued expenses...... $ 5,954 $ 2,200 (aii) $ 8,154
Notes payable.......... 4,000 4,000
-------- -------- --------
Total current
liabilities......... 9,954 2,200 12,154
Senior secured notes..... -- 69,702 (aiii) 69,702
Redeemable convertible
preferred stock......... 100,306 100,306
Minority interest........ -- $5,400 (dii) 5,400
Stockholders' deficit:
Convertible preferred
stock................. 12 12
Common stock........... 3 3
Additional paid-in
capital............... 749 30,300 (aiv) 31,049
Note receivable from
stockholder........... (152) (152)
Cumulative translation
adjustment............ 40 40
Accumulated deficit.... (23,905) (23,905)
-------- -------- ------ --------
Total stockholders'
deficit............. (23,253) 30,300 -- 7,047
-------- -------- ------ --------
Total liabilities,
redeemable
convertible
preferred stock and
stockholders'
deficit............. $ 87,007 $102,202 $5,400 $194,609
======== ======== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
47
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
-------------------------------------------------- ------------------------------------------------
UNIT OFFERING ACQUISITION UNIT OFFERING ACQUISITION
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------------- ----------- --------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue....... $ -- $ 369 (e) $ 369 $ 183 $ 282 (e) $ 465
Cost of sales........... -- 785 (e) 785 180 338 (e) 518
-------- -------- ------- -------- ------- ------- ----- --------
Gross margin........... -- (416) (416) 3 (56) (53)
Operating expenses:
General and
administrative
expenses.............. 6,365 1,493 (e) 8,729 6,353 589 (e) 7,118
871 (f) 176 (f)
Equity in losses of
affiliates............ 3,756 1,113 (g) 5,503 2,986 (21)(g) 2,633
634 (h) (332)(h)
-------- -------- ------- -------- ------- ------- ----- --------
Loss from operations... (10,121) (4,527) (14,648) (9,336) (468) (9,804)
Other income (expense):
Interest income........ 232 232 424 424
Interest expense....... (1,354) $(15,407)(b) (17,469) (201) $(9,105)(b) (9,725)
(708)(c) (419)(c)
Other.................. (28) (28) (13) (13)
-------- -------- ------- -------- ------- ------- ----- --------
Net loss............. $(11,271) $(16,115) $(4,527) $(31,913) $(9,126) $(9,524) $(468) $(19,118)
======== ======== ======= ======== ======= ======= ===== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
48
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THE UNIT OFFERING
The unaudited pro forma consolidated condensed financial statements reflect
adjustments for the Unit Offering, in which the Company sold 196,720 Units,
each consisting of a $1,000 principal amount Old Note and one Warrant
initially entitling the holder to purchase 11.638 shares of Common Stock. The
Unit Offering closed on August 15, 1996, providing total net proceeds of $94.2
million after deducting placement agent fees and offering expenses. The Unit
Offering has been reflected in the unaudited pro forma consolidated condensed
balance sheet as if the Unit Offering had occurred as of June 30, 1996, and on
the unaudited pro forma consolidated condensed statements of operations as if
the Unit Offering had occurred as of January 1, 1995.
THE ACQUISITIONS
The unaudited pro forma consolidated condensed financial statements reflect
adjustments for the following acquisitions and mergers:
Star Telecom Overseas (Cayman Islands) Limited
In August 1996, the Company acquired a 70% interest in Mainstream Limited, a
company to be renamed Star Telecom Overseas Limited ("STOL"), for a purchase
price of $13,500,000. The acquisition of STOL has been reflected in the
unaudited pro forma consolidated condensed balance sheet as if STOL had been a
consolidated majority-owned subsidiary as of June 30, 1996, and the unaudited
pro forma consolidated condensed statements of operations as if STOL had been
a consolidated majority-owned subsidiary since January 1, 1995.
TeamTalk Limited
Effective April 30, 1996, the Company acquired the remaining 1,700,000
shares of common stock of TeamTalk from the other TeamTalk shareholder for a
purchase price of approximately $3,198,000. This acquisition resulted in the
Company obtaining 100% ownership in TeamTalk. The acquisition of the remaining
50% ownership of TeamTalk has been reflected in the unaudited pro forma
consolidated condensed statements of operations as if the TeamTalk acquisition
had occurred on January 1, 1995.
Syarikat Telefon Wireless (M) SDN BHD
At various times during 1995, the Company purchased ownership interests in
STW, the Company's WLL operating company in Malaysia, to increase its
ownership percentage from 2% at the beginning of fiscal 1995 to 30% by
December 31, 1995. The investments have been reflected in the unaudited pro
forma consolidated condensed statements of operations as if the Company's
ownership had been 30% since January 1, 1995, accounting for the investment by
the equity method.
PT Rajasa Hazanah Perkasa
During 1995, the Company acquired ownership interests in RHP through which
the Company owns its interest in its Indonesia national cellular project. The
initial interest acquired was 15% in March 1995, which was then increased to
25% in October 1995. This investment has been reflected in the unaudited pro
forma consolidated condensed statements of operations as if the Company's
ownership had been 25% since January 1, 1995, accounting for the investment by
the equity method.
49
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--
(CONTINUED)
Merger with Vanguard International Telecommunications, Inc.
On December 18, 1995, the Company consummated a merger with Vanguard
International Telecommunications, Inc. ("VIT"), a wholly owned subsidiary of
Vanguard, as described in "Certain Transactions--The Vanguard Exchange" and
Note 4 of the Consolidated Financial Statements included elsewhere in this
Prospectus. This merger has been reflected in the unaudited pro forma
consolidated condensed statements of operations as if this merger had been
consummated on January 1, 1995.
PRO FORMA ADJUSTMENTS
Unit Offering Adjustments
The Unaudited Pro Forma Consolidated Condensed Balance Sheet gives effect to
the following Unit Offering adjustments:
(a) Represents the effects of the Unit Offering as if it had occurred on
June 30, 1996. The adjustments, based on gross proceeds of
approximately $100,000,000 and assuming total debt issuance costs of
approximately $5,838,000, reflect:
(i) an addition to cash representing net proceeds associated with the
issuance of the Units ;
(ii) an addition to defer debt issuance costs consisting of placement
agent fees of $3,638,000 netted against the proceeds and the
accrual of $2,200,000 of estimated additional debt issue costs;
(iii) an addition to long-term debt for the liability associated with
the 14% Senior Secured Notes net of the value associated with
warrants issued; and,
(iv) an increase to additional paid-in capital to record the value
attributed to the warrants associated with the Units.
The Unaudited Pro Forma Consolidated Condensed Statements of Operations
give effect to the following Unit Offering adjustments:
(b) Represents additional interest expense assuming the Unit Offering
occurred on January 1, 1995 of $15,407,000 and $9,105,000 for the year
ended December 31, 1995 and for the six months ended June 30, 1996,
respectively, calculated using the interest method.
(c) Represents amortization of debt issuance costs assuming the Unit
Offering occurred on January 1, 1995 of $708,000 and $419,000 for the
year ended December 31, 1995 and for the six months ended June 30,
1996, respectively, calculated using the interest method.
Acquisition Adjustments
The Unaudited Pro Forma Consolidated Condensed Balance Sheet gives effect to
the following acquisition adjustments:
(d) Represents the consolidation of STOL as if the Company's acquisition of
a 70% ownership interest had occurred on June 30, 1996. The
adjustments, based on a purchase price of $13,500,000, reflect:
(i) the acquisition of the individual assets of STOL as of June 30,
1996, which consist principally of telecommunication licenses; and,
(ii) the recording of minority interest for the remaining 30% ownership
of STOL.
50
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--
(CONTINUED)
The Unaudited Pro Forma Consolidated Condensed Statements of Operations
give effect to the following acquisitions adjustments:
(e) Represents the results of operations of TeamTalk derived from financial
statements of TeamTalk for the following periods (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996(1)
------------------ ------------------------
<S> <C> <C>
Operating revenues............ $ 369 $ 282
Cost of sales................. 785 338
Operating expenses............ 1,493 589
------- -----
Net loss...................... $(1,909) $(645)
======= =====
</TABLE>
--------
(1) Includes the results of operations for the period from January 1,
1996 through April 30, 1996. Results of operations for the period
from May 1, 1996 through June 30, 1996 are reflected in the
historical financial statements for the six months ended June 30,
1996.
(f) Represents amortization of telecommunications licenses over 20 years
for consolidated subsidiaries (Servicos de Radio Comunicacaoes Ltda.
("SRC") and M/S Mobilcom (Pte) Ltd. ("Mobilcom")) for periods prior to
the date of their acquisition. The Company acquired its ownership
interests in SRC and Mobilcom in connection with the Vangard Exchange.
In addition to these subsidiaries, the pro forma financial statements
also include TeamTalk and STOL as pro forma consolidated subsidiaries.
The additional amortization results from the excess of the costs of the
Company's investments in these entities over the Company's
proportionate interests in the net assets of these entities, assuming
the acquisitions had occurred on January 1, 1995. The excess investment
costs are attributed principally to telecommunication licenses.
Adjustments are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------ ------------------------
<S> <C> <C>
TeamTalk...................... $ 83 $ 41
STOL.......................... 270 135
SRC........................... 269 --
Mobilcom...................... 249 --
---- ----
Total......................... $871 $176
==== ====
</TABLE>
51
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--
(CONTINUED)
(g) Represents additional amortization of the excess of the cost of the
Company's investments over its proportionate interests in the net
assets in entities accounted for by the equity method. The excess
investment costs are attributed to telecommunication licenses held by
the investees. These entities include STW, RHP, HFCL Mobile Radio
Limited ("HFCL") and PT Binamulti Visualindo ("PTBV"); interests in all
these investees except STW were acquired in connection with the Vangard
Exchange. The additional amortization results from the assumption that
all the investments in the investees had been made on January 1, 1995.
In addition, an adjustment has been applied to remove TeamTalk's
amortization included in the historical financial statements, as
TeamTalk is accounted for as a consolidated subsidiary effective April
30, 1996. Adjustments are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------ ------------------------
<S> <C> <C>
STW........................... $ 235 $ --
RHP........................... 865 --
HFCL.......................... 11 --
PTBV.......................... 9 --
TeamTalk...................... (7) (21)
------ ----
Total......................... $1,113 $(21)
====== ====
</TABLE>
(h) Represents the additional equity in net losses of STW and RHP assuming
the Company's investments for current ownership interests of 30% and
25%, respectively, had been made on January 1, 1995. In addition, an
adjustment is required to remove the Company's equity in the losses of
TeamTalk which is accounted for as a consolidated investment effective
April 30, 1996. Adjustments are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------ ------------------------
<S> <C> <C>
STW........................... $ 718 $ --
RHP........................... 424 --
TeamTalk...................... (508) (332)
----- -----
Total......................... $ 634 $(332)
===== =====
</TABLE>
52
<PAGE>
CONSOLIDATED SELECTED FINANCIAL DATA
The following selected consolidated balance sheet and statement of
operations data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
financial statements and related notes thereto included elsewhere in this
Prospectus. The consolidated selected financial data as of and for the years
ended December 31, 1993, 1994 and 1995 are derived from, and qualified by
reference to, such financial statements, which have been audited by KPMG Peat
Marwick LLP, independent public accountants, whose report indicated a reliance
on other auditors relative to certain amounts relating to the Company's
investment in RHP as of and for the year ended December 31, 1995. The audited
financial statements of RHP as of and for the year ended December 31, 1995,
together with the independent auditors' report thereon, are included elsewhere
in this Prospectus. The consolidated selected financial data as of and for the
year ended December 31, 1992 were derived from financial statements which have
been audited by other auditors. The Company was incorporated in January 1992.
The consolidated selected financial data as of June 30, 1996 and for the six
months ended June 30, 1995 and 1996 are derived from unaudited financial
statements prepared by the Company that, in the opinion of management, reflect
all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the financial data for such periods and as of such date.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the entire year.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ----------------
1992 1993 1994 1995 1995 1996
----- ----- ------- -------- ------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenue........... $ -- $ -- $ -- $ -- $ -- $ 183
Cost of sales............... -- -- -- -- -- 180
----- ----- ------- -------- ------- -------
Gross margin............... -- -- -- -- -- 3
Operating expenses:
General and administrative
expenses.................. 169 809 2,481 6,365 2,073 6,353
Equity in losses of
affiliates................ -- -- -- 3,756 525 2,986
----- ----- ------- -------- ------- -------
Loss from operations..... (169) (809) (2,481) (10,121) (2,598) (9,336)
Other income (expense):
Interest income............ 5 2 106 232 112 424
Interest expense........... -- (33) (115) (1,354) (201) (201)
Other expense.............. -- (1) (13) (28) (10) (13)
----- ----- ------- -------- ------- -------
Net loss................. $(164) $(841) $(2,503) $(11,271) $(2,697) $(9,126)
===== ===== ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------- -----------
1992 1993 1994 1995 1996
---- ------ ------- -------- -----------
BALANCE SHEET DATA: (IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total current assets................ $ 4 $ 701 $12,580 $ 26,851 $ 11,030
Property and equipment, net......... 10 15 88 4,269 11,051
Investments in affiliates........... 322 1,723 5,427 52,280 47,524
Telecommunication licenses, net..... -- -- -- 12,106 13,389
License deposit..................... -- -- -- -- 3,042
Other assets........................ 200 201 329 137 971
---- ------ ------- -------- --------
Total assets........................ $536 $2,640 $18,424 $ 95,643 $ 87,007
==== ====== ======= ======== ========
Total current liabilities........... $ 50 $2,215 $ 2,000 $ 11,557 $ 9,954
Redeemable convertible preferred
stock.............................. -- -- 19,446 98,254 100,306
Total stockholders' equity
(deficit).......................... 486 425 (3,022) (14,168) (23,253)
---- ------ ------- -------- --------
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity (deficit)..... $536 $2,640 $18,424 $ 95,643 $ 87,007
==== ====== ======= ======== ========
</TABLE>
53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company owns and operates wireless communications projects in various
developing countries, primarily in Asia and Latin America. The Company owns
interests in seven operating companies located in Brazil, Indonesia, Malaysia,
Mexico, New Zealand and the Philippines. These companies offer a variety of
wireless communications services including cellular telephone, WLL and ECTR.
As of June 30, 1996, five of these projects had commercial operations. In
addition, the Company currently has a number of developmental stage projects
in these and other countries which will, if such projects become commercial,
offer, in addition to the above services, paging and wireless cable
television. The Company has minority ownership positions in many of its
operating companies and developmental stage projects, largely due to
restrictions on the level of foreign ownership under local law and, in some
cases, to historical limitations on the Company's access to capital.
As the Company generally invests in early stage projects, these projects
typically have neither cash flow nor revenue to support operating costs,
working capital and capital expenditures. In addition, to the extent that such
projects generate positive cash flow, the continuing capital investment
required to satisfy the growth requirements often encountered in such wireless
communications companies, as well as increasing operating expenses and working
capital requirements, typically results in little or no excess funds being
available for distribution to stockholders. As a result, the Company does not
expect its operating companies or developmental stage projects to pay any cash
dividends or other cash distributions for the foreseeable future. Therefore,
the ability of the Company to meet its operating expenses, other cash needs
and to make additional investments will be dependent upon its ability to raise
funds through debt financings, the sale of equity securities or the
liquidation of its investments. There can be no assurances that funds will be
available from any of these sources.
The Company has reported net losses for each fiscal year since the date of
its organization. As the Company continues to make investments accounted for
under the equity method or on a consolidated basis, these losses can be
expected to increase significantly.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 and 1995
The Company's net loss increased from $2.7 million for the first six months
of 1995 to $9.1 million for the first six months of 1996, an increase of 238%.
The increased loss was due to the increase in all expenses, especially general
and administrative expenses, and in equity in losses of affiliates.
The Company recorded minimal operating revenue for the first time during the
first six months of 1996 in the amount of $183,000, offset by $180,000 in cost
of sales, due to TeamTalk now being consolidated as a result of entering into
an agreement to purchase the remaining 50% of TeamTalk during the first six
months of 1996.
General and administrative expenses increased from $2.1 million for the
first six months of 1995 to $6.4 million for the first six months of 1996, an
increase of 206%. This was primarily due to increases in salary, travel
expenses, and consulting fees which reflected the overall growth in the
Company's business. In addition the first six months of 1996 includes $332,000
representing two months of general and administrative expense associated with
the consolidation of TeamTalk. This increase was also due to the amortization
of telecommunication licenses of consolidated subsidiaries of $313,000. There
was no material amortization of telecommunication licenses for consolidated
subsidiaries in the first six months of 1995.
Equity in losses of affiliates increased from $525,000 for the first six
months of 1995 to $3.0 million for the first six months of 1996, an increase
of 469%. This loss represented $261,000 and $1.9 million of operating losses
and $264,000 and $1.1 million of expense relating to the amortization of
telecommunication licenses during the first six months of 1995 and 1996,
respectively. The increase in operating losses reflects the overall
54
<PAGE>
growth of the Company's equity investments during the past year as well as the
Company's percentage of ownership increasing in these investments from 1995 to
1996. The increase in amortization is due to the timing of additional
investments occurring in the later part of 1995. Interest expense will
increase significantly in the future as a result of the issuance of the Old
Notes in the Unit Offering.
Interest income increased from $112,000 for the first six months of 1995 to
$424,000 for the first six months of 1996, an increase of 279%. This was
primarily due to higher average cash balances as compared to the prior period
as a result of the issuance of Preferred Stock.
Interest expense remained the same at $201,000 for the first six months of
1995 and 1996.
Years Ended December 31, 1995 and 1994
The Company's net loss increased from $2.5 million for 1994 to $11.3 million
for 1995, an increase of 350%. As the Company did not have any revenues during
either year, the increase was caused by higher general and administrative and
debt service expenses and to equity in losses of affiliates.
General and administrative expenses increased from $2.5 million for 1994 to
$6.4 million for 1995, an increase of 157%. This was primarily due to expanded
business development activities with a resultant increase in salary expense
from $661,000 to $1.7 million, an increase of 151%, consultants fees from
$269,000 to $1.2 million, an increase of 351%, and travel and related expenses
from $719,000 to $1.7 million, an increase of 140%.
Equity in losses of affiliates was $3.8 million for 1995. This represented
$2.8 million of operating losses, and $966,000 of expenses relating to the
amortization of telecommunications licenses. During 1994 the Company had no
material investments accounted for under the equity method.
Interest income increased from $106,000 to $232,000, an increase of 119%.
This was primarily due to higher average cash balances during the latter part
of the year as a result of the issuance of Preferred Stock.
Interest expense increased from $115,000 to $1.4 million. This is primarily
due to increased financing activity during the year.
Years Ended December 31, 1994 and 1993
The Company's net loss increased from $841,000 for 1993 to $2.5 million for
1994, an increase of 198%. This was primarily due to increases in general and
administrative costs as the Company, as a development stage enterprise, had no
operating revenue during either year.
General and administrative expenses increased from $809,000 for 1993 to $2.5
million for 1994, an increase of 207%. This was primarily due to an increase
in staff from six people at year end 1993 to nine people at year end 1994 and
a concomitant increase in staff costs such as travel and related expenses.
Interest income increased from $2,000 for 1993 to $106,000 for 1994. This
was due to the increase in the Company's average cash balances over the year
as a result of the issuance of $18.5 million of Preferred Stock during 1994.
Interest expense increased from $33,000 for 1993 to $115,000 for 1994, an
increase of 248%, due to an increase in notes payable outstanding during 1994.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded its cash requirements primarily using the
net proceeds from a series of Preferred Stock private placements, bridge loans
and the Unit Offering. The bridge loans have generally been
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converted into Preferred Stock. The proceeds from these financings were mainly
used to fund the Company's investments in operating companies and
developmental stage projects, to provide working capital and for general
corporate purposes, including the expenses incurred in seeking and evaluating
new investment opportunities. As of December 31, 1995 and June 30, 1996, the
Company had cash balances of $25.4 million and $5.2 million, respectively. The
Unit Offering increased the Company's cash balance by approximately $85.4
million after deducting placement agent fees and offering expenses and paying
of all amounts due under the 1996 TD Loan Agreement.
The Company has generated negative cash flow from operations for each of the
last three fiscal years and for the six months ended June 30, 1996, and its
operating companies and developmental stage projects are not expected to
provide any cash to the Company for the foreseeable future. As a result, the
Company is and will remain dependent upon raising funds from outside sources
to fund its working capital needs, investments in operating companies and
developmental stage projects and other cash requirements and to repay the
Exchange Notes and any other indebtedness it may incur when it becomes due and
payable.
The Company will require additional financing prior to December 31, 1997 to
meet currently anticipated investments in its operating companies and
developmental stage projects. The Company has no commitments or arrangements
for additional financing, and there can be no assurance that this additional
financing will be available to the Company on acceptable terms when required
by the Company or at all. The Company's inability to obtain such additional
financing on acceptable terms would have a material adverse effect on the
Company. In addition, the Company intends to pursue additional investment
opportunities for wireless communications projects and will require additional
sources of financing in order to pursue those investments. However, there can
be no assurance that such additional financing will be available on favorable
terms or at all. See "Risks Factors--Company Level Risks--Negative Operating
Cash Flow; Dependence on Additional Financing; No Commitments for Additional
Financing."
At the project level, the Company and its partners typically fund initial
project investments using capital contributions either in the form of equity
or shareholder loans. When projects become operational, the Company seeks to
fund ongoing development of the project using third-party financing,
preferably on a non-recourse basis to the Company.
Mobilkom, the Company's national ECTR operating company in Indonesia,
arranged a $50.0 million credit facility through a syndicate of Thai banks.
This facility is secured by all of the assets and capital stock of Mobilkom,
and $25.0 million of the facility has been guaranteed by Jasmine International
Public Company Limited ("Jasmine"), a 56.25% owner of Mobilkom. As of June 30,
1996, approximately $20.0 million was outstanding under this facility. The
Company anticipates that the current $50.0 million facility will be sufficient
for Mobilkom to meet all of its currently anticipated expenditures through
1997. Borrowings outstanding under this credit facility must be repaid in 16
quarterly installments commencing in 2000.
Mobisel, the Company's national cellular operating company in Indonesia in
which the Company holds an indirect 17.5% interest through RHP, has obtained a
$60.0 million credit facility from Nissho Iwai International (Singapore) Pte.,
Ltd. ("Nissho Iwai"). This facility is secured by all of Mobisel's assets and
a pledge of all of the capital stock held by RHP. RHP has also guaranteed the
credit facility. Borrowings under the credit facility with Nissho Iwai are
limited to funds necessary for the implementation and construction of its
network. Mobisel will require substantial additional financing to complete its
planned capital expenditures through 1997 and for other cash needs.
Accordingly, Mobisel has commenced discussions with a number of potential
financing sources in order to obtain additional financing. Borrowings
outstanding under this credit facility must be repaid in six equal semi-annual
installments beginning in late 1998.
STW, the Company's national WLL operating company in Malaysia, has arranged
a Ringgit 91.0 million (approximately $36.4 million as of June 30, 1996)
credit facility through a syndicate of Malaysian banks. This facility is
secured by substantially all of STW's assets and a pledge of all of the
capital stock of STW held by
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the Company and STW's other shareholders, and has been guaranteed by Shubila
Holding SDN BHD, the 60% owner of STW, and certain officers of STW (including
an officer of the Company). In addition, STW has agreed to assign to and
deposit with the banks all of its cash, including revenues, loan drawings and
shareholder advances. In addition to pledging their capital stock in STW, the
Company and the other STW shareholders have entered into a "keep well"
covenant pursuant to which they have agreed (i) to insure that STW remains
solvent and able to meet its financial liabilities when due and (ii) to insure
the timely completion of its WLL project and to make additional debt or equity
investments in STW necessary to meet any cost overruns. Accordingly, the
Company and the other STW shareholders could be jointly and severally liable
for amounts payable under the credit facility in the event of a default by
STW. Borrowings outstanding under this credit facility must be repaid in
eleven semi-annual installments beginning in October 1997. As of June 30,
1996, this facility was fully drawn and it is the intention of the Company and
its partners to seek additional third party debt financing to fund continued
expansion of STW's network and to refinance outstanding indebtedness under the
credit facility. See "Business--Operating Companies" and Note 7 of Notes to
Consolidated Financial Statements for additional information regarding the
credit facilities of STW, Mobisel and Mobilkom.
The business of the operating companies and developmental stage projects is
capital intensive and will require continuing sources of outside financing to
fund their working capital needs, capital expenditures and other cash
requirements. In particular, STW and Mobisel will require substantial
additional financing in order to complete planned capital expenditures.
However, there can be no assurance that the operating companies and the
developmental stage projects will be able to obtain required additional
financing on acceptable terms or at all, which could have a material adverse
effect on the Company. In addition, there can be no assurance that the
operating companies or developmental stage projects will be able to pay their
indebtedness or other liabilities when due. See "Risk Factors--Project Level
Risks--Operating Losses and Negative Cash Flow; Dependence on Additional
Financing/Capital."
As of June 30, 1996, the Company had total outstanding indebtedness of $4.0
million. Such indebtedness represents the Company's pro rata share of a note
payable to a subsidiary of Bell Atlantic Corporation ("Bell Atlantic")
pursuant to RHP's purchase of Bell Atlantic's 35% equity stake in RHP. The
Company's partners in RHP and RHP itself are jointly and severally liable with
IWC under this note, with principal and accrued interest totalling $17.1
million due in October 1996.
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BUSINESS
BACKGROUND
The Company is a leading developer, owner and operator of wireless
communications companies and projects in emerging markets in Asia and Latin
America. These companies and projects provide or are developing a variety of
wireless communications services, including cellular telephone, wireless local
loop ("WLL"), enhanced capacity trunked radio ("ECTR"), paging and wireless
cable television. The Company currently has interests in seven operating
companies in Brazil, Indonesia, Malaysia, Mexico, New Zealand and the
Philippines. In addition, the Company has interests in seven developmental
stage projects in China, India, Indonesia, Mexico, Pakistan, Peru, Taiwan and
Thailand and is actively pursuing other development and acquisition
opportunities. As of June 30, 1996, the Company's operating companies had
licenses covering an estimated 370 million people ("POPs") which, based on the
Company's equity interests in these operating companies, represented an
estimated 90 million equity POPs. As of June 30, 1996, the Company's operating
companies, which are generally in the early stages of operating and expanding
their networks, served approximately 50,000 subscribers.
Demand for Communications Services in Developing Countries
Many countries in Asia and Latin America are experiencing rapid economic
growth, but are hindered by inadequate telecommunications services. The
Company believes that businesses in particular are demanding better services
to improve competitiveness and are seeking cost-effective mobile
communications services to enhance their operations. The following table sets
forth certain information with respect to the countries in which the Company's
operating companies and developmental stage projects are located, together
with comparative information for the United States.
<TABLE>
<CAPTION>
POPULATION REAL GDP WAITING TIME
GROWTH GROWTH FOR INSTALLATION
YEAR ENDED GDP PER YEAR ENDED TELEPHONE OF LAND-LINE CELLULAR
POPULATION DECEMBER 31, CAPITA DECEMBER 31, LINES PER TELEPHONE PENETRATION
(MM)(1) 1995(1) (US$)(1) 1995(1) 100 POPS(2) (YEARS)(3) (% OF POPS)(2)
---------- ------------ -------- ------------ ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Asia-Pacific
China................... 1,215.4 1.2% $ 541 9.9% 2.3 0.3 0.30%
India................... 930.8 1.8% 360 5.6% 1.0 1.9 0.01%
Indonesia............... 195.3 1.6% 1,025 7.3% 1.2 0.3 0.09%
Malaysia................ 20.0 2.4% 4,261 9.5% 14.5 0.3 4.77%
New Zealand............. 3.5 1.1% 16,518 2.5% 48.7 0.0 8.35%
Pakistan................ 130.1 2.9% 484 4.5% 1.6 1.1 0.04%
Philippines............. 68.6 2.2% 1,080 5.0% 1.5 5.5 0.52%
Taiwan.................. 21.3 0.9% 12,485 6.1% 39.5 -- (/4/) 3.63%
Thailand................ 60.2 1.4% 2,751 8.5% 4.6 4.0 2.26%
Latin America
Brazil.................. 156.9 2.0% $ 4,316 4.2% 7.4 0.9 0.81%
Mexico.................. 94.8 1.9% 2,634 (6.9)% 9.2 0.2 0.77%
Peru.................... 23.8 2.0% 2,640 6.6% 3.3 4.3 0.31%
United States........... 263.6 1.0% $27,490 2.0% 59.4 0.0 12.79%
</TABLE>
- --------
(1) Source: DRI/McGraw-Hill World Markets Executive Overview, Second Quarter
1996. The DRI/McGraw-Hill data are for 1995. "GDP Per Capita" means gross
domestic product per person and "Real GDP Growth" means growth in gross
domestic product after adjustment for inflation during the relevant
measurement period.
(2) Source: MTA-EMCI World Cellular Markets: 1996. Telephone lines per 100
POPs is from 1994 and cellular penetration is from 1995. "Cellular
Penetration" means the number of cellular subscribers as a percentage of
the total population.
(3) Source: MTA-EMCI Wireless Local Loop: Opportunities in the Global
Marketplace (Volume 2), March 1996. Data are from 1994.
(4) Data not available.
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To address the growing demand for communications services and promote
economic growth, governments in many developing countries have begun
deregulating their telecommunications industries. In some developing
countries, the government is beginning to privatize national carriers and
encourage the formation of private communications competitors. As a result,
the Company believes there is a substantial opportunity for privately-owned
companies to provide wireless communications services in these countries.
Similar factors are also creating a market for wireless cable television.
The Company believes that consumers in many developing countries are demanding
access to more and better television broadcasting, and many governments in
these countries are now considering the private delivery of television
programming as an alternative to government-owned broadcast television. The
Company believes that wireless cable television is a fast and cost-effective
way to provide cable television-type services in developing countries.
Role of Wireless Technologies
A number of wireless technologies provide voice, data and video services
that address the communications needs of developing countries. These services
include cellular telephone, WLL, ECTR, paging and wireless cable television.
The Company believes that these existing and emerging wireless technologies
generally offer comparable functionality to, and lower construction costs and
more rapid deployment than, land-line technologies.
Cellular Telephone. In its simplest configuration, a cellular telephone
system consists of a series of cell sites, each with a cellular
transmitter/receiver tower. All sites are linked to a mobile telephone
switching office, which consists of a central computer that controls the
network. Currently, the majority of cellular systems use analog technology;
however, in some high density markets analog systems are reaching their
capacity limits, and are being supplemented with new digital technologies
which offer greater capacity.
Wireless Local Loop. WLL networks provide subscribers with access to the
standard land-line telephone network through wireless transmission from the
land-line switch to the telephone site rather than through conventional land
lines. This is accomplished by placing small transmitter/receivers at the
telephone site. WLL operates in the same way as a regular telephone, with the
added possibility of wide area "cordless telephone" use. WLL networks are
generally quicker to install and less expensive than current land-line
systems.
Enhanced Capacity Trunked Radio. ECTR combines attributes of cellular and
dispatch radio (e.g. emergency dispatch) to provide a cellular-like mobile
service. By permitting both voice and data communications and by combining
dispatch radio, cellular-like calling and paging capabilities in the same
system, ECTR offers a combination of functionality and capacity that is
particularly well suited for business needs in developing countries. The
infrastructure cost per subscriber of a loaded ECTR system is typically less
than that of a loaded analog cellular system. Unlike cellular telephone,
however, ECTR services have not been widely deployed in developing countries
and, as a result, licenses to provide such services have historically been
more readily available than licenses for cellular telephone.
Paging. Paging is a well-established technology, with service widely
available in many countries. A paging system typically consists of a number of
transmitter sites connected to a central messaging center. The messaging
center receives incoming messages from the public telephone network and
prepares batches of messages for transmission to subscribers. Two way paging
systems are now available, allowing message acknowledgment responses and short
data messages to be sent by the paging subscriber. In developing countries
where telephone penetration is low, paging often provides an affordable
alternative to public telephone service.
Wireless Cable Television. MMDS, commonly known as wireless cable
television, transmits video programming through broadcast microwaves rather
than coaxial cable, providing cable television-type service to subscribers.
Various new technologies exist or are emerging to support the provision of
MMDS. The Company believes that MMDS is generally quicker to install and a
more cost-effective means of delivering television
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programming to the home than coaxial cable-based cable television,
particularly in the Company's target markets where traditional cable
infrastructure is underdeveloped or non-existent.
Business Development Model
The Company typically plays an active role in the formation, development,
management and operation of its operating companies and developmental stage
projects. Once a wireless communications opportunity is identified, the
Company typically joins with local and strategic partners to develop the
project. In some cases the Company's local partners have previously been
granted telecommunications licenses. In addition, the Company and its partners
may seek to obtain initial or additional licenses through private negotiations
rather than through competitive bidding. As the cost of competitively awarded
licenses, particularly cellular licenses, has increased, the Company believes
that wireless communications services based on alternative technologies and
privately negotiated licenses generally have a pricing advantage.
The Company provides its operating companies and developmental stage
projects with a range of management services. These services often include:
. Defining license needs, preparing, submitting and monitoring license
applications and negotiating the acquisition of additional licenses.
. Seconding one or more of its own employees to a particular operating
company to provide initial and/or ongoing management support.
. Selecting equipment and negotiating with equipment manufacturers and
suppliers.
. Planning the network for the project, either by a team under the
Company's direction or with the equipment manufacturer for the project.
. Arranging debt and equity financing at the project level.
. Developing and implementing core marketing, customer service and terminal
distribution and support plans.
. Training project personnel, normally at the facilities of one of the
Company's strategic partners such as Vanguard.
Business Strategy
The Company's principal business objective is to become a pre-eminent
provider of wireless communications services in selected developing countries.
Key elements of the Company's strategy for achieving this objective include:
Develop Long-Term Relationships With Strong Local Partners. The Company
seeks to develop long-term relationships with financially strong and
strategically well-positioned local partners. These partners often own or have
access to an existing telecommunications asset base (such as cell sites and
microwave/fiber optic transmission networks) that can be used by the Company's
operating companies to reduce capital expenditures, operating costs and
deployment time. Local partners frequently play an active role in securing
licenses and obtaining necessary regulatory approvals, assisting in arranging
and providing local financing and identifying opportunities for additional
wireless projects.
Obtain Licenses With Broad Frequency Ranges and Substantial Geographic
Coverage. The Company seeks to obtain licenses with broad frequency ranges,
substantial geographic coverage and flexible operating terms. The Company
believes that continuing advances in wireless technologies will allow numerous
technologies to provide services with similar functionality. As a result, the
Company believes that market opportunities for such services will be
determined predominantly by license terms rather than by technological
factors. Licenses with broad frequency allocation and flexible operating terms
also enable the Company to
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provide additional services and facilitate the adoption of new technologies.
In addition, the ability to provide service over a broad geographic area is
frequently an important selling point for users of services such as cellular
telephone and ECTR.
Offer Multiple Wireless Services in Existing Markets. The Company seeks to
expand by developing multiple wireless services in those countries where it
has existing operations. This strategy is intended to allow the Company to
build on its expertise in the host country as well as to achieve cost savings
and operating efficiencies through the sharing of cell sites, microwave
transmission networks and marketing and administrative functions. For example,
in Indonesia and Mexico, the Company initially established a national or large
regional ECTR business that is providing opportunities for developing
additional services, such as cellular, WLL and/or wireless cable television
services.
Remain Technology and Vendor Independent. The Company seeks to obtain
licenses that do not stipulate the type of technology to be used in the
provision of a particular communications service. This flexibility allows the
Company to match appropriate technology to a given business opportunity on the
basis of cost, capacity, reliability, functionality and availability. It also
allows operating companies to migrate to superior technologies as they
develop. Where possible, the operating companies use non-proprietary or open-
standard technologies with multiple vendor sources, thereby reducing their
dependence on any single supplier.
Pursue Low Cost Structure. The Company pursues strategies designed to allow
its operating companies to reduce capital expenditures and operating costs.
First, it seeks to form partnerships with local partners that have existing
telecommunications assets, including licenses, that can be used to reduce the
costs of developing and operating its wireless networks. Second, where
appropriate, the Company seeks to obtain initial or additional licenses
through private negotiation, rather than competitive bidding. Third, the
Company seeks to provide multiple wireless services within an existing market
to generate economies of scale. Fourth, when a common technology is selected
for multiple operating companies, the Company seeks to secure global
purchasing discounts with selected vendors.
Actively Manage Operating Companies. The Company typically plays an active
role in the development and management of its operating companies. Its local
country managers and corporate staff provide technical, financial and
administrative support to most of these companies, including serving as senior
executives of operating companies and/or serving on the boards of directors of
these companies. Moreover, shareholder agreements generally provide the
Company with the right to approve key decisions at the operating company
level, including approval of operating budgets, business plans and major
corporate transactions.
Promote Flexible Management Structure. The Company relies heavily on local
country managers to develop existing operating companies and identify new
wireless communications opportunities. These managers are often natives of the
local country with significant managerial and operating experience. Although
Company employees, they typically serve as senior executives of operating
companies. They are supported by a corporate staff located primarily in the
United States with extensive experience in wireless communications and
international operations. The Company believes that the use of local country
managers, supported by the Company's experienced corporate staff, allows it to
rapidly and effectively respond to operational matters, develop and maintain
close working relationships with local partners and capitalize on wireless
communications opportunities.
Strategic Relationships
The Company has entered into strategic relationships with selected
communications companies to assist it in identifying wireless communications
opportunities and to provide resource support to its operating companies and
developmental stage projects.
Vanguard. Vanguard, one of the largest independent cellular operators in the
United States, is the Company's principal strategic partner as well as its
largest stockholder. As of August 31, 1996, Vanguard beneficially owned
approximately 39% of the Company's equity on an as converted basis. Vanguard
has
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provided and continues to provide a number of services relating to the
formation, development and operation of the Company's wireless communication
businesses, including identification and evaluation of wireless communications
opportunities, review of business and technical plans, and assistance in
training operating company personnel. Haynes G. Griffin, Chairman of the Board
of Directors of the Company, is President, Chief Executive Officer and a
director of Vanguard. See "Management--Compensation Committee Interlocks and
Insider Participation" and "Certain Transactions."
Broadcast Communications Limited. Broadcast Communications Limited ("BCL"),
a wholly owned subsidiary of the national television company of New Zealand,
is a leading telecommunications engineering and network operating company. BCL
provides a variety of services including wireless communications engineering
design, cell site planning, microwave and fiber optic transmission design, and
project management for network implementation. BCL has comprehensive
experience in WLL and has installed and commissioned major wireless networks
in the Asia-Pacific region. BCL has assisted in the planning, engineering and
project management of the WLL network of the Company's operating company in
Malaysia.
OPERATING COMPANIES
Unless otherwise indicated, information set forth below regarding POPs,
population growth, GDP per capita, and GDP growth is from 1995, data regarding
POPs covered by licenses is based on POPs data from 1995 (or in certain cases
estimates provided by the operating companies) and licenses held as of June
30, 1996, and data regarding telephone lines per 100 POPs and the waiting time
for installation of land-line telephones is from 1994. Such data has been
taken from the sources indicated above under "Business--Background--Demand for
Communication Services in Developing Countries."
For a discussion of the risks associated with the ownership and operation of
the operating companies, see "Risk Factors--Project Level Risks."
MALAYSIA NATIONAL WLL
The Company currently holds a 30% interest in Syarikat Telefon Wireless (M)
SDN BHD ("STW"), a provider of WLL services in Malaysia. STW commenced a pilot
program in Northern Malaysia in 1993, and acquired its first commercial
subscribers by the end of 1994. In December 1994, based on its success in
Northern Malaysia, STW was granted a national license covering approximately
400 channels in the 800 MHz frequency band. STW believes that, based on its
national license, which covers an estimated 20 million POPs, as well as the
size of its equipment contract and the scale of its proposed build-out, its
project is one of the largest digital WLL projects in the world. As of June
30, 1996, STW served approximately 3,500 subscribers.
Market Opportunity. Malaysia is one of the fastest growing countries in the
Asia-Pacific region. Malaysia has experienced rapid economic development and
significant population growth, as evidenced by real GDP and population growth
rates of 9.5% and 2.4%, respectively, for the year ended December 31, 1995.
With approximately 14.5 telephone lines per 100 POPs in 1994, rapid growth of
businesses and international trade and a large and increasingly affluent
population, the Company believes Malaysia has a large unmet demand for
communications services.
The Malaysian government has announced a national telecommunications plan
which includes an objective to increase the country's telephone network from
approximately 2.8 million lines in 1994 to 9 million lines by the year 2000.
Based on conversations with the Malaysian Economic Planning Unit, STW believes
that Telekom Malaysia Berhad SDN BHD ("Telekom"), the national telephone
company, will not be able to provide more than 6 million lines by the year
2000, resulting in a shortfall of approximately 3 million lines.
STW's sales and marketing efforts focus on this anticipated shortfall of
approximately 3 million telephone lines, primarily by pursuing opportunities
with businesses and housing developments in the growing suburban markets,
which the Company believes are not adequately served by Telekom. STW estimates
that the suburban markets currently cover more than 15 million POPs and
expects further growth in this market segment. In
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addition, STW is also targeting small- to medium-sized businesses which
require additional telephone lines to satisfy their communication needs,
including facsimile, data and additional voice lines, which STW believes are
not being adequately served by Telekom.
Regulatory Environment. In an effort to meet the goal of 9 million lines by
the year 2000, the Malaysian government has begun permitting private companies
to provide wireless communications service. However, in an apparent reversal
of its prior policies, in early 1996, the government announced a program
designed to consolidate the telecommunications industry in Malaysia into a
limited number of telecommunications companies. Pursuant to this program, the
government undertook efforts to cause the sale of STW to one of such surviving
telecommunications companies. STW resisted these efforts and, in July 1996,
the Malaysian government announced that it did not intend to proceed with this
program. However, there can be no assurance that the Malaysian government will
not initiate similar programs in the future, or that it will not otherwise
impose further restrictions on private or foreign telecommunication providers.
See "Risk Factors--Project Level Risks-- Risks Inherent In Foreign
Investment."
In addition, during the time that the Malaysian government was proceeding
with its consolidation program, the government denied STW certain microwave
frequencies necessary for linking STW's radio base stations and switches.
Also, Telekom denied STW interconnection in certain regions not previously
covered by STW, which prevented STW from adding new subscribers in such
regions. Since the Malaysian government announced its intention not to proceed
with the consolidation program, it has granted STW such microwave frequencies,
and Telekom has begun the process of providing interconnection capability in
such regions. However, there can be no assurance that the Malaysian government
will continue to grant additional microwave frequencies or that Telekom will
not impede interconnection in the future, either of which could have a
material adverse effect on STW.
Moreover, the Malaysian government has continued a number of other
restrictive policies, including a moratorium on further licensing of private
communications operators, a deferral on equal access (which allows a telephone
subscriber of one company to make domestic long-distance and international
calls through another telephone company) until 1999 and a limitation on
foreign investment in Malaysian telecommunication companies to no more than a
30% equity interest. In addition, the Malaysian government continues to
regulate tariffs.
Local Strategic Partner. The Company's principal strategic partner in STW is
Shubila Holding SDN BND ("Shubila Holding"), whose equity interest in STW is
60%. Shubila Holding is controlled by former Malaysian senator Hj Shuib Lazim.
The remaining 10% of STW is owned by an entity controlled by Vijay Kumar, a
board member of STW.
Project Background. The Company began efforts to develop a WLL project in
Malaysia in 1993. In 1994, the Company and its local strategic partners
acquired STW, provided additional capital and obtained a national
telecommunications license. In March 1996, the Company entered into a
shareholders' agreement with its partners, pursuant to which the Company
increased its interest in STW to 30%.
License and Interconnection. STW's national wireless license was the second
such license awarded in Malaysia, covering 400 channels in the 800 MHz
frequency band. STW believes that its license currently allows it to provide a
wide variety of communication services, including cellular, WLL and long
distance. The license has a term of 20 years and expires in 2014, at which
time STW will be required to seek governmental approval to renew the license.
The license does not restrict the type of technology STW may use, nor does it
contain any requirements regarding construction of the wireless networks. The
license allows for an unlimited number of subscribers.
STW has entered into an interconnect agreement with Telekom which permits
STW's wireless systems to be connected to Telekom's national telephone
network. Pursuant to this agreement, STW has the right to retain a substantial
share of local, long distance and international calling revenues generated by
STW's subscribers as well as a portion of the revenues generated by calls
terminated on STW's network which originated on
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Telekom's network. The interconnect agreement provides for national coverage
and expires in August 1997. Although STW believes that a successor
interconnect agreement will be executed, any failure by STW to obtain a
successor agreement would have a material adverse effect on STW. In addition,
any successor agreement on terms less favorable to STW than the current
agreement could have a material adverse effect on STW. See "Risk Factors--
Project Level Risks--Dependence on Other Telecommunications Providers."
Existing Operations and Development Plan. As of June 30, 1996, STW had
approximately 3,500 subscribers, primarily in the states of Penang and Keddah,
two growing industrial regions in Malaysia. STW has experienced growth in
subscribers, adding approximately 2,250 subscribers since December 31, 1995,
despite the efforts of the Malaysian government during this period to
consolidate the Malaysian telecommunications industry and the related adverse
effects of such activities on STW, which delayed STW's marketing and network
development. For the fiscal year ended December 31, 1995, STW realized
revenues of approximately $749,000 while cash flow from operations was a
deficit of approximately $4.3 million. STW experienced an average monthly
subscriber churn rate (computed as the number of subscribers who terminated
the service provided by STW during the period divided by the average number of
subscribers during the period, and expressed as a percentage) of less than 1%
during the six months ended June 30, 1996.
As of June 30, 1996, STW had 25 operational cell sites and system capacity
of 25,000 subscribers. STW is in the process of constructing new cell sites
and, subject to the availability of additional financing, expects to have
approximately 85 cell sites and system capacity of approximately 85,000
subscribers by December 31, 1996. STW uses digital AMPS ("D-AMPS") technology.
D-AMPS is a widely used cellular standard prevalent throughout much of the
United States and supported by a number of large equipment suppliers. STW's
network equipment and subscriber terminals are currently supplied by Ericsson
Telecommunications, SDN BHD ("Ericsson") pursuant to a $400.0 million
contract. As of June 30, 1996, STW had a total of 109 full-time employees.
Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had expended $22.2 million to acquire its 30% interest in, and to make
capital contributions to, STW.
STW has budgeted capital expenditures of approximately $35.0 million and
$100.0 million in 1996 and 1997, respectively, primarily to fund the continued
buildout of its network. STW has funded a significant portion of its 1996
capital expenditures with borrowings under its existing five-year $36.4
million senior credit facility (the "STW Credit Facility"). However, at March
31, 1996, STW had borrowed substantially all of the amount available under the
STW Credit Facility, and STW will require substantial additional financing to
complete its planned capital expenditures, including equipment purchases under
the contract with Ericsson, and for other cash needs. There can be no
assurance that STW will be able to obtain any such financing, in which case
STW would be required to defer or abandon portions of its planned network
development, which would have a material adverse effect on STW. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The STW Credit Facility has been provided by a syndicate of Malaysian banks
to finance the construction of STW's network. Pursuant to the terms of the STW
Credit Facility, the Company and STW's other shareholders have each executed a
"keep well" covenant pursuant to which they have agreed (i) to ensure that STW
will remain solvent and be able to meet its financial liabilities when due and
(ii) to ensure that the project is timely completed and to make additional
debt and equity investments in STW to meet cost overruns. In addition, Shubila
Holding and certain directors of STW, including Jan-Olof Conny Dolonius, an
officer of the Company, have guaranteed amounts payable under the STW Credit
Facility. Accordingly, the Company and the other STW shareholders could be
jointly and severally liable for amounts payable under the STW Credit Facility
in the event of a default by STW. In addition, each shareholder has agreed to
subordinate all amounts owing to it by STW to obligations arising under the
STW Credit Facility.
Borrowings under the STW Credit Facility bear interest at a floating rate
based on standard reference rates and are secured by substantially all of
STW's assets and a pledge of the STW stock held by the Company and
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STW's other shareholders. In addition, STW has agreed to assign to and deposit
with the banks all of its cash, including revenues, loan drawings and
shareholders advances. Under the terms of the STW Credit Facility, the
syndicate was granted an option, exercisable upon the occurrence of certain
events, to purchase 7.5% of the shares held by IWC and each of the other
shareholders of STW at a price, under certain circumstances, equal to 50% of
the current market value at the time of exercise. The STW Credit Agreement
contains certain covenants that, among other things, (i) prohibit STW from
paying dividends or making other distributions to its shareholders and from
incurring any other indebtedness and (ii) prohibit IWC and the other
shareholders of STW from reducing their respective stockholdings in STW
without the prior written consent of the lenders. As of June 30, 1996, the STW
Credit Facility, which must be repaid in eleven semi-annual installments
commencing October 1997, was fully drawn.
Competition. STW's primary competitor is Telekom, which provided service to
approximately 2.9 million telephone subscribers as of December 31, 1994. In
addition, there are seven cellular providers, including three PCS operators,
providing service to approximately 950,000 subscribers. There are currently no
other fixed wireless local loop operators in Malaysia. Because the Malaysian
government regulates tariffs, competition is limited to marketing and service.
STW seeks to differentiate itself from its competitors by, among other things,
its rapid deployment of service, its focus on businesses and housing
developments in the growing suburban markets and its emphasis on customer
service.
INDONESIA NATIONAL CELLULAR
The Company indirectly owns a 17.5% equity interest in PT Mobile Selular
Indonesia ("Mobisel"), a provider of cellular services in Indonesia. The
Company holds this interest through its 25% interest in PT Rajasa Hazanah
Perkasa, an Indonesian company ("RHP"), that owns 70% of Mobisel. Mobisel
currently holds a provisional license which covers 225 channels in the 400 MHz
frequency band permitting it to build and operate a cellular system throughout
Indonesia. Mobisel commenced operations in February 1996 after having acquired
RHP's cellular operations, which, at the time of the acquisition, had
approximately 20,400 subscribers. For purposes of this section, the term
"Mobisel" includes RHP's cellular operations for periods prior to their
acquisition by Mobisel.
Market Opportunity. Mobisel's provisional license was expanded in 1995 to
cover all of Indonesia, one of the most populous countries in the world with
more than 195 million people. Indonesia has experienced rapid economic and
significant population growth, as evidenced by real GDP and population growth
rates of approximately 7.3% and 1.6%, respectively, for the year ended
December 31, 1995. With approximately 1.2 telephone lines per 100 POPs in
1994, rapid growth of businesses and international trade and a large and
increasingly affluent population, the Company believes Indonesia has a large
unmet demand for communications services.
Mobisel's sales and marketing efforts focus on the suburban and rural
markets. The Company believes there is less competition in these markets and
that it will have a competitive advantage as a result of its technology which
it believes allows for broader geographic coverage at a lower cost than its
principal competitors. The Company estimates that this market segment
currently covers more than 145 million POPs, the great majority of whom have
no telephone service. Although Mobisel anticipates that the majority of its
subscribers will be located in suburban and rural markets, it also seeks to
further develop its urban market base. Mobisel has also initiated the
conversion of subscriber equipment from mobile phones in vehicles to portable
handsets. The Company believes that portable handsets provide subscribers with
increased usage opportunities.
Regulatory Environment. Since the early 1990s, the Indonesian government has
been deregulating its telecommunications industry in order to improve the
quality and expand the coverage of telecommunications services. Prior to that
time, cellular operators in Indonesia were typically given licenses of short
duration (6 to 10 years) which were subject to revenue-sharing arrangements
with PT (Persero) Telekomunikasi Indonesia ("Telkom Indonesia"), the state-
owned telecommunications company, that resulted in operators, including RHP,
charging over $5,000 per handset and thereby limiting the growth of the
cellular market. In 1994, the government
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changed its policy to allow arrangements whereby cellular operators could form
equity alliances with Telkom Indonesia. Under these equity alliances, the
government has provided longer license periods (generally 20-25 years) and
introduced more favorable interconnect arrangements in line with international
standards. Subsequent to this change in governmental policy, Mobisel has
reduced handset prices and has sought to improve customer service and cellular
coverage. Notwithstanding the government's effort with respect to
deregulation, the government continues to regulate tariffs in the
telecommunications market.
Local Strategic Partners. The Company's three principal strategic partners
in Mobisel are Telkom Indonesia, which owns 30% of Mobisel, PT Deltona Satya
Dinamika ("DSD"), which indirectly owns 17.5% of Mobisel through its 25%
equity interest in RHP, and PT Bina Reksa Perdana ("BRP"), which indirectly
owns 35% of Mobisel through its 50% equity interest in RHP. Telkom Indonesia
provides the Company with strategic support and interconnect services.
Project Background. In early 1995, the Company invested $5.0 million in RHP,
a company formed in 1985 to provide cellular services in Indonesia. In October
1995, one of RHP's principal shareholders, Bell Atlantic, agreed to sell its
35% interest in RHP pro rata to RHP's other shareholders, including the
Company. Bell Atlantic's interest was purchased for a total amount of
$17.1 million. Following the sale of Bell Atlantic's interest, the Company's
interest in RHP increased to 25%. In November 1995, RHP contributed its
cellular operations to Mobisel in return for a 70% interest in Mobisel.
License and Interconnection. Mobisel's provisional license permits
nationwide coverage. Pursuant to the terms of the license, Mobisel was
obligated to and has already completed providing service to West Java,
including Jakarta, and is obligated to and expects to provide service
throughout Java, Bali and Lampung by the end of 1996. The license requires
that Mobisel complete construction of its network no later than April 1998.
The license has no fixed term, does not limit the number of subscribers, but
does require Mobisel to use Nordic Mobile Telephone ("NMT") cellular
technology. To date, the billing for Mobisel's subscribers has been performed
by Telkom Indonesia. Although the billing function is expected to be
transferred to Mobisel in October 1996, to date Mobisel has relied on Telkom
Indonesia for information as to the number of its subscribers. Mobisel
operates under an interconnection arrangement with Telkom Indonesia; however,
no written interconnection agreement currently exists and any termination of
this interconnection arrangement by Telkom Indonesia would have a material
adverse effect on Mobisel.
Existing Operations and Development Plan. As of June 30, 1996, Mobisel
provided cellular services to approximately 20,400 subscribers. For the fiscal
year ended December 31, 1995, RHP's cellular operations (later contributed to
Mobisel) realized revenues of approximately $7.3 million and cash flow from
operations of approximately $347,000. Mobisel experienced an average monthly
subscriber churn rate of less than 0.5% for the four months ended June 30,
1996.
As of June 30, 1996, Mobisel had the system capacity to serve approximately
30,000 subscribers and has completed the upgrade of 32 transmitter sites in
and around Jakarta and Bundung. In addition, Mobisel is in the process of
introducing or expanding services throughout the rest of Java, Bali and
Lampung. Subject to the availability of financing, Mobisel plans to construct
116 new transmitter sites in these areas, which will increase its total sites
to 148 and expand system capacity to serve approximately 150,000 subscribers.
Mobisel has selected 68 of these new sites and, subject to Mobisel's obtaining
financing, 80 additional sites are expected to be in operation by the end of
1996, and most of the remaining sites are expected to be completed by the end
of the first quarter of 1997. In addition, Mobisel intends to install new
telephone switching exchanges in Jakarta, Bundung, Semarang, Surubaya and
Bali. All 32 existing transmitter sites are now fully operational.
As of June 30, 1996, Mobisel had a total of 98 employees and 11 contract
persons working full time in Jakarta. Two of the contract persons are provided
by the Company to assist Mobisel in marketing and engineering support. In
return, it is anticipated that Mobisel will pay the Company $300,000 in 1996,
representing the cost to the Company of these Company employees.
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Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had expended approximately $25.5 million to acquire its 25% interest
in, and to make capital contributions to, RHP. The Company, together with RHP,
DSD and BRP, are jointly and severally liable to pay Bell Atlantic $17.1
million pursuant to the promissory note issued in connection with the purchase
of Bell Atlantic's stake in RHP in October 1995. The promissory note will
mature on October 10, 1996. The $17.1 million represents Bell Atlantic's total
investment in RHP.
Mobisel has budgeted capital expenditures of approximately $56.0 million and
$68.0 million for 1996 and 1997, respectively, primarily for the construction
of new transmitter sites and switching systems which will expand geographic
coverage and capacity. Mobisel expects to fund a portion of these expenditures
through its existing $60.0 million credit facility. Mobisel will require
substantial additional financing to complete its planned capital expenditures
through 1997 and for other cash needs. Although Mobisel is seeking to obtain
such additional financing from outside sources, there can be no assurance that
it will be able to do so. In such event, Mobisel would either seek such
additional financing from its shareholders or defer or abandon portions of its
planned network development. Such deferral or abandonment could result in the
loss of Mobisel's license, which could have a material adverse effect on the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
Mobisel has obtained a five-year $60.0 million credit facility from Nissho
Iwai International (Singapore) Pte. Ltd. ("Nissho Iwai") to finance the
construction of its network and the purchase of subscriber terminals.
Borrowings under the credit facility bear interest at a floating rate based on
LIBOR and are secured by all of Mobisel's assets and a pledge of all the
capital stock held by RHP. RHP has also guaranteed the credit facility. In
addition, Mobisel has agreed to assign to and deposit with Nissho Iwai all of
its cash, including revenues, loan drawings and shareholders' advances.
Borrowings under Mobisel's credit facility with Nissho Iwai are limited to
funds necessary for the construction of its network. As of June 30, 1996,
borrowings of approximately $35.0 million were outstanding under this
facility.
Competition. Mobisel's primary competitors in the Indonesian
telecommunications market are PT Komselindo, PT Satelit Palapa Indonesia,
Telecomcell and Excelcomindo. The Ministry of Tourism, Post and
Telecommunications regulates tariffs, and, as a result, competition is limited
to marketing and service. Mobisel seeks to differentiate itself from its
competitors by, among other things, offering wider coverage, flexible payment
and pricing packages targeted to specific market segments and focusing on
customer service.
INDONESIA NATIONAL ECTR
The Company, through its wholly owned subsidiary, New Zealand Wireless
Limited ("NZW"), owns 15% of PT Mobilkom Telekomindo ("Mobilkom"), a provider
of ECTR services in Indonesia. Mobilkom owns a national ECTR license for over
200 channels in the 400 MHz frequency band. Mobilkom commenced service in
September 1995 and as of June 30, 1996 had approximately 2,000 subscribers.
The Company is currently negotiating the purchase of an additional 5% interest
in Mobilkom, although there can be no assurance that such purchase will be
completed.
Market Opportunity. Mobilkom's license covers all of Indonesia, one of the
most populous countries in the world with more than 195 million people.
Indonesia has experienced rapid economic and significant population growth, as
evidenced by real GDP and population growth rates of approximately 7.3% and
1.6%, respectively, for the year ended December 31, 1995. With approximately
1.2 telephone lines per 100 POPs in 1994, rapid growth of businesses and
international trade and a large and increasingly affluent population, the
Company believes Indonesia has a large unmet demand for communications
services.
Mobilkom's sales and marketing efforts focus primarily on providing cost-
effective wireless voice and data communications services to small- and
medium-sized businesses engaged in the local distribution, financial services,
utility and construction industries. Additionally, Mobilkom focuses on
suburban markets and industrial complexes that are being constructed outside
the major cities in Indonesia. Based on the estimated number of
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Private Mobile Radio ("PMR") users in Indonesia and the general movement from
PMR to ECTR, the Company believes that the market demand for ECTR services
will continue to grow.
Regulatory Environment. Since the early 1990s, the Indonesian government has
been deregulating the telecommunications industry in order to improve the
quality and expand the coverage of telecommunications services. See "--
Indonesia National Cellular--Regulatory Environment." In connection with this
deregulation, the government has awarded several wireless licences, including
cellular, ECTR and paging, and has provided for interconnection with the
state-owned network. The Indonesian government continues to regulate the
tariffs charged by telecommunications companies to their subscribers.
Local Strategic Partners. The principal shareholders of Mobilkom include
Jasmine International Public Company Limited ("Jasmine"), a Thai
telecommunications company with operations throughout Asia, PT Inka Forindo
Jaya ("PT Inka"), an Indonesian telecommunications and engineering company,
and PT Telekomindo Prima Bhakti ("Telekomindo"), a 40% owned investment
subsidiary of the national telephone company of Indonesia. The remaining 60%
of Telekomindo is owned by Rajawali Group, a private Indonesian entity.
Jasmine, PT Inka and Telekomindo own 56.25%, 15% and 5% of Mobilkom,
respectively.
Jasmine, directly and through its relationships throughout Asia, provides
Mobilkom with valuable technical, financial and strategic support. Mobilkom
has entered into a management agreement with Jasmine for the planning,
construction and implementation of the network and billing system. PT Inka
provides Mobilkom with microwave transmission system engineering support.
Project Background. In December 1991, the Company, through NZW, entered into
a joint venture agreement with several Indonesian telecommunications
companies, including Telekomindo, to develop a national ECTR system in
Indonesia. In June 1994, Jasmine acquired a 61.25% ownership interest in
Mobilkom and subsequently sold 5% of such interest to GS Capital Partners, an
affiliate of Goldman, Sachs & Co., in February 1995.
License and Interconnection. Mobilkom currently owns a five-year national
license issued February 28, 1995, covering over 200 channels in the 400 MHz
frequency band. Under the terms of the license, Mobilkom may request extension
of the license beyond the initial five-year term. The license has no
restrictions on capacity, type of technology Mobilkom may use, and covers over
an estimated 195 million POPs. Mobilkom's ECTR network currently has limited
interconnection with Telkom Indonesia, the state-owned telephone company;
however, no written interconnection agreement currently exists and any
termination of these interconnection arrangements by Telkom Indonesia would
have a material adverse effect on Mobilkom.
Existing Operations and Development Plan. Mobilkom's ECTR system is
operational in the three largest cities of Java, including Jakarta. Mobilkom
began selling its ECTR services in June 1995 and, as of June 30, 1996, had
over 2,000 subscribers. For the fiscal year ended December 31, 1995, Mobilkom
realized revenues of $82,000 while cash flow from operations was a deficit of
approximately $3.5 million. Mobilkom experienced an average monthly subscriber
churn rate of less than 1% for the six months ended June 30, 1996.
As of June 30, 1996 Mobilkom had the system capacity to serve approximately
11,000 subscribers. Mobilkom is constructing a number of new transmitter sites
and, subject to the availability of financing, is planning to invest in
additional site capacity to increase capacity to 50,000 subscribers by the
year 2001. Nokia infrastructure equipment is being used by Mobilkom. As of
June 30, 1996, Mobilkom had a total of 78 full-time employees and 33 contract
employees.
Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had expended approximately $1.5 million to acquire its 15% interest
in, and to make capital contributions to, Mobilkom.
Mobilkom has budgeted capital expenditures of $16.7 million and $15.6
million in 1996 and 1997, respectively, primarily to fund the continued
buildout of the network. Mobilkom expects to fund these capital
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expenditures and the acquisition of subscriber terminals primarily through an
eight-year $50.0 million credit facility which it has obtained from a
syndicate of Thai banks. Borrowings under the credit facility bear interest at
a floating rate based on LIBOR and are secured by substantially all of
Mobilkom's assets and a pledge of all of the capital stock held by the Company
and Mobilkom's other shareholders. Jasmine has guaranteed borrowings of up to
$25.0 million under the credit facility. Such borrowings were primarily used
for construction of the network. The agreement governing this facility
contains certain covenants which, among other things, may restrict Mobilkom's
ability to pay dividends or make any other distributions to Mobilkom's
shareholders and, under certain circumstances, requires Mobilkom to require
its shareholders, including the Company, to make additional capital
contributions to Mobilkom. As of June 30, 1996, borrowings of approximately
$20.0 million were outstanding under this facility.
Competition. As of June 30, 1996, the Indonesian government had awarded six
trunked radio licenses. However, operators under only three of these licenses,
including Mobilkom, were providing services as of June 30, 1996. The Ministry
of Tourism, Post and Telecommunications regulates tariffs and, as a result,
competition is limited to marketing and service. The two other existing ECTR
operators, PT Jastrinda and PT Maesa, have designed their infrastructures to
primarily cover car mounted radio terminals. Mobilkom differentiates itself
from these competitors by, among other things, offering portable handsets and
the broadest geographic coverage of any of its competitors.
PHILIPPINES REGIONAL ECTR
The Company owns a 19% beneficial interest in Universal Telecommunications
Service, Inc. ("UTS"), a provider of ECTR services in the Philippines. UTS
owns a provisional license covering over 300 channels in the 400 MHz frequency
band permitting it to build and operate an ECTR system in the Visayas and
Mindanao regions of the country. UTS has applied for authority to expand its
service area into metropolitan Manila and other parts of the Philippines and
expects to receive licenses for such areas by the end of 1996. UTS commenced
operations in July 1996.
Market Opportunity. The Philippines, with a population of approximately 69
million people, has experienced economic development and rapid population
growth as evidenced by real GDP and population growth rates of 5% and 2.2%,
respectively, for the year ended December 31, 1995. With approximately 1.5
telephone lines per 100 POPs in 1994, growth of business and international
trade and a large and increasingly affluent population, UTS believes the
Philippines has a large, unmet demand for communication services.
UTS holds provisional authority to operate an ECTR system in eight major
cities in Visayas and Mindanao, which have a total population estimated at
greater than 27 million. The Company believes that Cebu, in the Visayas
region, is one of the fastest growing cities in the Philippines after
metropolitan Manila. Davao, in the Mindanao region, is an emerging economic
center which has received government infrastructure and development grants.
The Company believes that the other key cities covered by UTS's project, Gen.
Santos, Cagayan de Oro, Iligan, Zamboanga, Iloilo and Bacolod, are also
expanding.
UTS's sales and marketing efforts focus on businesses located in the Visayas
and Mindanao region, where it believes the need for additional
telecommunications services is significantly greater than metropolitan Manila
where the majority of the telephone lines in the Philippines are concentrated.
In Visayas and Mindanao, the teledensity is much lower than the national
average, and is currently estimated by the Company to be approximately 0.7 and
0.3 telephone lines per 100 POPs, respectively. The Company believes that
there exist significant opportunities to provide wireless communications
services in these regions. UTS will target businesses whose operations involve
the use of field personnel, field offices, fleets of vehicles, and existing
PMR networks. UTS estimates this market segment to cover more than 7,500
businesses with a potential of more than 30,000 subscribers.
Regulatory Environment. The Philippine government has recently begun
deregulating its telecommunications industry. However, the government has
continued a number of restrictive policies, including
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a limitation on foreign investment in Philippine telecommunications companies
to no more than a 40% equity interest.
Local Strategic Partners. The Company's strategic partners in UTS are
Marsman-Drysdale Corporation ("MDC"), a large Philippine company in the
agribusiness, food processing, tourism and communications businesses, and
Filinvest Development Corporation ("FDC"), a large Philippine real estate
investment company. George M. Drysdale, a shareholder and former director of
IWC, is Vice Chairman of MDC and Chairman of UTS. Both MDC and FDC have
extensive experience conducting business in the Philippines and have provided
UTS with valuable strategic support.
Project Background. In March 1994, the Company in alliance with MDC and FDC
agreed to purchase a 49% equity interest in UTS. In September 1995, the
Company and its partners exercised an option to purchase an additional 31% of
UTS' then outstanding capital stock from another stockholder. In December 1995
and January 1996, the Company purchased additional interests in UTS which,
upon the completion of certain formalities, will bring its ownership to 19%.
Licenses and Interconnection. UTS has received a legislative franchise and a
provisional authority to install, operate and maintain an ECTR system in eight
cities in Visayas and Mindanao. Up to 320 paired channels in the 400 MHz
frequency band are potentially available to the project. UTS recently obtained
governmental approval for a new frequency allocation within the 400 MHz
frequency band which was sought in part because of interference at the
frequency originally granted. UTS has applied for and expects that it will be
granted final authorization to operate the ECTR system by the end of 1996,
although no assurance can be given that certain factors, including UTS'
failure to fully comply with the service date requirement contained in its
provisional authority, will not adversely affect its ability to obtain such
final authorization.
UTS's franchise was renewed in July 1991 and it received its provisional
authority to operate its ECTR network in May 1995. The franchise has a term of
twenty-five years from the date of renewal. The provisional authority has
expired, and UTS is in the process of applying for an extension of the term of
such authority. Final authorization to operate the ECTR system, once obtained,
is expected to be coterminous with the legislative franchise, but may be
terminated by the Philippine government under certain circumstances. UTS's
provisional authority does not contain, nor is the final authorization
expected to contain, any restriction on the type of technology UTS may use or
on the number of subscribers. Tariff rates, however, are subject to approval
by local regulatory authorities.
Interconnection among carriers is mandated by law. UTS has an
interconnection agreement with Radio Communications of the Philippines, Inc.
("RCPI") for connection to the land-line telephone system covering certain
regions of the Philippines, including Visayas and Mindanao.
The interconnection agreement is renewable on a year-to-year basis. RCPI is
owned by Bayantel, a large privately-held telecommunications company. MDC owns
10% of RCPI. With this interconnection agreement, UTS subscribers can make and
receive local, regional and international calls. The revenue sharing
arrangement is in accordance with industry norm, providing that revenues are
allocated 30% to the originator, 40% to the carrier and 30% to the terminating
party. UTS is currently negotiating an agreement with the Philippine Long
Distance Telephone Company which, if entered into, would give it full
interconnection capabilities throughout the Philippines.
Existing Operations and Development Plan. The first link in the ECTR
network, the Cebu-Davao link, was completed in March 1996. The next link, the
Cebu-Cagayan de Oro link, was completed in July 1996. UTS has recently begun
marketing to potential subscribers. UTS plans to offer cellular-type calling,
dispatch radio, private long distance, and data transmission service from
mobile and fixed sites.
UTS has signed equipment supply and service contracts with Nokia with a
total equipment and service price in excess of $3 million.
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Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had expended approximately $1.5 million to acquire its 19% interest
in, and to make capital contributions to, UTS. UTS has budgeted capital
expenditures of $4.2 million and $700,000 in 1996 and 1997, respectively,
primarily for infrastructure equipment. UTS has entered into a credit facility
with the Land Bank of the Philippines to partially fund the cost of the
ECTR network. Additional financing is expected to be provided by equipment
vendors or UTS shareholders.
Competition. Wireless communications services are provided by cellular and
public trunked radio operators. As of June 30, 1996, there were five companies
providing cellular service in the Philippines. As of June 30, 1996, the
estimated total cellular subscriber base was almost 500,000, an approximate
increase of almost 60% from June 30, 1995. Cellular is very popular and enjoys
a high level of public awareness. Price competition is intense. Although most
cellular operators offer nationwide service, their coverage is limited to
urban areas.
As of June 30, 1996, there were nine companies providing ECTR services, most
of which compete in the metropolitan Manila market. The ECTR business was
introduced in the Philippines in 1990 and, as of June 30, 1996, there were
approximately 18,800 subscribers, mostly in the Manila area.
NEW ZEALAND NATIONAL ECTR
The Company provides ECTR services in New Zealand through its wholly owned
operating company, TeamTalk Limited ("TeamTalk"). The licenses under which
TeamTalk operates its ECTR network cover an aggregate of over 174 channels in
the 400 MHz frequency band. TeamTalk commenced operations in 1994 and, as of
June 30, 1996 served approximately 3,400 subscribers throughout the North
Island of New Zealand, as well as in and around the city of Christchurch on
the South Island.
Market Opportunity. As of June 30, 1996, there were approximately 80,000
mobile radio subscribers in New Zealand, of which approximately 70,000
subscribers used PMR. PMR, however, has limited coverage, generally poor sound
quality and a lack of privacy. As a result of these limitations, together with
the decision of the New Zealand Ministry of Commerce to reallocate a number of
frequencies, there is an ongoing transition in the New Zealand mobile radio
market from PMR to trunked radio.
TeamTalk's sales and marketing efforts focus on a broad range of companies,
including trucking fleets and security businesses. TeamTalk believes that it
is able to provide smaller companies with a higher level of customer service
than Telecom New Zealand, its primary competitor. TeamTalk also believes that
the advanced features provided by its ECTR system should appeal to the needs
of larger companies. In addition, the Company believes that there is an
opportunity in New Zealand for trunked radio services in geographic areas that
are not currently covered by existing trunked radio operators. TeamTalk
currently has service in the major population centers throughout the North
Island of New Zealand as well as in the city of Christchurch on the South
Island.
Regulatory Environment. The New Zealand communications market has been
deregulated and is now fully open to private companies to provide wireless
communications services.
Local Strategic Partner. The Company has entered into a local strategic
alliance with Broadcast Communications Limited ("BCL"), a leading
telecommunications engineering and operating company and wholly owned
subsidiary of Television New Zealand. BCL provides TeamTalk with access to
strategically located transmitter sites, many of which are connected by a
nationwide digital microwave and fiber optic network.
Project Background. The Company began efforts to develop an ECTR project in
New Zealand in 1994. These efforts resulted in the formation of a joint
venture with BCL. TeamTalk was incorporated in 1995 and was owned in equal
shares by the Company and BCL. Effective April 30, 1996, the Company acquired
BCL's 50% interest in TeamTalk for an aggregate price of approximately $3.2
million which was paid for in July 1996. In connection with this sale, BCL and
the Company entered into agreements whereby BCL agreed to, among other things,
provide TeamTalk with access to certain BCL cell sites, as well as access to
BCL's nationwide digital microwave and fiber optic network. These agreements
have terms of 20 years and provide for payments to BCL by TeamTalk.
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License and Interconnection. TeamTalk has licenses to provide ECTR service
for approximately 174 channels. The licenses have a term of one year and have
no construction requirements or restrictions with respect to tariffs or the
type of technology TeamTalk may use.
In 1994, the Company and BCL entered into an agreement with Telecom New
Zealand to provide full interconnection for TeamTalk's ECTR network. Although
the agreement is assignable to TeamTalk, TeamTalk is currently negotiating,
and expects to enter into, a new interconnection agreement directly with
Telecom New Zealand.
Existing Operations and Development Plan. The TeamTalk network is
operational in the major population centers throughout the North Island of New
Zealand, as well as in the city of Christchurch, the largest city on the South
Island. TeamTalk began selling its ECTR services in December 1994 and had
approximately 2,500 subscribers by December 1995. As of June 30, 1996, the
number of TeamTalk's subscribers had grown to over 3,400. TeamTalk intends to
seek additional licenses allowing it to provide coverage in the major
population centers throughout New Zealand by the end of 1996, at which time
TeamTalk's network will have a capacity of approximately 7,000 subscribers.
For the fiscal year ended December 31, 1995, TeamTalk realized revenues of
approximately $369,000, while cash flow from operations was a deficit of
approximately $1.2 million. For the six months ended June 30, 1996, TeamTalk
experienced an average monthly churn rate of approximately 2%.
As of June 30, 1996, TeamTalk had 23 full-time employees. TeamTalk primarily
uses Nokia infrastructure equipment.
Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had invested approximately $5.0 million in TeamTalk, excluding the
$3.2 million paid by the Company to acquire BCL's 50% interest in TeamTalk in
July 1996. Prior to the sale of its interest in TeamTalk to the Company, BCL
had invested approximately $3.8 million in TeamTalk.
TeamTalk currently plans to spend approximately $3.8 million and $3.1
million for capital expenditures in 1996 and 1997, respectively. TeamTalk is
now actively seeking external debt financing to fund these capital
expenditures. If external debt financing is not obtained, the Company
anticipates funding TeamTalk's 1996 and 1997 capital expenditures through
shareholder loans, capital contributions or a combination thereof.
Competition. Competition exists in the New Zealand telecommunications
market. TeamTalk's principal competitor is Fleetlink, a service provided by
Telecom New Zealand, which initiated the development of its trunked radio
network in 1992. TeamTalk believes that it has several competitive advantages
over Fleetlink. These include the use of Nokia ECTR technology, which is newer
technology and, consequently, provides a greater variety of features and
services to customers than the Tait technology used by Telecom New Zealand. In
addition, TeamTalk believes it provides superior customer service and greater
flexibility on billing than Fleetlink.
BRAZIL REGIONAL ECTR
Pursuant to an agreement with Rede Brasil Sul ("RBS"), the Company has the
right to acquire an equity interest in a joint venture ("Via 1") which is
being formed to provide ECTR services in the major cities in Southern and
Central Brazil. The Company, indirectly through its wholly owned subsidiary
Servicos de Radio Comunicacoes Ltda. ("SRC"), holds licenses covering 140
channels in the 800 MHz frequency band. RBS holds licenses covering 545
channels in the 800 MHz frequency band. RBS and the Company intend to
contribute the companies through which they hold their licenses to Via 1.
Grupo Arbi, a Brazilian industrial and financial group ("Arbi") has agreed to
participate as an equity partner in Via 1 by contributing the use of its
licenses for 125 channels in the 800 MHz frequency band to the Via 1 project
(the "Via 1 Project"). Upon the formation of Via 1, it is anticipated that the
Company's initial equity interest in Via 1 will be 65.1% and that RBS's and
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Arbi's initial interests will be 27.9% and 7%, respectively. In the event that
certain options currently being negotiated with RBS and Arbi are exercised in
their entirety, the Company's equity interest in Via 1 will be reduced below
50%.
In anticipation of the formation of Via 1, the Company, RBS and Arbi
commenced initial operations of the Via 1 Project in the cities of Porto
Alegre, Novo Hamburgo and Caxias do Sul in July 1996. The Company's, RBS' and
Arbi's licenses that are anticipated to be contributed to Via 1 upon its
formation (the "Via 1 Licenses") cover major cities in Southern and Central
Brazil, including Sao Paulo, Curitiba and Rio de Janeiro.
Market Opportunity. Brazil, with a population of approximately 156.9
million, is among the largest countries in the world, and has the highest real
GDP in Latin America. In addition, since 1991 Brazil has experienced a
significant increase in international trade due to steady economic growth and
structural economic reforms, including the implementation of a successful
anti-inflation plan, and a regional free trade and customs union with
Argentina, Uruguay and Paraguay ("Mercosur"), which Chile recently joined as a
free trade partner. The Company believes that there is a significant unmet
demand for telephone services as evidenced by only 7.4 lines per 100 POPs. In
addition, with the exception of ECTR licenses, the government has not to date
issued licenses for cellular systems to private operators, although it is
taking steps to do so. As a result, the Company believes that Brazil is one of
the most attractive countries in Latin America for the introduction of an ECTR
system. The Via 1 Licenses cover approximately 60 million POPs.
Sales and marketing efforts will focus primarily on providing cost-effective
communications services to small- and medium-sized businesses in the local
distribution, financial services, utility and construction industries in
Southern and Central Brazil.
Regulatory Environment. The Brazilian communications market is widely
regulated. Private communications licenses, except those relating to ECTR, are
restricted to operators with a majority of the voting interest held by
Brazilian shareholders. However, various reform projects to liberalize
Brazil's telecommunications market are currently being considered by the
federal government.
Local Strategic Partners. RBS, the Company's proposed partner in Via 1, is
one of Brazil's largest media companies with operations in television and
radio broadcasting and newspaper publishing in Southern Brazil. To date, RBS
has contributed to the Via 1 Project by expediting the import of
infrastructure equipment and assisting in negotiations with governmental
regulatory authorities. Additionally, RBS owns both cell sites and large
microwave networks, which the Company anticipates Via 1 will use to carry its
network traffic. Pursuant to the stockholders' agreement between RBS and the
Company, the Company has been providing the Via 1 Project with technical
services, operational management and equipment necessary for the development
of the network. Implementation of the stockholders' agreement will require
certain governmental approvals. See "--Licenses and Interconnection" below.
Project Background. The Company began efforts to develop an ECTR project in
Brazil in 1993. These efforts resulted in the execution of the stockholders'
agreement which contemplates the formation of Via 1 with RBS. The Company and
RBS have agreed to contribute to Via 1 the companies through which they hold
their licenses and their applications for additional licenses. The Company and
RBS have also invited Arbi to participate in the project by contributing to
Via 1 all licenses it will control at the time of the transaction and its
applications for additional licenses.
Licenses and Interconnection. The licenses held by the companies that will
be contributed to Via 1 generally have terms of 15 years, with the first
licenses having been granted in 1994. These licenses cover 810 channels in the
800 MHz frequency band, and applications for licenses on file cover an
additional 12,000 and 4,500 channels in the 800 MHz and 400 MHz frequency
bands, respectively. Under Brazilian law, operations must commence within one
year of license grant, subject to extensions in certain circumstances. RBS and
SRC failed to meet such deadlines with respect to several licenses. However,
RBS and SRC have obtained extensions with respect to the deadlines for these
licenses and expect that operations will commence within the extended
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time period. These licenses contain no restrictions regarding the technology
which may be used but, in certain cases, have operational requirements. The
continued operation of the Via 1 Project as well as the proposed transfer of
the Via 1 Licenses are subject to receipt of certain approvals or
authorizations from the Brazilian Ministry of Communications. There can be no
assurance that such approvals or authorizations will be received. Failure to
obtain such approvals could result in, among other things, the forfeiture of
some or all of the Via 1 Licenses and could have material adverse effect on
the Company. Brazilian law allows full interconnection with the public
network. Arrangements are in place with two of the four local exchange
operators on interconnection and additional interconnect arrangements are
under negotiation with the remaining local exchange operators. See "Risk
Factors--Project Level Risks--Risk of Modification or Loss of Licenses;
Uncertainty as to the Availability, Cost and Terms of Licenses; Restrictions
on Licenses."
Existing Operations and Development Plan. The Via 1 Project became
operational in July 1996 with six cell sites providing system capacity for
2,000 subscribers. Subject to the timely delivery of necessary equipment, it
is expected that by the end of 1997, Via 1 will construct cell sites to cover
an additional 28 cities in five states in Southern and Central Brazil
increasing system capacity to 25,000 subscribers.
Cell site transmission and switching equipment and network operations
management facilities are currently being installed in Belo Horizonte (Minas
Geiras), Campinas, Santos and Sorocaba (Sao Paulo) and Rio de Janeiro. A
combination of Uniden and Nokia infrastructure equipment is being used. As of
June 30, 1996, the operations that will comprise Via 1 had 25 employees and
used the services of approximately 30 additional outside engineering and
installation personnel for the construction of its network.
Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had expended approximately $12.8 million to acquire its 65.1% interest
in, and to provide funding for, the Via 1 Project.
Via 1 has budgeted capital expenditures of $9.3 million and $12.0 million
for 1996 and 1997, respectively, primarily for the construction of its
network. Via 1 will seek to fund these expenditures through a combination of
external financing and equity or debt investments by its shareholders. In
accordance with the stockholders' agreement and Via 1's current business plan,
it is anticipated that the Company and Via 1's other stockholders will be
required to invest an additional aggregate amount of approximately $15.0
million in Via 1 prior to December 1998. If Via 1 is unable to obtain
necessary financing, it will be required to delay its planned capital
expenditures.
Competition. Via 1's primary competition consists of cellular services
provided by local exchange carriers and three other multi-site ECTR service
providers (M-Comcast, Airlink Servicios e Comercio and Radio Mobile Digital).
The Company believes that Via 1 will have a pricing advantage over traditional
cellular services and will seek to market its services to small and medium-
sized businesses, which it believes are generally more cost-sensitive than the
retail customers targeted by cellular operators. The Company does not believe
that Via 1 will directly compete with the three other multi-site ECTR service
providers whose licenses and operations are concentrated in Sao Paulo and
which focus their marketing efforts on the retail user as compared to Via 1's
operations which are anticipated to cover the broader geographic area of
Southern and Central Brazil and focus on the business user.
MEXICO REGIONAL ECTR PROJECT
The Company currently owns a 2.3% equity interest in Corporacion Mobilcom,
S.A. de C.V. ("Mobilcom Mexico"), a provider of trunked radio services in
Mexico. Mobilcom Mexico holds licenses covering an aggregate of over 4,300
channels in the 400 and 800 MHz frequency bands covering the major cities in
Northern and Central Mexico, including Mexico City. Mobilcom Mexico commenced
providing commercial service in July 1993 and, as of June 30, 1996, provided
service to approximately 22,000 subscribers.
Market Opportunity. Strong government support for privatization and the
development of competitive alternatives to Telefonos de Mexico, S.A. de C.V.
("Telmex"), the national telephone company, as well as a
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need for enhanced telecommunications services, have combined to make Mexico an
attractive market for investment in communications services. According to a
private Mexican market research group, the demand for new phone lines is
projected to increase to 2.2 million by the year 2000, from the approximately
1.6 million in December 1995.
Mobilcom Mexico's sales and marketing efforts currently focus primarily on
providing cost-effective local and regional dispatch radio and data
transmission services to businesses engaged in manufacturing and distribution.
Regional dispatch radio services are expected to be provided by a high-
capacity digital microwave network being completed throughout Central and
Northern Mexico. NEXTEL, a large shareholder of Mobilcom Mexico, is proposing
to consolidate Mobilcom Mexico's network into NEXTEL's North American ECTR
network, which also includes Clearnet Communications, Inc. in Canada. In
linking these networks, NEXTEL would be able to provide seamless communication
services to its customers throughout North America. Mobilcom Mexico's existing
licenses currently cover approximately 65 million POPs.
Regulatory Environment. Since early 1994, the Mexican government has been
deregulating the telecommunications industry in order to improve the quality
and expand the coverage of telecommunications services. A new
telecommunications law, which became effective in June 1995, outlines the
broad rules for the opening of the local and long-distance service markets to
competition. The government has stated its intention to increase competition
within the telecommunication industries and its desire to attract foreign
investment for the purpose of improving Mexico's telecommunications
infrastructure. However, in June 1995, the Mexican government enacted
legislation limiting foreign investment in telecommunications companies, from
which Mobilcom Mexico's current operations are exempt.
Local Strategic Partners. The Company's strategic partners in Mobilcom
Mexico include: Grupo Comunicaciones San Luis S.A. de C.V. ("Grupo"), which
currently owns a 39.4% interest in Mobilcom Mexico; Associated SMR, Inc., an
international cellular radio operating company; LCC Incorporated, an
international wireless engineering and design company; and certain investment
companies, including The Carlyle Group. In March 1995, NEXTEL acquired a 16.5%
interest in Mobilcom Mexico for $52.5 million and in August 1995 acquired an
additional 2% for approximately $4.7 million. NEXTEL also received options to
acquire up to an additional 29.5% of Mobilcom Mexico on a fully diluted basis.
NEXTEL's current interest in Mobilcom Mexico is approximately 18%. In the
event NEXTEL exercises its options in full, the Company's interest in Mobilcom
Mexico will decrease to 1.8%.
Project Background. Mobilcom Mexico was formed in 1991 by Grupo to pursue
mobile trunked radio opportunities in Mexico. At the time of the Company's
initial investment in December 1992, Mobilcom Mexico had already obtained
licenses to provide trunked radio services covering a substantial number of
channels through Central and Northern Mexico. Following such investment,
Mobilcom Mexico began providing ECTR services, brought in additional partners
and obtained licenses for more channels both from the Mexican government and
through the acquisition of other local operators.
Licenses and Interconnection. Mobilcom Mexico's existing licenses, which
expire from 2000 to 2016, include 1,976 channels in the 400 MHz frequency band
covering Central and Northern Mexico, and more than 2,370 channels in the 800
MHz frequency band covering Mexico City and areas in Northeastern Mexico. The
licenses do not contain restrictions on the type of technology Mobilcom Mexico
may use or on the number of subscribers. Mobilcom Mexico's licenses, however,
are subject to certain requirements and restrictions which include build-out
requirements and transfer restrictions. In particular, Mobilcom's licenses
generally require that they be held for at least three years before they may
be sold or transferred. Mobilcom Mexico has been, and expects to continue to
be, in full compliance with its license requirements. Failure to satisfy such
requirements, however, could result in a loss of licenses, which could have a
material adverse effect on Mobilcom Mexico. Mobilcom Mexico has full
interconnection capabilities through Telmex. Mobilcom Mexico currently
provides interconnection services to a limited number of its subscribers, but
expects to significantly increase subscriber interconnection as it upgrades
its network.
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Existing Operations and Development Plan. As of June 30, 1996, Mobilcom
Mexico had approximately 22,000 subscribers in 39 cities throughout Central
and Northern Mexico, including Mexico City. For the fiscal year ended December
31, 1995, Mobilcom Mexico realized revenues of $5.3 million, while cash flow
from operations was a deficit of approximately $22.5 million. For the six
months ended June 30, 1996, Mobilcom Mexico experienced an average monthly
subscriber churn rate of approximately 2.7%.
As of June 30, 1996, Mobilcom Mexico had 42 transmitter sites and the system
capacity to serve approximately 26,600 subscribers. Mobilcom Mexico is in the
process of constructing 11 additional transmitter sites, thereby increasing
its total sites to 53 and expanding its network capacity to serve
approximately 30,500 subscribers by December 31, 1996. Motorola and Nokia
technology is being used by Mobilcom Mexico.
Mobilcom Mexico had a total of 162 employees working full-time throughout
Northern and Central Mexico as of June 30, 1996.
Investment and Budgeted Capital Expenditures. As of June 30, 1996, the
Company had expended approximately $2.1 million to acquire its 2.3% interest
in, and to make capital contributions to, Mobilcom Mexico.
Mobilcom Mexico has budgeted capital expenditures of approximately $17.2
million and $57.2 million for 1996 and 1997, respectively, primarily for the
continued development and expansion of its network. Mobilcom Mexico plans to
fund such capital expenditures primarily through financing under credit
facilities, anticipated cash flow from operations, as well as capital
contributions from shareholders.
Mobilcom Mexico has obtained various financing arrangements to fund the
infrastructure equipment being used in the 400 MHz network. The Export
Division of the Bank of Finland is providing 7-year debt financing on 85% of
the estimated cost of the 400 MHz infrastructure equipment, most of which is
being supplied by Nokia. Nacional Financiera ("Nafinsa") is providing the
remaining 15% of the estimated cost plus financing of freight, duties and
infrastructure installation. These loans are being made through Banco
Mexicano, which has established a $32.1 million line of credit for the 400 MHz
network. Borrowings under this credit facility bear interest at a floating
rate based on LIBOR and mature from 2000 to 2006. Borrowings under this credit
facility are secured by equipment purchased with such funds and all of the
assets and capital stock of RadioPhone, S.A. de C.V., a wholly owned
subsidiary of Mobilcom Mexico, as well as the capital stock of other Mobilkom
Mexico subsidiaries that hold the licenses under which Mobilkom Mexico
operates. As of May 30, 1996, borrowings of approximately $15.1 million were
outstanding under this credit facility. In addition to these bank financings,
certain shareholders have made loans to Mobilcom Mexico which in the aggregate
equaled approximately $1.8 million as of June 30, 1996.
Competition. Wireless communications services are provided both by cellular
and ECTR operators in Mexico. As of June 30, 1996, Mobilcom Mexico was one of
the largest ECTR service providers in Mexico with approximately 28% of
estimated total number of ECTR subscribers. Mobilcom Mexico has three primary
competitors in the wireless communications market in Mexico: Radiocel, an ECTR
operator with approximately 20,000 subscribers, as well as Radiomovil Dipsa,
S.A. de C.V. (Commercial Telcel) with approximately 400,000 subscribers and
Iusacell, S.A. de C.V. with approximately 209,000 subscribers, both of which
are cellular communications providers. Mobilcom Mexico seeks to differentiate
itself from its competitors by, among other things, offering widespread
coverage, a focus on custom service and payment packages tailored to meet
customer needs.
DEVELOPMENTAL STAGE PROJECTS
Unless otherwise indicated, information set forth below regarding population
and POPs, population growth, GDP per capita, and GDP growth is from 1995; data
regarding POPs covered by licenses is based on POPs data from 1995 and
licenses held as of June 30, 1996; and data regarding telephone lines per 100
POPs and the waiting time for installation of land-line telephones is from
1994. Such data has been taken from the sources
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indicated above under "Business--Background--Demand for Communications
Services in Developing Countries."
As indicated below, the terms of the Company's proposed investment in the
developmental stage projects, including the percentage interest to be received
by the Company, are under negotiation and are typically provided for in MOUs
rather than definitive agreements and are typically subject to compliance with
local law and receipt of necessary licenses and approvals. There can be no
assurances that such licenses and approvals will be received. The Company's
anticipated investment and interest in these projects, as well as the scope of
the projects themselves, may change and the Company may elect not to pursue
one or more of the developmental stage projects described below. See "Risk
Factors--Project Level Risks--Early Stage of Development of Wireless
Projects."
TAIWAN NATIONAL ECTR
Background. Taiwan has a population of approximately 21.3 million people, of
which approximately seven million live in and around the capital of Taipei.
Taiwan's 1995 GDP per capita of approximately $12,485 was one of the highest
in Southeast Asia. Until recently, the telecommunications industry in Taiwan
was highly restricted, with only the government-owned telephone company
providing mobile communications of any form. In 1994, there were less than 40
telephone lines per 100 POPs. In early 1996, the government of Taiwan
announced that it would open up the country's telecommunications sector to
private enterprises. To date, the Company has invested $3.0 million in the
Taiwan National ECTR project.
The Project. The Company and the proposed shareholders of a Taiwanese
company to be called Taiwan Mobile Communications Corp. ("TMCC") have agreed
to file joint applications for a number of mobile voice and data licenses to
provide national coverage of Taiwan. This project was organized by Jason Wu
and Central Investment Holding, both of whom are existing shareholders of the
Company, and certain other proposed investors in TMCC. It is anticipated that
the Company, through a combination of direct and indirect ownership and
revenue sharing agreements with TMCC, will receive a 20% economic interest in
the joint venture. Selection of the successful applicants by the government
will not be done on the basis of an auction, but rather based on the quality
of the application, the expertise demonstrated in the application and other
factors. License applications have been submitted, and license awards are
expected to be announced during the first quarter of 1997. The Company
believes that, on the basis of its experience in providing ECTR services and
the quality of its local partners, it is well positioned to receive one or
more of the licenses for which it will apply, although no assurance can be
given that any such licenses will be awarded. See "Risk Factors--Project Level
Risks--Risk of Modification or Loss of Licenses; Uncertainty as to the
Availability, Cost and Terms of Licenses; Restrictions on Licenses."
STAR TELECOM OVERSEAS
Background. The Company currently holds a 70% interest in Mainstream
Limited, a company to be renamed Star Telecom Overseas (Cayman Islands)
Limited ("STOL"). STOL holds an equity interest in a regional paging project
in India and rights to an equity interest in a national paging project in
Taiwan and is actively pursuing paging opportunities in Indonesia and
Thailand. Pursuant to an agreement with Star Telecom Holdings Limited
("STHL"), which holds the remaining 30% interest in STOL, the Company's
interest may be reduced to approximately 57.1% upon the exercise of options
held by STHL as well as options that may be granted to members of the senior
management of STOL. STHL is a Hong Kong corporation that is a wholly owned
subsidiary of Star Telecom International Holding, Ltd., a company listed on
the Hong Kong stock exchange that owns one of the largest paging operators and
Internet service providers in Hong Kong. Pursuant to a technical services
agreement and a technology and trademark licensing agreement between STHL and
STOL, STHL has agreed to provide and/or license to STOL certain technical
services, personnel and know-how and certain technology and other intellectual
property for use in STOL's paging projects. Pursuant to a management services
agreement between the Company and STOL, the Company has agreed to provide to
STOL and its paging projects certain management, financial and other
operational services, personnel and know-how.
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India Regional Paging. Through STOL, the Company holds an indirect interest
of approximately 7.7% in RPG Paging Service Limited ("RPSL"), a regional
provider of paging services in India. RPSL began operations in 1995 and, as of
June 30, 1996, had approximately 30,000 subscribers. STOL is currently
negotiating to increase its interest in RPSL to approximately 19%, which would
increase the Company's indirect interest in RPSL to approximately 13.3%. As of
June 30, 1996, RPSL provided paging services in New Delhi, Madras and
Ahmadabad, which together had approximately 14 million POPs, based on the most
recently available data. STOL's partners in RPSL are RPG Group ("RPG"), a
leading Indian manufacturer of chemical products and provider of
telecommunications services, and two Japanese companies, Itochu and Nippon
Telegraph and Telephone International ("NTTI"). As of June 30, 1996, each of
RPG, Itochu and NTTI held a 60%, 20% and 10% equity interest in RPSL,
respectively. In April 1995, STOL entered into an agreement with RPSL to
provide technical services for the installation, testing and commissioning of
its paging system and technical, sales and billing system training. As of
December 31, 1995, STOL had invested approximately $1.6 million in RPSL. The
Company currently anticipates future investments in RPSL by STOL of
approximately $200,000.
Taiwan National Paging. In 1996, the Taiwanese government adopted a policy
to liberalize the national telecommunications market for mobile services,
including cellular, trunked radio and paging. Pursuant to this policy, the
Taiwanese government invited applications for two nationwide paging licenses.
STOL is a member of a consortium led by Pacific Electric Wire and Cable
Limited, a large public Taiwanese telecommunications company and STOL's
partner in its Indonesian paging project ("PEWC"), that has applied for such a
national paging license. STOL has a right to a 20% economic interest in the
consortium, part of which is anticipated to be structured as a direct equity
interest. In July 1996, STOL funded approximately $3.0 million to the
consortium, which amount constitutes its pro-rata share of the minimum
capitalization required to be demonstrated by the consortium in support of its
license application. While the Company believes that the consortium is well
positioned to receive one of the nationwide paging licenses, there can be no
assurance that its application will be successful. See "Risk Factors--Project
Level Risks--Risk of Modification or Loss of Licenses; Uncertainty as to the
Availability, Cost and Terms of Licenses; Restrictions on Licenses." In the
event that the application is unsuccessful, the amounts funded by STOL to the
consortium, less bidding expenses, will be returned to STOL. Paging services
are currently available in Taiwan only through the government owned telephone
company. Therefore, the Company believes that a significant market for high
quality paging services currently exists in Taiwan.
Indonesia National Paging. In August 1995, STOL and PEWC entered into a MOU
with an Indonesian subsidiary of a leading Asian telecommunications company
with cellular operations in Indonesia. In 1995, this Indonesian company was
granted a 10-year license to provide national paging services. The Company
believes that only nine other licenses to provide paging services have been
granted by the Indonesian government and that it is unlikely that the
Indonesian government will issue additional licenses in the near future. The
terms of the MOU contemplate the formation of a joint venture between PEWC,
STOL and the Indonesian company to operate paging services under the
Indonesian company's licenses. It is intended that the Indonesian company
provide base station sites and sales outlets and guarantee financing for the
purchase of certain additional equipment. The Company anticipates that STOL
would invest approximately $3.2 million to acquire up to a 25% interest in
this joint venture, although no assurances can be given that the terms of such
investment will not differ substantially from those described above.
Thailand Paging. STOL is pursuing negotiations with a local Thai company to
form a joint venture that would provide paging services to the Royal Thai
Police Department (the "RTPD"). It is expected that the RTPD, which controls
the frequencies necessary to operate a paging network, would make such
frequencies available to STOL and its Thai partner under a 20-year license.
The network would initially serve police personnel and their relatives. The
Company anticipates that the network will also be used to provide security
related services to the general public. The Company expects that STOL would
initially invest approximately $8.0 million in exchange for a 25% interest in
this project.
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CHINA REGIONAL CELLULAR
In May 1996, the Company and STHL, the Company's proposed partner in STOL,
entered into a letter of intent providing for the acquisition by the Company
of a 40% equity interest in a wholly owned subsidiary of STHL, Star Digitel
Limited ("SDL"), a Hong Kong company engaged in various cellular projects in
China. In July 1996, STHL agreed to increase the interest offered to the
Company in SDL to 49% for a proposed purchase
price of $56.5 million. The Company intends to retain a 25% interest in SDL
and to invite a third party to purchase the remaining 24% interest.
The description of SDL's operations and activities set forth below is based
primarily upon representations of and information and documents provided by
SDL and STHL and in some cases has not been independently verified by the
Company.
In recent years, the Chinese People's Liberation Army (the "PLA") has sought
to use its extensive network of radio frequencies for commercial purposes. To
implement this policy, the PLA has created business agencies which have
developed and are operating regional cellular networks in China with financial
and technical support from foreign telecommunications companies. SDL is the
foreign partner in ten of these projects which, as of June 30, 1996, were
operational in the provinces of Guangdong, Sichuan, Shangdong, Gansu, Hebei,
Yunnan and Xinjiang. SDL has entered into cooperative agreements with PLA
operators pursuant to which SDL is providing equipment and technical and
engineering services necessary to build and operate the networks. These
cooperative agreements include revenue sharing arrangements pursuant to which
SDL is generally allocated 60% of the revenues collected by the PLA until
SDL's development costs are reimbursed, at which time SDL's share will be
reduced to between 20% and 50%. Certain of these cooperative agreements
include purchase and sale agreements whereby SDL provides network
infrastructure equipment to the PLA.
The existing PLA cellular networks did not allow interconnection with the
public telephone system until 1995 when the Chinese Ministry of Post and
Telecommunications (the "MPT") agreed to cooperate with the PLA in operating
the PLA's existing cellular networks and developing further projects. Under
the China Telecom Great Wall Mobile Communications ("China Telecom Great
Wall") joint ventures, the MPT would provide interconnection with the public
telephone system and numbering services and the PLA would make available its
800 MHz frequencies and base station sites.
SDL intends to participate in the China Telecom Great Wall projects by
providing the financing, technical and engineering services necessary for the
construction and operation of the China Telecom Great Wall networks for a
fixed period of time under revenue sharing arrangements. SDL intends initially
to enter into agreements with China Telecom Great Wall joint ventures to
construct additional networks in the provinces of Shangdong, Hebei, Guangdong
and Hainan.
PAKISTAN NATIONAL ECTR
Background. Pakistan has a population of approximately 130 million people
and is one of the largest countries in the world. The Company believes that
there exists substantial unmet demand for telephone services, as evidenced by
only 1.6 telephone lines in Pakistan per 100 POPs. Pakistan's real GDP grew at
a rate of approximately 4.5% during the year ended December 31, 1995.
Political unrest, which has inhibited foreign investment in Pakistan in the
past, has generally abated.
The Project. In December 1995, the Company formed Mobilcom (Private) Limited
("Mobilcom Pakistan"). The Company presently owns 100% of Mobilcom Pakistan,
but expects that a 10% interest will be acquired by its local partner, Habib
Rafiq International (Private) Limited ("Habib"). Habib is a major conglomerate
in Pakistan with interests in construction and other industries in addition to
telecommunications. A national trunked radio license, with an initial term of
15 years, has been issued to Mobilcom Pakistan. Various frequency bands have
been made available by the government of Pakistan for trunked radio. Mobilcom
Pakistan has chosen 800 MHz frequency band and is awaiting government
confirmation of the Mobilcom Pakistan
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frequency choice. Mobilcom Pakistan's business plan calls for building
regional networks covering most of the major population centers of the
country, including Karachi, Lahore and Islamabad and later connecting them
along major highways. Though a number of other trunked radio licenses have
been granted, the Company believes that other networks will provide only local
dispatch service and will not effectively compete with Mobilcom Pakistan's
regional/national network. Also, the Pakistan market is particularly
attractive as PMR systems have historically not been allowed in Pakistan.
MEXICO WLL
Background. In March 1996, a local company was incorporated in Mexico City
by a prominent Mexican business person (the "Mexican Partner") to provide
telecommunications services in Mexico.
In May 1996, another local company was incorporated by the Mexican Partner
in Mexico City to pursue a WLL business. This company expects to receive a
national WLL license within the next several months and has developed a
preliminary business plan and secured initial staffing.
The Mexican Partner executed an MOU with the Company in June 1996 giving the
Company the option to purchase a 40% ownership interest in each of the two
local companies described above, both of which are currently owned by the
Mexican Partner and certain associates. The anticipated investment by the
Company in the two local companies described above, in the event the Company
exercises its options, would be an aggregate of approximately $18.5 million.
The MOU also contemplates that one or more strategic partners may be invited
to purchase equity interests in the local companies.
In the event the Company and the Mexican Partner elect to proceed with the
investments described above, the local companies are expected to be organized
and managed on a coordinated basis, with each supporting the operations of the
other. The Company anticipates entering into a shareholders agreement with the
Mexican Partner providing, among other things, that each shareholder will
provide its proportionate share of all financing and all guarantees required
for capital equipment and operating expenses of each of the local companies
and make its proportional share of any and all capital contributions required
by each such company's approved business plan. In addition, each of the
Company and the Mexican Partner is expected to enter into a service agreement
with the local company formed to pursue the WLL business, pursuant to which it
would provide engineering, technical, marketing and management support to such
company.
PERU NATIONAL ECTR/PAGING
Background. Peru has a population of 23.8 million. Peru's 1995 GDP per
capita was $2,640 and real GDP grew at a rate of approximately 6.6% during the
year ended December 31, 1995. Peru also has one of the least developed
telephone networks in Latin America, with only 3.3 telephone lines per 100
POPs and a waiting time for installation of approximately 4.3 years in 1994.
The Company estimates that approximately half of Peru's telephone lines are
located in Lima, representing a penetration rate in the city of approximately
5% and a penetration rate in the remainder of the country of less than 1%. The
main providers of telecommunications services in Peru are currently Telefonica
de Peru, the national telephone company that following privatization in 1994
is now majority owned by Telefonica de Espana, and Tele2000, a regional
cellular operator owned by the Delgado Parker Group.
The deregulation of the telecommunications industry in Peru, other than the
removal of restrictions on foreign ownership, includes the opening up of
spectrum grants to private enterprises and the reduction of import duties on
telecommunications equipment from a 1990 level of 66% to a current level
averaging approximately 16.5%.
ECTR Project. In May 1995 PeruTel S.A. ("PeruTel") was incorporated in Lima,
Peru to apply for ECTR radio licenses in Peru. The Company owns a 98% interest
in PeruTel, with the remainder owned by Promociones Telefonicas S.A.
("Protelsa"), a local telecommunications engineering company that prepared the
license application on behalf of PeruTel, and Marmaud S.A. ("Marmaud"), the
parent of Protelsa. In November 1995,
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PeruTel was advised by the Director General of Telecommunications that,
subject to certain conditions that were subsequently satisfied, it had been
awarded up to 100 channels in the 800 MHz frequency band for the provision of
mobile trunked radio communications throughout Peru.
As part of its license application, PeruTel prepared and submitted a network
design to the Ministry of Telecommunications. Currently, PeruTel is awaiting
receipt of the proposed tariff agreement from the Ministry of
Telecommunications and, once finalized, it will then have 12 months to
commence construction of its network. The Company has invested approximately
$100,000 in connection with the establishment of PeruTel to date and
anticipates an additional investment of approximately $17.5 million by
December 31, 1997. As described below, the Company is negotiating an agreement
to exchange a 10% interest in PeruTel for a 34% interest in Protelsa's paging
operation in Peru.
Paging Project. Protelsa was awarded a national paging license in September
1995 and has commenced construction of its paging network using a Phillips
APOC network and Glenayre base stations. Protelsa has invited the Company to
exchange 10% of its interest in PeruTel (7% to Protelsa; 3% to Marmaud) for a
34% equity interest in Protelsa's paging operation, and the Company has
accepted this offer and is in the process of negotiating an exchange agreement
with Protelsa.
COMPETITION
Because the implementation of wireless technologies is at a early stage of
development in many developing countries, the Company believes there are
significant opportunities to form, develop and operate companies that deploy
these technologies. The Company believes its business will become increasingly
competitive, particularly as businesses and foreign governments realize the
market potential of wireless technologies. A number of large American,
Japanese and European companies, including RBOCs and major international
carriers, are actively engaged in programs to develop and commercialize
wireless technologies in developing countries. Most of these companies have
substantially greater financial and other resources, research and development
staffs and technical and marketing capabilities than the Company. The
Company's operating companies and developmental stage projects will frequently
compete against traditional land-line companies (i.e. local telephone
companies), cellular telephone companies and direct competitors using the same
wireless technologies as the operating companies. The Company's competitive
strategy depends on the service offered and the competitor. For example, the
Company's strategy is for its ECTR operating companies to compete against
cellular telephone service providers by offering greater functionality at
lower cost, particularly for business users, to compete against traditional
land-line carriers by offering better service, faster deployment and lower
construction costs and to compete against direct competitors, including those
formed by large American, Japanese and European companies, by relying on local
partners to obtain operating licenses and provide access to existing
telecommunications asset bases. There will, however, be increasing competition
for licenses; and there will be increased competition once licenses are
obtained from both other wireless operators and, in some cases, from
government-owned telephone companies. Although the Company intends to employ
new technologies, there will be a continuing competitive threat that even
newer technologies will render the wireless systems employed by certain
operating companies obsolete. There is no assurance that any of the Company's
operating companies or developmental stage projects will compete successfully
in the marketplace. See "Risk Factors--Project Level Risks--Competition."
TECHNOLOGY
Cellular Telephone
Cellular telephone was first commercially introduced in Sweden in 1976.
Commercial introduction in the United States occurred in 1983. Cellular
services are now broadly available in developed countries and are available or
being introduced in most developing countries around the world.
The principle of cellular telephone service is coverage of the target market
with a number of overlapping "cells" each centered on a low tower or cell
site. In its simplest configuration, a cellular telephone system consists of a
series of cell sites, each with a cellular tower. Cell sites are linked to a
mobile telephone switching
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office, which consists of a central computer which controls the network, and a
switch to route calls between cells and the public switched telephone network.
Currently, most cellular systems use analog technologies such as AMPS (U.S.
standard), TACS (UK/European standard) or NMT (European standard). In some
high density markets analog systems are reaching their capacity limits and are
being supplemented with new digital technologies that offer greater capacity
than analog systems.
Several digital cellular technologies have been developed in the last three
to five years. D-AMPS has been introduced as an upgrade for operators of
existing AMPS systems. D-AMPS nominally provides three times the capacity of
analog systems and is now a mature and well proven technology. In Europe, the
Global System for Mobile Communication ("GSM") standard has been developed and
is widely available throughout Europe and Asia. GSM provides approximately two
to three times the capacity of analog systems and has the additional benefit
of international roaming due to its broad availability and system
compatibility. Another new digital technology, Code Division Multiple Access
("CDMA"), is being introduced in the U.S. and several other major countries.
CDMA provides the highest capacity of any digital cellular technology at this
point, with six to ten times analog system capacity in a mobile environment.
Its first commercial deployment in Hong Kong has been successful, and it is
now being planned for deployment in Personal Communications Services ("PCS")
networks in the United States and elsewhere.
Despite the introduction of these digital technologies, analog networks
continue to dominate markets in most countries. For example, even after the
introduction of GSM services in Scandinavia, the NMT analog service continues
to experience significant growth, partly due to its superior coverage outside
of the major cities in the region. Two new enhancements, NMT 450-I and NMT
900-I, provide NMT networks with GSM-like functionality, including calling
number display, short message service, voice mail indicator and real-time
clock. In addition, a common GSM/NMT number facility is now available.
Spectrum for cellular is usually allocated in the 400 MHz, 800 MHz or 900
MHz frequency bands, depending on the country and the standard used. In many
countries, spectrum is also being made available in the 1.8 and 1.9 GHz "PCN"
and PCS bands. PCS is essentially a variant of cellular telephone operating in
different frequency ranges, but providing similar services. In the US market,
PCS is being targeted mainly towards the residential and individual subscriber
markets, where it competes not only with cellular but with existing wireline
telephone services. In developing countries, the availability of PCS spectrum
provides opportunities for operators to address both the mobile and fixed
telephone markets.
Wireless Local Loop
WLL refers to a group of technologies designed to provide customer access to
the public switched telephone network using wireless radio technologies rather
than traditional wire or fiber optic lines.
A WLL system typically consists of a number of radio base stations (similar
to cell sites used for cellular telephone) covering the target market area, a
switching center, and fixed subscriber terminals on the subscriber's premises.
On the fixed subscriber terminal a standard telephone jack allows connection
to standard telephone equipment. In some systems portable handsets are
available, providing the added value of wide-area cordless telephone service
to the subscriber.
The Company believes that WLL is an attractive technology for the rapid
expansion of telephone facilities in developing countries. The use of digital
technology provides substantially greater capacity than analog alternatives
which the Company believes results in WLL being a cost-effective
communications solution.
Several types of technology can be used to provide WLL. These include (i)
cellular telephone technologies such as CDMA, D-AMPS or GSM which are suitable
for providing WLL, wide-area cordless and combined WLL/PCS services, (ii)
"PSTN Transparent" technologies, designed specifically for WLL applications,
which
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provide a direct replacement to the traditional wireline (cable based) local
loop in a manner which is completely transparent to the user, and (iii) new
digital cordless technologies such as Digital European Cordless Telephone
(DECT) and the Japanese Personal HandiPhone System (PHP/PHS).
Enhanced Capacity Trunked Radio
ECTR refers to a group of technologies designed to provide a combination of
cellular telephone, specialized mobile radio ("SMR") dispatch services, paging
services, data services, wide-area subscriber roaming and fixed site services
(WLL) all on a single system. Typically known as "Business Cellular," or
"Business Communications Services," the technology was developed in Europe in
the early 1980's as an outgrowth of previously developed cellular telephone
and trunked radio technology. Trunked radio was developed in the U.S. in the
early 1970's to allow users of traditional single channel, PMR systems to
share channels in a dynamic manner, thereby increasing system capacity and
reducing competition for channels among users. Trunked radio has been
traditionally used for dispatching trucks, taxis, and other fleet vehicles.
In creating ECTR, a group of leading manufacturers (Nokia, Motorola,
Phillips) combined existing cellular telephone and trunked radio technologies
and incorporated new features to optimize the technology for business users.
The resulting "MPT 1327" technology is now one of the leading trunked radio
technologies in the world in terms of number of countries in which it is
deployed. Most countries in Western Europe now have commercial MPT 1327
systems, as do many countries in Eastern Europe, Asia and Latin America.
MPT 1327 is a combination of analog (traffic channels) and digital (control
channels) technology. An MPT 1327 system user can (i) make cellular calls on
terminals similar in size to GSM cellular telephone terminals, (ii) dispatch
vehicles and control field personnel, (iii) transmit data to fax machines and
mobile and fixed site computers, (iv) page users and provide short messages on
the terminal display, (v) connect out-of-office employees into office PABXs to
provide the functionality of the office PABX away from the office, and
(vi) provide primary or second line service to fixed sites (wireless local
loop). The Company believes that MPT 1327 ECTR technology provides these
capabilities at a lower cost per subscriber than cellular telephone in most
applications.
An added advantage of MPT 1327 ECTR is its ability to operate in numerous
frequency bands. The Company has found that this frequency flexibility makes
it easier to obtain frequency allocations to establish ECTR operations in
developing countries. Also, as MPT 1327 supports cellular calling services,
the Company has been able to obtain substantial blocks of ECTR frequency in
its project countries, and provide business cellular service, without paying
the high license fees typically paid for cellular licenses.
ECTR technologies continue to develop and evolve. The Company continually
evaluates these developments and adapts them as appropriate.
Paging
Paging is a well-established technology, with service widely available in
most developed and developing countries. A paging system typically consists of
a number of transmitter sites, connected to a central messaging center. The
messaging center receives incoming messages from the public telephone network
and prepares batches of messages for transmission to subscribers.
Paging systems are normally based on industry standard transmission
protocols, the most common being POCSAG 512. Newer systems such as POCSAG 1200
and Motorola "Flex" provide higher capacity by using higher transmission
speeds.
Two way paging systems are now available, allowing message acknowledgment
responses and short data messages to be sent back by the paging subscriber.
These systems normally require multiple receiver sites in the
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network to ensure reliable reception of low power transmissions from pagers.
Depending on the technology used, existing paging systems can be upgraded to
incorporate this capability.
As paging networks are essentially broadcast messaging systems additional
applications can also be supported by the existing infrastructure, such as
news retrieval, stock market quotes and weather forecasts. In developing
countries where telephone penetration is low, paging often provides an
affordable alternative to public telephone service. The high penetration rates
of paging in China and Hong Kong are indicative of this phenomenon. When used
in conjunction with public voice mail services (which are often provided by
paging operators), a "virtual telephone" service can be provided.
Wireless Cable Television
MMDS, commonly known as wireless cable television, transmits video
programming through broadcast microwaves instead of coaxial cable, providing
cable television-type services to subscribers. The Company believes that MMDS
is a cost-effective means of delivering video programming to the home,
particularly in developing countries where existing cable infrastructure is
underdeveloped or non-existent.
MMDS provides for wireless transmission from one or more central
transmitters directly to subscribers' rooftop antennas. The transmitter site
is co-located with or connected to a "headend" similar to that of a
traditional cable system, which receives programming from satellites, local
production studios or video tape. Conventional MMDS transmitters are capable
of delivering quality signals to subscribers within 20 to 30 miles of the
transmitter site.
The Company has developed an alternative MMDS system design which operates
in frequency ranges which are much higher than those of traditional MMDS
systems. The Company believes that licenses to provide MMDS services in these
frequency ranges may be more easily obtained than licenses to provide such
services in conventional MMDS frequency ranges. In addition, this alternative
system architecture is comprised of readily available electronic components.
As a result, the Company believes that this new system design holds great
potential in its targeted developing countries.
EMPLOYEES
As of August 31, 1996, the Company had 28 employees, including 7 local
country managers. None of the Company's employees are subject to collective
bargaining agreements. The Company believes that its relations with its
employees are good. The Company's operating companies had an aggregate of
approximately 525 employees at the end of August 31, 1996.
LEGAL PROCEEDINGS
The Company is not a party to any litigation at the present time.
FACILITIES
The Company leases approximately 2,800 square feet of space in a facility
located in San Mateo, California. The lease provides for current annual rent,
including expenses, of approximately $60,000 per year. Lease payments are
subject to adjustment in the event of increases in property taxes and other
events.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of August 31, 1996
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Haynes G. Griffin(1).... 49 Chairman of the Board
John D. Lockton......... 58 President, Chief Executive Officer and Director
Hugh B. L. McClung...... 55 Vice Chairman of the Board and Managing Director, Asia
Clarence "Sam" Endy..... 58 Executive Vice President, Operations and Chief Operating Officer
Douglas S. Sinclair..... 42 Executive Vice President and Chief Financial Officer
Patrick Ciganer......... 45 Senior Vice President, Latin America
Robert M. Curran........ 42 Senior Vice President, Marketing
Roger Quayle............ 42 Senior Vice President, Technology
Aarti C. Gurnani........ 29 Vice President, Legal Affairs and Secretary
Stephen R. Leeolou(2)... 39 Director
Piers Playfair.......... 37 Director
John S. McCarthy(2)..... 48 Director
Carl C. Cordova
III(1)(2).............. 34 Director
Brian Rich.............. 35 Director
Van Snowdon............. 41 Director
Carl F. Pascarella(1)... 53 Director
Stanley Wen............. 41 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. Griffin was elected Chairman of the Board of Directors of the Company in
June 1996. Mr. Griffin is a co-founder of Vanguard Cellular Systems, Inc., a
wireless cellular telephone company ("Vanguard"), and has served as President
and Chief Executive Officer of Vanguard since 1984. Mr. Griffin also serves as
a director of Lexington Global Asset Managers, Inc. and Geotek Communications,
Inc. Mr. Griffin holds a B.A. in Economics from Princeton University.
Mr. Lockton is a co-founder of the Company and has served as President,
Chief Executive Officer and a director of the Company since August 1991. From
May 1991 to August 1991, he was Managing Partner of Corporate Technology
Partners ("CTP"), a partnership formed to pursue wireless communications
licenses and form local wireless communications businesses in developing
countries. In 1988, he founded Cellular Data, Inc., a wireless company, and
Star Associates, Inc., a cellular radio RSA company. From 1983 to mid-1986,
Mr. Lockton was Executive Vice President for Pacific Bell Company, with
responsibilities including its wireless business. Mr. Lockton has been a
director of Interactive Network, Inc., a wireless based interactive television
company, since 1987 and was Chairman of the Board of Directors until 1994. Mr.
Lockton holds a B.A. in Economics and Chemical Engineering from Yale
University, an L.L.B. from Harvard Law School and an Executive M.B.A. from the
Columbia University Business School.
Mr. McClung is a co-founder of the Company and has served as Vice Chairman
of the Board of Directors since December 1995 and Managing Director, Asia
since January 1996. Mr. McClung served as Chairman of the Board of Directors
of the Company from January 1992 to December 1995, and served as Chief
Financial Officer of the Company from January 1992 until April 1995. From 1986
to 1991, he was a general partner of CTP, which he co-founded to pursue
wireless communications licenses and form local wireless communications
businesses in developing countries. Mr. McClung holds a B.A. in Economics and
an M.B.A. from the University of Washington.
Mr. Endy has served as Chief Operating Officer of the Company since June
1996 and has served as Executive Vice President, Operations of the Company
since August 1994. From July 1988 to May 1994,
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Mr. Endy held the positions of Senior Vice President, Service and Engineering,
Senior Vice President, Marketing and Sales and Chief Service Officer at Centex
Telemanagement, Inc., a telecommunications management company. Mr. Endy served
as a member of the Board of Directors of TeamTalk and currently serves on the
Board of Directors of Mobilkom and STW. Mr. Endy holds a B.S. in Military
Science from the U.S. Military Academy, West Point, an M.S. in Electrical
Engineering from Purdue University and a Ph.D. in Electrical Engineering from
Purdue University.
Mr. Sinclair has served as Executive Vice President and Chief Financial
Officer of the Company since May 1995. From March 1993 to May 1995, Mr.
Sinclair was Chief Financial Officer, Secretary and Treasurer of Pittencrieff
Communications, Inc., a major U.S. trunked radio operator. From March 1990 to
March 1993, Mr. Sinclair was Group Finance Director of Pittencrieff, plc.,
Scotland, an oil exploration and development company. Mr. Sinclair is a member
of the Board of Directors of TeamTalk and Wireless Data Services. Mr. Sinclair
holds a B.Sc. in Electrical & Electronic Engineering from the University of
Glasgow and an M.B.A. from the Harvard Graduate School of Business
Administration.
Mr. Ciganer has served as Senior Vice President, Latin America of the
Company since May 1996 and Vice President, Operations--Latin America of the
Company from January 1994 to April 1996. From May 1992 to January 1994, Mr.
Ciganer was Chief Executive Officer of Transcom Corporation, a wireless
telecommunications engineering and service organization. From November 1990 to
April 1992, Mr. Ciganer was a director and co-founder of Chronos Tracking
Systems, Ltd., a privately financed wireless data start-up company. Mr.
Ciganer holds a B.A. in Economics from Georgetown University.
Mr. Curran has served as Senior Vice President, Marketing of the Company
since August 1996. From March to August 1996, Mr. Curran was Vice President,
Marketing of 360(degrees) Communications Company, a U.S. cellular operator
that is the successor corporation to Sprint Cellular Company ("Sprint
Cellular"), a U.S. cellular operator that was wholly owned by Sprint
Corporation. From February 1994 to March 1996, Mr. Curran served as Vice
President, Marketing for Sprint Cellular, and from September 1990 to February
1994, he served as Regional Vice President for Sprint Cellular. From March
1980 to September 1990, Mr. Curran served in various positions with Centel
Cellular Company, a U.S. cellular operator, and Centel Supply Company, a
telecommunications equipment supplier. Mr. Curran holds a B.S. in Criminal
Justice from the University of Nebraska and is a graduate of the Executive
Development Programs of Columbia University and Northwestern University.
Mr. Quayle has served as Senior Vice President, Technology of the Company
since May 1996, prior to which he served as Vice President, Technology of the
Company from May 1995 to April 1996 and as Vice President, Asian Operations
from August 1994 to May 1995. From July 1991 to the present, he has held
various management positions with Broadcast Communications Ltd., the
government-owned national broadcasting and telecommunications network company
of New Zealand, most recently as General Manager of Technology and Business
Development.
Ms. Gurnani has served as Vice President, Legal Affairs of the Company since
March 1996 and as Secretary of the Company since August 1996. From July 1993
to March 1996, Ms. Gurnani was an Associate at Brobeck, Phleger & Harrison
LLP, a private law firm. Ms. Gurnani holds a B.S. in Medical Microbiology from
Stanford University and a J.D. from Hastings College of the Law.
Mr. Leeolou has served as a director of the Company since February 1994 and
served as Chairman of the Board of Directors of the Company from December 1995
until June 1996. Mr. Leeolou is a co-founder of Vanguard and has served as its
Executive Vice President, Chief Operating Officer and Secretary since 1984.
Mr. Leeolou holds a B.A. in Communications from James Madison University.
Mr. McCarthy has served as a director of the Company since May 1993. Since
December 1984, Mr. McCarthy has been a General Partner of Gateway Associates,
a venture capital firm which he co-founded ("Gateway Associates"). Mr.
McCarthy also serves on the Boards of Directors of Transaction Network
Services,
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Inc., a publicly held electronic data telecommunications company, D & K
Wholesale Drug, Inc., a publicly held company. Mr. McCarthy also serves on the
boards of directors of Tek Now, Inc., a private paging networks system
company, and NetSolve, Inc., a private data communications network company.
Mr. McCarthy holds a B.S. in Business from Washington University and an M.B.A.
from St. Louis University.
Mr. Cordova has served as a director of the Company since December 1995. Mr.
Cordova is a Vice President of Electra Inc., a subsidiary of Electra
Investment Trust PLC, which he joined in 1993. He serves on the Boards of
Directors of a number of media and telecommunications companies. Prior to
joining Electra Inc., he was a Vice President of Columbia Capital Group. Mr.
Cordova received a B.A. from Gettysburg College and an M.B.A. from The Wharton
School of the University of Pennsylvania.
Mr. Rich has served as a director of the Company since December 1995. Since
July 1995, Mr. Rich has served as Managing Director and Group Head of Toronto
Dominion Capital, the U.S. merchant bank affiliate of Toronto Dominion Bank.
From September 1990 to July 1995 he served as Managing Director of
Communications Finance Group of The Toronto Dominion Bank in New York where he
focused on transactions in the wireless communications, cable and broadcast
industries. Mr. Rich also serves as a member of the Board of Directors of
Teletrac, Inc. and InterAct, Inc. Mr. Rich holds a B.S. in Engineering from
State University of New York at Buffalo and an M.B.A. from Columbia
University.
Mr. Snowdon has served as a director of the Company since March 1996. From
December 1995 to the present, Mr. Snowdon has served as Vice President of
Vanguard Communications, Inc., a subsidiary of Vanguard. From January 1990 to
December 1995, he was Vice President of Vanguard International
Telecommunications, Inc., a subsidiary of Vanguard. Mr. Snowdon also serves on
the Board of Directors of Servicecellular S.A., and Digitel-Telecommunications
Ltd. Mr. Snowdon holds a B.S. in Management and Marketing and an M.B.A. from
James Madison University.
Mr. Pascarella has served as a director of the Company since April 1996.
Since August 1993, Mr. Pascarella has served as President and Chief Executive
Officer of Visa U.S.A. Mr. Pascarella initially joined Visa International in
January 1983 as Assistant Chief General Manager of the Asia-Pacific region and
shortly thereafter was appointed President of Visa International's Asia-
Pacific region and director of the Asia-Pacific Regional Board of the
organization. Mr. Pascarella has served as a member of the Board of Directors
of General Magic. Mr. Pascarella holds a B.S. in Accounting from the State
University of New York at Buffalo and an M.B.A. from the Stanford Graduate
School of Business.
Mr. Playfair has served as a director of the Company since June 1996. Since
January 1996, Mr. Playfair has served as a Managing Principal of Bassini,
Playfair + Associates, LLC, an investment firm which he co-founded, and from
September 1990 to December 1995, he was a Managing Director and International
Portfolio Manager of BEA Associates. Mr. Playfair holds a B.A. from the School
of Slavonic and East European Studies, University of London and a post-
graduate degree from the Polytechnic of Central London.
Mr. Wen has served as a director of the Company since March 1996. Since May
1993, Mr. Wen has served as a Manager of Tai-Shin Management Consulting Co.,
Ltd. From May 1992 to May 1993, he was a Senior Engineer at Taiwan Aerospace
Co., Ltd., a Taiwanese aerospace company. Mr. Wen holds a B.S. in Electrical
Engineering from Virginia Military Institute and an M.S. in Industrial
Engineering from West Virginia University.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently has two standing committees: (i) an Audit
Committee (the "Audit Committee"); and (ii) a Compensation Committee (the
"Compensation Committee"). The Board of Directors may also establish other
committees to assist in the discharge of its responsibilities.
The duties of the Audit Committee include recommending independent auditors
to the Board of Directors, reviewing the intended scope of the annual audit
and the audit methods and principles being applied by the independent auditors
and the fees charged by the independent auditors, reviewing and discussing the
results of
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the audit, reviewing the Company's significant accounting principles, policies
and practices and undertaking related matters. KPMG Peat Marwick LLP presently
serves as the independent auditors of the Company. The Audit Committee is
currently comprised of Messrs. Cordova, Leeolou and McCarthy.
The duties of the Compensation Committee include providing guidance and
periodic monitoring for all corporate compensation, benefit, perquisite and
employee equity programs, including those for all corporate officers, and
succession planning for corporate officers. The Compensation Committee is
currently comprised of Messrs. Cordova, Griffin and Pascarella.
ARRANGEMENTS CONCERNING ELECTION OF DIRECTORS
Pursuant to the Company's Amended and Restated Certificate of Incorporation
(the "Certificate"), (i) Vanguard, as the holder of Series E Preferred Stock
(as defined below), is entitled to elect three directors to the Company's
Board of Directors; and (ii) for so long as 20% of the shares of Series F
Preferred Stock (as defined below) remain outstanding, the holders of Series
F-1 Preferred Stock (as defined below) are entitled to elect three directors,
one of whom Electra has the right to elect, one of whom Central Investment
Holdings, Inc. ("CIH") has the right to elect and one of whom Toronto Dominion
Investments Inc. ("TDI") has the right, subject to the conversion of its
Series F-2 Preferred Stock (as defined below) into Series F-1 Preferred Stock,
to elect (subject, in each case, to minimum stock ownership requirements).
Pursuant to the IRA (as defined below), upon termination of the rights
referred to in clause (ii) of the preceding sentence, for so long as 20% of
the Series F Preferred Stock or the Common Stock issued or issuable upon
conversion thereof (the "Series F Conversion Shares") are held by Series F
Holders (as defined in the IRA), holders of the Company's Preferred Stock
("Preferred Stock") and certain transferees thereof have agreed to vote for
three directors designated by a majority of the Series F Conversion Shares,
one of whom Electra has the right to designate, one of whom CIH has the right
to designate and one of whom TDI has the right to designate (subject, in each
case, to minimum stock ownership requirements). The Company's Board of
Directors includes: Messrs. Griffin, Leeolou and Snowdon, who are
representatives of Vanguard; Mr. Cordova, who is a representative of Electra;
Mr. Wen, who is a representative of CIH; and Mr. Rich, who is a representative
of TDI.
The holders of Series F-1 Preferred Stock have certain additional rights
with respect to the election of one additional director upon the occurrence of
certain events specified in the Series F Purchase Agreement (as defined
below).
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF
LIABILITY
The Certificate limits the liability of the Company's directors for monetary
damages arising from a breach of their fiduciary duty as directors, except to
the extent otherwise required by the Delaware General Corporation Law
("Delaware Law"). Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware Law. The Company has
also entered into indemnification agreements with its officers, directors, and
certain other employees containing provisions that may require the Company,
among other things, to indemnify such persons against certain liabilities that
may arise by reason of their status or service as directors, officers or
employees of the Company (other than liabilities arising from willful
misconduct of a culpable nature) and to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified.
DIRECTOR COMPENSATION
Directors do not receive any cash compensation for their service as members
of the Board of Directors, although they are reimbursed for their expenses in
attending Board and Committee meetings. Certain outside directors have been
granted options to purchase shares of Common Stock in connection with their
service as directors of the Company as follows: Stephen R. Leeolou--80,000
shares at an exercise price of $8.12 per share granted in March 1996; John S.
McCarthy--12,000 shares at an exercise price of $2 per share granted in
October 1994; and Carl F. Pascarella--12,000 shares at an exercise price of
$8.12 per share granted in June 1996.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and four other most highly compensated executive
officers, each of whom earned salary and bonus for the fiscal year ended
December 31, 1995 in excess of $100,000 (collectively, the "Named Officers"),
for services rendered in all capacities to the Company during its previous
fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
------------------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
John D. Lockton
President and Chief Executive
Officer...................... $ 120,000 $ 50,000 0 $ 0
Hugh B. L. McClung
Vice Chairman of the Board and
Managing Director, Asia....... $ 120,000 $ 50,000 0 $ 0
Clarence Endy
Executive Vice President, Op-
erations and Chief Operating
Officer...................... $ 195,000 $ 20,000 0 $ 0
Douglas S. Sinclair(1)
Executive Vice President and
Chief Financial Officer....... $ 100,104 $ 15,000 120,000 $116,122(2)
Patrick Ciganer
Senior Vice President, Latin
America...................... $ 114,000 $ 0 0 $ 0
</TABLE>
- --------
(1) Mr. Sinclair joined the Company on May 7, 1995; his annual salary for 1996
will be $155,000.
(2) Represents reimbursement for relocation expenses of $68,642 and a cost of
living adjustment of $47,480.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Officers for the fiscal year ended December 31,
1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM (3)
------------------------- ---------------------
NUMBER OF
SHARES OF % OF TOTAL
COMMON STOCK OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
---- ------------ ------------ --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John D. Lockton(4)...... 0 0 -- -- -- --
Hugh B. L. McClung(4)... 0 0 -- -- -- --
Clarence Endy(4)........ 0 0 -- -- -- --
Douglas S. Sinclair(4).. 120,000 70% $6.25 05/14/05 $ 471,671 $ 1,195,307
Patrick Ciganer(4)...... 0 0 -- -- -- --
</TABLE>
- --------
(1) Each option is immediately exercisable. The shares purchasable thereunder
are subject to repurchase by the Company at the original exercise price
paid per share upon the optionee's cessation of service prior to vesting
in such shares. The repurchase right lapses and the optionee vests as to
25% of the option shares upon completion of one year of service from the
date of grant and the balance in a series of equal monthly installments
over the next 36 months of service thereafter. The option shares will vest
upon an acquisition of the Company by merger or asset sale, unless the
Company's repurchase right with respect to the unvested option shares is
transferred to the acquiring entity. The options have a maximum term of
ten years, subject to earlier termination in the event of the optionee's
cessation of employment with the Company.
(2) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares, together with any federal and state income tax liability incurred
by the optionee in connection with such exercise.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are provided for informational purposes only based on rules of the
Securities and Exchange Commission. The Company is unable to predict
whether the stock price will increase or decrease and, if it does
increase, there can be no assurance that the actual stock price
appreciation over the ten-year option term will be at the assumed 5% and
10% levels or at any other defined level. Unless the market price of the
Common Stock appreciates over the option term, no value will be realized
from the option grants made to the executive officers.
(4) On March 6, 1996, each of the following Named Officers was granted options
covering the following number of shares of Common Stock at an exercise
price of $8.125 per share: Mr. Lockton--200,000; Mr. McClung--200,000; Mr.
Endy--40,000; and Mr. Ciganer--20,000. On May 1, 1996, Mr. Sinclair was
granted options to purchase 36,000 shares at an exercise price of $8.125
per share. The options are immediately exercisable and subject to a right
of repurchase by the Company, as described in footnote (1). None of the
Named Officers is currently vested in any of these options.
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<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning option holdings for
the fiscal year ended December 31, 1995 with respect to each of the Named
Officers. No options were exercised during the fiscal year ended December 31,
1995, and no stock appreciation rights were exercised during such year or were
outstanding at the end of that year.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF VALUE OF
COMMON STOCK UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AS OF DECEMBER 31, 1995(#) AS OF DECEMBER 31, 1995(1)
---------------------------- ---------------------------
NAME EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ------------- ---------------------------
<S> <C> <C> <C> <C>
John D. Lockton......... 80,000 0 $ 730,000 0
Hugh B. L. McClung...... 80,000 0 $ 730,000 0
Clarence Endy........... 140,000 0 $ 1,277,500 0
Douglas S. Sinclair..... 120,000 0 $ 375,000 0
Patrick Ciganer......... 80,000 0 $ 730,000 0
</TABLE>
- --------
(1) Based on the estimated fair market value of Common Stock as of December
31, 1995 ($8.125 per share) less the exercise price payable for such
shares.
(2) The options are immediately exercisable for all the option shares, but any
shares of Common Stock purchased under the options will be subject to
repurchase by the Company at the original exercise price per share upon
the optionee's cessation of service prior to vesting in such shares. The
repurchase right has lapsed as to the following number of shares as of
December 31, 1995: Mr. Lockton--26,640; Mr. McClung--19,960; Mr. Endy--
46,640; Mr. Sinclair--0; Mr. Ciganer--38,320.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Griffin, Cordova and
Pascarella; Mr. Griffin serves as its Chairman. In 1995, Messrs. Lockton,
Leeolou, McCarthy and Schiff served on the Compensation Committee; Mr.
McCarthy served as its Chairman. Mr. Griffin is Chairman of the Board of
Directors of the Company and President and Chief Executive Officer of
Vanguard. Mr. Cordova is a Vice President of Electra Inc., an affiliate of
Electra. Mr. Lockton is President and Chief Executive Officer of the Company.
Mr. Leeolou has been a director of the Company since February 1994 and is
Executive Vice President and Chief Operating Officer of Vanguard. Mr. McCarthy
is a general partner of Gateway Associates, a venture capital firm affiliated
with Gateway (as defined below). Mr. Schiff is a general partner of Northwood
Ventures, a venture capital firm, and Chairman and Chief Executive Officer of
Northwood Capital Partners LLC (together with Northwood Ventures and an
affiliated individual, "Northwood"). As of June 30, 1996, Vanguard, Electra
and Gateway each held more than 5% of the outstanding voting equity securities
of the Company.
In March 1992, the Company sold 271,960 shares of Series B Preferred Stock
to Gateway (as defined) for an aggregate purchase price of $250,000 (a
purchase price of $0.92 per share). In June 1992, the Company issued Gateway a
warrant to purchase an additional 417,040 shares of Series B Preferred Stock
at an exercise price of $0.60 per share, which was subsequently canceled. In
May 1993, the Company sold 435,120 shares of Series B Preferred Stock to
Gateway for an aggregate purchase price of $399,984, including cancellation of
indebtedness in the amount of $75,000.
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<PAGE>
In October and November 1993, the Company issued convertible secured notes
in a principal amount of $485,812 to Gateway and $615,000 to Northwood. In the
Series C Financing (as defined), the Company sold 224,920 shares of Series C
Preferred Stock to Gateway for an aggregate purchase price of $499,997,
including cancellation of such note, 341,880 shares of Series C Preferred
Stock to Northwood for an aggregate purchase price of $759,999, including
cancellation of such note, and 837,880 shares of Series C Preferred Stock to
Vanguard for an aggregate purchase price of $1,862,607. The Company also
issued Vanguard warrants (as subsequently amended) to purchase (i) 50,440
shares of Series C Preferred Stock at an exercise price of $2.22 per share,
(ii) 273,440 shares of Series C Preferred Stock at an exercise price of $2.22
per share, and (iii) 393,120 shares of Series D Preferred Stock at an exercise
price of $6.55 per share and entered into a Development Agreement (as defined)
with Vanguard.
In May 1994, the Company issued May 1994 Bridge Notes (as defined) in a
principal amount of $500,000 to each of Gateway and Northwood and $770,234 to
Vanguard. In connection with such financing, the investors received warrants
exercisable for shares of Series D Preferred Stock, including: Gateway and
Northwood--11,440 shares each; and Vanguard--17,640 shares.
In the Series D Financing (as defined), the Company sold (i) 106,880 shares
of Series D Preferred Stock to Gateway for an aggregate purchase price of
$700,064, including cancellation of a May 1994 Bridge Note in the principal
amount of $500,000, (ii) 190,880 shares of Series D Preferred Stock to
Northwood for an aggregate purchase price of $1,250,264, including
cancellation of a May 1994 Bridge Note in the principal amount of $500,000,
and (iii) 445,400 shares of Series D Preferred Stock to Vanguard for an
aggregate purchase price of $2,917,370, including cancellation of a May 1994
Bridge Note in the principal amount of $770,234. In connection with the Series
D Financing, Vanguard loaned $1.8 million to the Company in exchange for two
convertible notes in the amount of $900,000 each. On April 26, 1996, Vanguard
converted both notes, as amended, into an aggregate of 274,800 shares of
Series D Preferred Stock.
On April 6, 1995, the Company issued April 6, 1995 Bridge Notes (as defined)
in principal amounts of $390,000 to Vanguard, $200,000 to Gateway and $100,000
to Northwood, which were canceled in a subsequent financing. In connection
with issuing such notes, the Company issued warrants exercisable for shares of
Series D Preferred Stock, including warrants to purchase 5,960 shares issued
to Vanguard, 3,080 shares issued to Gateway, and 1,560 shares issued to
Northwood.
On April 24, April 25, and June 27, 1995, the Company issued the April 24,
1995 Bridge Notes (as defined) in principal amounts of $1,541,070 to Vanguard,
$403,000 to Northwood and $200,000 to Gateway. Of the $1,541,070 loaned by
Vanguard, $390,000 was in the form of cancellation of the April 6, 1995 Bridge
Note held by Vanguard.
On July 31, 1995, the Company issued the First July 1995 Vanguard Note (as
defined) in the principal amount of $1,485,000 to Vanguard. The Company paid
Vanguard a $20,000 fee in connection with the transaction. The First July 1995
Vanguard Note was cancelled in the Series F Financing (as defined). The
Company also issued Vanguard, for a purchase price of $15,000, a warrant to
purchase 32,000 shares of Series F-1 Preferred Stock at an exercise price of
$9.37 per share .
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<PAGE>
In the July 1995 Financing (as defined), the Company issued additional notes
in the principal amount of $1,490,013 to Vanguard, $199,066 to Northwood and
$391,576 to Gateway. The Company also issued (i) 380,880 shares of Series D
Preferred Stock to Vanguard, 46,080 shares of Series D Preferred Stock to
Northwood and 680 shares of Series D Preferred Stock to Gateway and (ii)
warrants to purchase shares of Series F-1 Preferred Stock (not including the
warrant issued to Vanguard in connection with the First July 1995 Vanguard
Note) at an exercise price of $9.37 per share, including warrants to purchase
32,120 shares issued to Vanguard, 4,320 shares issued to Northwood and, 8,440
shares issued to Gateway. Certain notes previously issued by the Company were
canceled in the July 1995 Financing. In connection with the July 1995
Financing, Mr. Lockton agreed, pursuant to a letter agreement dated July 28,
1995, to vote his shares of the Company's capital stock in favor of the
election to the Company's Board of Directors of a person designated by the BEA
Funds (as defined). This obligation terminated on July 31, 1996.
In November and December 1995, the Company borrowed $1,000,000 from
Vanguard, $450,000 from Gateway and $300,625 from Northwood and issued short-
term convertible unsecured notes (the "Winter 1995 Notes") that bore interest
at 10% per annum. In connection with these transactions, the Company paid loan
fees of $30,000 to Vanguard, $13,500 to Gateway and $9,019 to Northwood.
In the Series F Financing (as defined), the Company sold Series F-1
Preferred Stock to Vanguard (424,000 shares for an aggregate purchase price of
$3,975,000, including the conversion of certain outstanding notes), Northwood
(56,720 shares for an aggregate purchase price of $531,750, including the
conversion of certain outstanding notes), and Gateway (94,200 shares for an
aggregate purchase price of $883,125, including the conversion of certain
outstanding notes).
Pursuant to the Vanguard Exchange (as defined), the Company acquired the
interests or rights to acquire interests of Vanguard Sub (as defined) in ten
wireless projects in Indonesia, New Zealand, Brazil, India and Pakistan.
Vanguard's cost of acquiring such projects was in excess of approximately $3.5
million.
In January 1992, the Company issued 1,200,000 shares of Series A Preferred
Stock to CTI (as defined), an entity beneficially owned by Messrs. Lockton and
McClung and another individual, for an aggregate purchase price of $300,000.
CTI subsequently distributed 510,000 shares to Mr. Lockton. Pursuant to the
CTP Exchange (as defined), on December 18, 1995 the Company issued 103,280
shares of Common Stock to Mr. Lockton and deposited an additional 45,360
shares of Common Stock into escrow for the benefit of certain parties,
including Messrs. Lockton and McClung.
For additional information regarding the above transactions, see "Certain
Transactions." For a description of compensation of executive officers and
directors of the Company and the eligibility of executive officers and
directors to participate in the Stock Plan, see "Management--Executive
Compensation." "--1994 Stock Option/Stock Issuance Plan" and "--Director
Compensation."
1994 STOCK OPTION/STOCK ISSUANCE PLAN
The 1994 Stock Option/Stock Issuance Plan (the "Stock Plan") was initially
adopted by the Board of Directors of the Company on January 7, 1994, and
approved by its stockholders on May 11, 1994. A total of 2,400,000 shares of
Common Stock have been authorized for issuance under the Stock Plan after
giving effect to subsequent plan amendments which have been adopted by the
Company's Board of Directors and approved by its stockholders. The individuals
eligible to receive option grants or share issuances under the Stock Plan are
93
<PAGE>
employees (including officers and directors), non-employee members of the
Board of Directors and consultants of the Company or any parent or subsidiary
corporation. As of August 31, 1996 options to purchase a total of 1,922,960
shares of Common Stock were outstanding under the Stock Plan. In addition, the
Board of Directors of the Company has approved the automatic grant of options
to purchase a total of 100,000 shares of Common Stock to certain employees of
the Company. The grant date of these options will be the next anniversary of
each such employee's initial date of service, provided that certain conditions
are met, including that such employee remains in the service of the Company.
The Stock Plan is divided into two separate programs: the option grant
program and the stock issuance program. Under the option grant program,
eligible individuals may be granted options to purchase shares of Common Stock
at a discount of up to 15% of the fair market value of such shares on the
grant date, and options may be structured as installment options that become
exercisable for vested shares over the optionee's period of service or as
immediately exercisable options for unvested shares that may be subject to
repurchase upon the optionee's termination of employment. The stock issuance
program allows eligible individuals to purchase shares of Common Stock at fair
market value or at discounts of up to 15% of the fair market value of the
shares on the grant date. Such shares may be fully vested when issued or may
vest over time. In addition, shares of Common Stock may be issued as bonus
awards in recognition of services rendered to the Company.
The Stock Plan is administered by the Board of Directors of the Company or a
committee thereof. The Board will select the individuals to receive option
grants or share issuances and the number of shares subject to each such grant
or issuance; determine the exercise or vesting schedule for each granted
option or share issuance; and determine whether a granted option is to be an
incentive stock option affording favorable tax treatment to the optionee at
the loss of a deduction to the Company or a non-statutory option entitling the
Company to a deduction upon exercise. Each granted option will have a maximum
term of ten years, subject to earlier termination following the optionee's
cessation of service with the Company.
In the event the Company is acquired by merger or asset sale, each
outstanding option under the Stock Plan that is not to be assumed or replaced
with a comparable option from the successor corporation will automatically
terminate. The Company's outstanding repurchase rights under the Stock Plan
will also terminate, and the shares subject to those repurchase rights will
become fully vested, upon the merger or asset sale, unless such repurchase
rights are assigned to the successor corporation.
The Board has the authority to effect the cancellation of outstanding
options under the Stock Plan in return for the grant of new options for the
same or different number of option shares with an exercise price per share
based upon the lower fair market value of the Common Stock on the new grant
date. The Board may also amend or modify the Stock Plan at any time, provided
that no such amendment may adversely affect the rights and obligations of the
participants with respect to their outstanding options without their consent.
The Stock Plan will terminate on January 6, 2004, unless sooner terminated
upon the occurrence of certain events.
94
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENT TRANSACTIONS
See "Description of Capital Stock--Preferred Stock" for a description and
definition of each series of Preferred Stock of the Company and "Description
of Capital Stock--Authorized and Outstanding Capital Stock" for a description
of prior reclassifications of the Company's capital stock.
The Series B Financing
In March 1992, the Company sold 271,960 shares of Series B Preferred Stock
to Gateway Venture Partners III, L.P. ("Gateway") for an aggregate purchase
price of $250,000 (a purchase price of $0.92 per share). In June 1992, the
Company issued to Gateway a warrant to purchase an additional 417,040 shares
of Series B Preferred Stock at an exercise price of $0.60 per share, with the
number of shares and exercise price subject to adjustment in certain
circumstances, which was subsequently canceled.
In May 1993, the Company sold an aggregate of 848,520 shares of Series B
Preferred Stock for an aggregate purchase price of $780,000 (a purchase price
of $0.92 per share), of which 435,120 shares were sold to Gateway for an
aggregate purchase price of $399,984, including cancellation of indebtedness
in the amount of $75,000.
The Series C Financing
In October and November 1993, the Company issued convertible secured notes
in an aggregate principal amount of $1,350,812, including notes in aggregate
principal amounts of $615,000 issued to Northwood (the "Northwood Note") and
$485,812 issued to Gateway (the "Gateway Note"). These notes bore interest at
prime plus 1% per annum and were secured by all of the assets of the Company.
In a series of transactions during January and February 1994 (the "Series C
Financing"), the Company sold an aggregate of 1,762,280 shares of Series C
Preferred Stock for an aggregate purchase price of $3,917,550 (a purchase
price of $2.22 per share), including 224,920 shares sold to Gateway for an
aggregate purchase price of $499,997, including cancellation of the Gateway
Note; 341,880 shares sold to Northwood for an aggregate purchase price of
$759,999, including cancellation of the Northwood Note, and 837,880 shares
sold to Vanguard for an aggregate purchase price of $1,862,607.
In connection with the Series C Financing, the Company issued to Vanguard
warrants (as subsequently amended) to purchase (i) 50,440 shares of Series C
Preferred Stock at an exercise price of $2.22 per share, (ii) 273,440 shares
of Series C Preferred Stock at an exercise price of $2.22 per share, and (iii)
393,120 shares of Series D Preferred Stock at an exercise price of $6.55 per
share. The warrant described in clause (i) is exercisable until December 18,
1997; the warrants described in clauses (ii) and (iii) are exercisable until
May 15, 1997 or, if earlier, upon the initial public offering of the Company's
capital stock. The number of shares and exercise price for all such warrants
are subject to adjustment in certain circumstances.
In connection with the Series C Financing, the investors were granted
certain registration rights, information rights, board observer rights, board
representation rights, rights of first offer and co-sale rights. Vanguard was
also granted a right of first refusal to acquire an amount of any future
equity financing by the Company equal to (i) the amount Vanguard would be
entitled to acquire under its first offer rights based on its pro rata equity
ownership in the Company (calculated on an as-converted basis) plus (ii) an
overcall amount. The overcall amount was the number of shares which, when
added to the number of shares represented by the warrants issued to Vanguard
in the Series C Financing (including shares acquired upon the exercise of such
warrants), would equal 15.01% of the outstanding shares of the Company capital
stock on a post-transaction basis. The right of first refusal was amended in
connection with the Series D Financing (as defined below).
In connection with the Series C Financing, Vanguard and the Company entered
into a Business Development and Resource Access Agreement dated as of February
28, 1994 (the "Development Agreement").
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<PAGE>
The Development Agreement has a five year term and provides that if either
party becomes aware of opportunities for wireless projects outside the United
States or PCS projects within or outside the United States, and brings the
opportunity to the attention of the other party, then the other party will
have the opportunity to participate in such projects. The Development
Agreement also provides for Vanguard to assist the Company, at the Company's
request and subject to availability of Vanguard resources, by providing
various services including project review, operations support, technical
support, training, site visits, staffing and recruiting. The Company
reimburses Vanguard for Vanguard's costs in providing certain of such
services; such reimbursement has not exceeded $60,000 in fiscal years 1994 or
1995 or 1996 through June 30, 1996.
The Series D Financing
In May 1994, the Company issued convertible notes (the "May 1994 Bridge
Notes") in an aggregate principal amount of $2,028,993, including $500,000 to
each of Gateway and Northwood and $770,234 to Vanguard. The May 1994 Bridge
Notes were due in 180 days and bore interest at prime plus 1% per annum. In
connection with the May 1994 Bridge Notes, the purchasers received warrants
exercisable for an aggregate of 46,440 shares of Series D Preferred Stock,
including: Gateway and Northwood--11,440 shares each; and Vanguard--17,640
shares. The warrants have an exercise price of $6.55 per share and are
exercisable until May 6, 1997, or, in the case of the warrants issued to
certain of the other lenders, May 23, 1997 or June 12, 1997, provided that the
warrants shall no longer be exercisable upon the occurrence of (i) the closing
of the initial public offering of the Company's capital stock, (ii) the sale
of all or substantially all of the Company's assets, (iii) the merger of the
Company with or into another entity resulting in the transfer of at least 50%
of the Company's outstanding voting equity securities, or (iv) any other
transfer of at least 50% of the Company's outstanding voting equity securities
(each or certain other similar events, a "Termination Event"). All share
amounts and the exercise price are subject to adjustment in certain
circumstances.
In a series of transactions in September and October 1994 (the "Series D
Financing"), the Company sold an aggregate of 2,230,560 shares of Series D
Preferred Stock for an aggregate purchase price of $14,610,168 (a purchase
price of $6.55 per share), including (i) 106,880 shares sold to Gateway for an
aggregate purchase price of $700,064, including cancellation of May 1994
Bridge Notes in the principal amount of $500,000, (ii) 190,880 shares sold to
Northwood for an aggregate purchase price of $1,250,264, including
cancellation of May 1994 Bridge Notes in the principal amount of $500,000, and
(iii) 445,400 shares sold to Vanguard for an aggregate purchase price of
$2,917,370, including cancellation of May 1994 Bridge Notes in the principal
amount of $770,234. Among the purchasers in the Series D Financing were
certain funds managed by or affiliated with BEA Associates (the "BEA Funds"),
which purchased an aggregate of 1,221,440 shares of Series D Preferred Stock
for an aggregate purchase price of $8,000,432. The Company also entered into
an agreement with the BEA Funds providing that, where feasible, appropriate
and mutually advantageous, the Company and the BEA Funds will bring to the
attention of each other trunked radio, WLL, PCS and other existing and future
wireless projects.
In connection with the Series D Financing, Vanguard loaned $1.8 million to
the Company in exchange for two convertible notes in the amount of $900,000
each. Each note was due upon the earlier of April 26, 1996 or the occurrence
of certain events which did not occur prior to that date. On April 26, 1996,
Vanguard converted both notes, as amended, pursuant to the Vanguard Exchange
(as defined below), into an aggregate of 274,800 shares of Series D Preferred
Stock.
The April 1995 Financings
On April 6, 1995, the Company issued convertible notes (the "April 6, 1995
Bridge Notes") in an aggregate principal amount of $696,700, including notes
in principal amounts of $390,000 to Vanguard, $200,000 to Gateway and $100,000
to Northwood. The April 6, 1995 Bridge Notes bore interest at prime plus 1%,
were due in 150 days, and were automatically convertible into equity
securities, subsequently determined to be Series D Preferred Stock, upon the
closing of the Company's next equity financing in which at least $5 million
was raised. The April 6, 1995 Bridge Notes were canceled in connection with a
subsequent financing of the Company.
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<PAGE>
In connection with the issuance of the April 6, 1995 Bridge Notes, the
Company issued warrants (the "April Bridge Warrants") exercisable for an
aggregate of 10,720 shares of Series D Preferred Stock, including warrants to
purchase 5,960 shares issued to Vanguard, 3,080 shares issued to Gateway, and
1,560 shares issued to Northwood. The warrants have an exercise price of $6.55
per share and are exercisable until April 6, 1998, provided that the warrants
shall no longer be exercisable upon the occurrence of a Termination Event. All
share amounts and the exercise price are subject to adjustment in certain
circumstances.
On April 24, April 25, and June 27, 1995, the Company issued convertible
secured notes (the "April 24, 1995 Bridge Notes" and, together with the April
6, 1995 Bridge Notes, the "April 1995 Bridge Notes") in an aggregate principal
amount of $6,144,070, including notes in principal amounts of $1,541,070 to
Vanguard, $4,000,000 to the BEA Funds, $403,000 to Northwood and $200,000 to
Gateway. Of the $1,541,070 loaned by Vanguard, $390,000 was in the form of
cancellation of the April 6, 1995 Bridge Note held by Vanguard. The April 24,
1995 Bridge Notes bore interest at prime plus 1% per annum, were due 45 days
after their respective issue dates and were secured by a lien on substantially
all of the Company's assets. The April 24, 1995 Bridge Notes provided that
principal thereon was to be automatically converted on the respective due
dates into Series D Preferred Stock at a price of $6.55 per share, provided
that no holder was required to convert to the extent that conversion would
result in the holder owning 20% or more of the Company's capital stock.
The July 1995 Financing
On July 31, 1995, the Company issued a convertible unsecured note (the
"First July 1995 Vanguard Note") in the principal amount of $1,485,000 to
Vanguard (such issuance, together with the issuance of the other notes in July
1995 described below, the "July 1995 Financing"). The note bore interest at
prime plus 1% per annum and was due 180 days after the issue date or, at the
Company's option, 270 days after the issue date. The note provided that the
principal balance thereof was automatically convertible into the Company's
equity securities upon the closing of the Company's next equity financing
meeting certain conditions (at a conversion price per share equal to the share
price in such equity financing, but not to exceed $10.40). The Company paid
Vanguard a $20,000 fee in connection with the note transaction. The First July
1995 Vanguard Note was cancelled in the Series F Financing (as defined below).
In connection with the issuance of the First July 1995 Vanguard Note, the
Company issued Vanguard, for a purchase price of $15,000, a warrant to
purchase 32,000 shares of Series F-1 Preferred Stock at an exercise price of
$9.37 per share, with the number of shares and the exercise price subject to
adjustment in certain circumstances. The warrant is exercisable until December
18, 1998, provided that the warrants shall no longer be exercisable upon the
occurrence of a Termination Event.
In the July 1995 Financing, the Company issued additional July 1995 Notes in
an aggregate principal amount of $7,118,025, including notes in the amount of
$1,490,013 to Vanguard, $460,116 to the BEA Funds, $199,066 to Northwood and
$391,576 to Gateway. The July 1995 Notes bore interest at prime plus 1% per
annum, had due dates and conversion features substantially identical to those
contained in the First July 1995 Vanguard Note and were unsecured. These notes
were cancelled in the Series F Financing.
In the July 1995 Financing, the Company issued an aggregate of 1,147,600
shares of Series D Preferred Stock for an aggregate purchase price of
$7,516,780 (a purchase price of $6.55 per share), including 380,880 shares to
Vanguard, 539,600 shares to the BEA Funds, 46,080 shares to Northwood and 680
shares to Gateway. All of the remaining April 1995 Bridge Notes were canceled
in the July 1995 Financing.
In the July 1995 Financing, for an aggregate purchase price of $71,901, the
Company issued warrants to purchase an aggregate of 153,760 shares of Series
F-1 Preferred Stock (not including the warrant issued to Vanguard in
connection with the First July 1995 Vanguard Note) at an exercise price of
$9.37 per share, including warrants to purchase 32,120 shares issued to
Vanguard, 4,320 shares issued to Northwood, 8,440 shares issued to Gateway and
9,920 shares issued to the BEA Funds. All share amounts and the exercise price
are subject to adjustment in certain circumstances. The warrants are
exercisable until December 18, 1998, provided that the warrants shall no
longer be exercisable upon the occurrence of a Termination Event.
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In connection with the July 1995 Financing, Messrs. Lockton and McClung
agreed, pursuant to letter agreements dated July 28 and July 31, 1995,
respectively, to vote their shares of the Company's capital stock in favor of
the election to the Company's Board of Directors of a person designated by the
BEA Funds. This obligation terminated on July 31, 1996.
The 1995 TDI Financing
On August 15, 1995, pursuant to a Note and Warrant Purchase Agreement dated
as of August 14, 1995, the Company borrowed $4,950,000 from Toronto Dominion
Investments, Inc. ("TDI") and issued an unsecured convertible note in the
principal amount of $4,950,000 (the "TDI Unsecured Note"). The TDI Unsecured
Note bore interest at 9.75% per annum and was due on January 27, 1996, subject
to the Company's option to extend the maturity date to April 26, 1996. The
principal balance of the TDI Unsecured Note was automatically convertible into
shares of the Company's equity securities upon the closing of the Company's
next equity financing in which the gross proceeds to the Company exceeded
$15,000,000, provided that such equity financing closed on or before January
27, 1996. Pursuant to an Investors' Agreement dated as of July 31, 1995, the
July 1995 Notes and the First July 1995 Vanguard Note were amended to provide
that such notes were pari passu with the TDI Unsecured Note and with each
other.
On August 15, 1995, for a purchase price of $50,000, the Company issued TDI
a warrant (the "First TDI Warrant") to purchase 106,680 shares of Series F-2
Preferred Stock at an exercise price of $9.37 per share, with the number of
shares and exercise price subject to adjustment in certain circumstances. The
First TDI Warrant is exercisable until December 18, 1998, provided that the
warrants shall no longer be exercisable upon the occurrence of a Termination
Event.
Pursuant to a Loan Agreement dated as of August 14, 1995, between the
Company and TDI (the "1995 TDI Loan Agreement"), the Company borrowed
$5,000,000 from TDI and issued a note in the principal amount of $5,000,000
(the "TDI Secured Note"). The TDI Secured Note was due on the earlier of 180
days from its issue date or the closing of the Company's next equity financing
in which the Company received net proceeds of at least $5,000,000, and bore
interest at 11% per annum for the first 90 days and 13% per annum thereafter.
Pursuant to the 1995 TDI Loan Agreement, the Company paid TDI a fee of
$125,000. The Company's obligations under the 1995 TDI Loan Agreement were
secured by substantially all of the Company's assets and a pledge of the stock
of certain wireless projects owned by the Company. At the closing of the
Series F Financing (as defined below), the Company repaid the TDI Secured Note
in full through the issuance to TDI of 320,000 shares of Series F-2 Preferred
Stock at a purchase price of $9.37 per share, for an aggregate amount of
$3,000,000, and cash in the amount of $2,000,000 plus accrued interest, and
TDI released its security interest and returned the pledged stock to the
Company.
Pursuant to the 1995 TDI Loan Agreement, the Company issued to TDI a warrant
(the "Second TDI Warrant") to purchase 106,680 shares of Series F-2 Preferred
Stock at an exercise price of $9.37 per share, with the number of shares and
the exercise price subject to adjustment in certain circumstances. The Second
TDI Warrant is exercisable until the same date, with the date being subject to
change in the same circumstances, as the First TDI Warrant.
The Series F Financing
In November and December 1995, the Company borrowed a total of $1,797,515,
including $1,000,000 from Vanguard, $450,000 from Gateway and $300,625 from
Northwood and issued short-term convertible unsecured notes (the "Winter 1995
Notes") that bore interest at 10% per annum. In connection with these
transactions, the Company paid the lenders an aggregate of $53,925 in loan
fees, including $30,000 to Vanguard, $13,500 to Gateway and $9,019 to
Northwood.
In a transaction that was consummated on December 18, 1995 (the "Series F
Financing") pursuant to a Securities Purchase Agreement dated as of December
6, 1995 (the "Series F Purchase Agreement"), the
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Company sold an aggregate of 4,508,480 shares of Series F-1 Preferred Stock
and sold 848,000 shares of Series F-2 Preferred Stock to TDI, for an aggregate
purchase price of $50,217,000 (a purchase price of $9.375 per share). Among
the purchasers of Series F-1 Preferred Stock were Vanguard (424,000 shares for
an aggregate purchase price of $3,975,000, including the conversion of certain
outstanding notes), the BEA Funds (123,560 shares for an aggregate purchase
price of $1,158,375, including the conversion of certain outstanding notes),
Northwood (56,720 shares for an aggregate purchase price of $531,750,
including the conversion of certain outstanding notes), Gateway (94,200 shares
for an aggregate purchase price of $883,125, including the conversion of
certain outstanding notes), CIH (1,066,640 shares for an aggregate purchase
price of $9,999,750) and Electra (1,066,640 shares for an aggregate purchase
price of $9,999,750). TDI purchased 848,000 shares of non-voting Series F-2
Preferred Stock for an aggregate purchase price of $7,950,000, all of which
was paid for by conversion of the TDI Unsecured Note and conversion of
$3,000,000 in principal amount of the TDI Secured Note. In connection with the
Series F Financing, the Company paid Electra financing fees of $265,000 and
paid TDI fees for services performed as placement agent.
Pursuant to the Series F Purchase Agreement, the Company agreed to covenants
customary in financing transactions of such type, including limits on
incurring debt and granting liens and pledges and other negative convenants
including limitations on payments, dividends, investments, mergers, asset
sales, amendments of its Certificate or Bylaws that would adversely impact the
rights of the Series F-1 Preferred Stock and Series F-2 Preferred Stock,
changes to its business, changes in control and sales of equity securities.
Upon the occurrence of certain events in the nature of defaults by the Company
under the Series F Purchase Agreement, the holders of Series F-1 Preferred
Stock have the right to (i) cause the Company to increase the size of its
Board of Directors and (ii) elect one additional director. In July 1996,
certain covenants contained in the Series F Purchase Agreement were waived to
permit the transactions contemplated by the Offering.
In connection with the Series F Financing, the Company entered into the
Fifth Amended and Restated Investor Rights Agreement dated as of December 18,
1995 (the "IRA"), with certain investors, including holders of its Series B,
C, D, E and F Preferred Stock, and the Registration Rights Agreement dated as
of December 18, 1995 (the "Registration Rights Agreement") with holders of its
Series F Preferred Stock. See "Description of Capital Stock--Preferred Stock--
Registration Rights."
The IRA provides a right of first offer to purchase shares of any class of
the Company's capital stock sold by the Company (subject to certain
exceptions) to any investor who holds at least 10% of the Registrable
Securities (as defined in the IRA) it initially acquired and to any person who
acquires at least 10% in the aggregate of any of the Series B, C, D, E, or F
Preferred Stock outstanding as of December 18, 1995. Each such investor may
purchase up to its pro-rata share of the shares being offered determined on an
as-converted basis. The right of first offer does not apply to, and expires
upon, a public offering of Common Stock in which the offering price is at
least $18.75 per share and $25,000,000 in the aggregate.
The IRA provides that, with certain exceptions, transfers of their stock by
investors who hold at least 100,000 shares of Common Stock or securities
convertible into at least 100,000 shares of Common Stock ("Large Investors")
are subject to rights of first offer and co-sale rights in favor of the other
Large Investors (except holders of Series A Preferred Stock). In particular,
(i) each Large Investor (subject to certain exceptions) has a right of first
offer with respect to transfers of Company's capital stock by other Large
Investors to purchase up to its pro rata share of the shares being
transferred, determined on an as-converted basis, and (ii) each Large Investor
who elects not to exercise such right of first offer may sell a pro rata
number of the shares being transferred, determined on an as-converted basis.
The rights of first offer do not apply to shares sold in a public offering of
the Company's capital stock, and the co-sale rights do not apply to sales of
shares sold in a public offering of the Company's capital stock, sales by the
Company and certain other transfers and are subject to certain preferential
rights of the holders of Series F Preferred Stock. In addition, Mitsui & Co.
Ltd., Mitsubishi Corporation and their affiliates may elect to opt out of the
first offer obligations in certain circumstances. In addition, Messrs.
Lockton, McClung, Endy, Sinclair, Ciganer and Dolonius and other Company
management are prohibited from transferring more than 20,000 shares of the
Company stock, subject to certain exceptions.
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The IRA also contains board observer rights, board representation rights,
agreements concerning voting of shares and registration rights. See
"Management--Arrangements Concerning Election of Directors" and "Description
of Capital Stock."
The IRA requires that a special committee of the Board of Directors,
consisting of a Vanguard designee, a Series F designee (who shall be the
Electra designee, if there is an Electra designee on the Board of Directors),
a member designated by the other outside investors and a Company management
designee, shall from time to time consult with an unaffiliated investment bank
as to the commercial reasonableness of an initial public offering of the
Common Stock (an "IPO"). Based on such consultation, the committee shall make
a recommendation to the Board of Directors about proceeding with an IPO.
Subject to approval of the Board of Directors and to the registration rights
of holders of Series F Preferred Stock under the Registration Rights
Agreement, the Company shall proceed with an IPO unless three or more
directors oppose such a transaction, in which case the Company shall submit
the decision to proceed with an IPO to binding arbitration. If no IPO occurs
by December 31, 1996, the committee shall explore with unaffiliated investment
bankers other liquidity alternatives, including the sale of the Company.
THE VANGUARD EXCHANGE
In connection with the issuance of the April 24, 1995 Bridge Notes, the
Company and Vanguard agreed that a wholly owned subsidiary of Vanguard would
contribute its interests in ten wireless projects to the Company in exchange
(as amended, the "Vanguard Exchange") for shares of Preferred Stock resulting
in Vanguard owning not less than a 50% equity interest in the Company on a
fully diluted basis. On July 28, 1995, the Company, Vanguard and Vanguard
International Telecommunications, Inc., a wholly owned subsidiary of Vanguard
("Vanguard Sub"), entered into an Agreement and Plan of Reorganization (as
amended, the "Vanguard Reorganization") which specified the terms and
conditions of the Vanguard Exchange. The Vanguard Reorganization provided that
Vanguard Sub would be merged into the Company, with the Company as the
surviving corporation, and in exchange therefor Vanguard would receive
3,972,240 shares of Series E Preferred Stock, subject to adjustment in certain
circumstances. The Vanguard Exchange occurred on December 18, 1995
concurrently with the closing of the Series F Financing.
Pursuant to the Vanguard Exchange, the Company acquired Vanguard Sub's
interests or rights to acquire interests in ten wireless projects in
Indonesia, New Zealand, Brazil, India and Pakistan. Vanguard's cost of
acquiring such projects was in excess of approximately $3.5 million. The terms
of the Vanguard Exchange were arrived at through arms-length negotiations and
were approved by a majority of disinterested directors of the Company and by
the Company's stockholders. See "Business--Operating Companies" and "--
Developmental Stage Projects." In connection with the Vanguard Exchange, the
warrants issued to Vanguard in connection with the Series C Financing were
amended to, among other things, extend the maturity of certain of these
warrants.
TRANSACTIONS WITH FOUNDERS
In January 1992, the Company issued 1,200,000 shares of Series A Preferred
Stock to Corporate Technology International ("CTI"), an entity beneficially
owned by Messrs. Lockton and McClung and another individual, for an aggregate
purchase price of $300,000. CTI subsequently distributed 510,000 shares to
each of Messrs. Lockton and McClung.
In January 1994, the Company entered into an agreement (the "CTP Agreement")
with Messrs. Lockton, McClung and a third party to exchange 251,920 shares of
Common Stock (the "CTP Exchange") for 70% of the then outstanding equity of
CTP, a partnership owned by Messrs. McClung, Lockton and others that was
formed to pursue wireless communications opportunities. The CTP Exchange was
consummated on December 18, 1995. Pursuant to the CTP Exchange, the Company
issued 103,280 shares of Common Stock to each of Messrs. Lockton and McClung
and deposited an additional 45,360 shares of Common Stock into escrow for the
benefit of certain parties, including Messrs. Lockton and McClung. The terms
of the CTP Exchange were arrived at through arms' length negotiations and were
approved by a majority of disinterested directors of the Company.
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In August 1996, Mr. McClung converted 266,800 shares of Series A Preferred
Stock into a like number of shares of Common Stock.
INDEBTEDNESS OF MANAGEMENT
On October 19, 1994, pursuant to a Stock Purchase Agreement and a
Compensation Agreement, the Company sold Mr. Snowdon, who is a director of the
Company and Vice President of Vanguard Communications, Inc., 76,080 shares of
Common Stock at a purchase price of $2.00 per share and 3,920 shares of Series
D Preferred Stock at a purchase price of $6.55 per share, for an aggregate
purchase price of $177,836. The Company loaned Mr. Snowdon the purchase price,
which loan is evidenced by a note from Mr. Snowdon to the Company dated
October 19, 1994. The note bears interest at 7.69% per annum. Principal and
accrued interest are due on October 19, 2004. The note is secured by a pledge
of the stock purchased by Mr. Snowdon and is non-recourse to him.
1996 TD LOAN AGREEMENT
In July 1996, the Company entered into a Loan Agreement (the "1996 TD Loan
Agreement") with Toronto Dominion (Texas), Inc., an affiliate of Toronto
Dominion, providing for a $10.0 million revolving credit facility. Subject to
the terms and conditions of the 1996 TD Loan Agreement, the Company is able to
borrow funds in an initial amount of at least $2,000,000 and additional
amounts in integral multiples of at least $1.0 million. All borrowings are
evidenced by a promissory note bearing interest at a specified base rate plus
a margin increasing from 2.25% to 3.75% over the term of the facility or a
specified LIBOR rate plus a margin increasing from 3.5% to 5.0% over the term
of the facility and are due in July 1997, subject to mandatory repayment,
without premium, from the net proceeds from any public or private sale of debt
or equity securities (including the net proceeds of this Offering), the net
proceeds from certain asset sales by the Company or its subsidiaries, or
certain other events. The obligations of the Company under the 1996 TD Loan
Agreement and the note issued pursuant thereto are secured by a pledge by the
Company of all capital stock of certain of the Company's subsidiaries and
affiliates. Under the 1996 TD Loan Agreement, Toronto Dominion (Texas), Inc.
received a facility fee of $300,000 and was reimbursed for certain costs and
expenses. In addition, Toronto Dominion (Texas), Inc. is entitled to a
commitment fee of 0.5% of the average unused available portion of such,
payable quarterly in arrears. Mr. Rich, a director of the Company, serves as
an executive officer of Toronto Dominion Capital, an affiliate of Toronto
Dominion (Texas), Inc. On August 15, 1996, the Company used $7.4 of the net
proceeds from the Offering to repay in full all outstanding borrowings under
the 1996 TD Loan Agreement.
OTHER TRANSACTIONS
In 1995 the Company paid Coriander Willow, an entity owned by Vicky Bratten,
who is Mr. McClung's wife, $90,330 for accounting services performed by
Coriander Willow for the Company. Management believes that this transaction
was upon terms substantially equivalent to or more favorable to the Company
than those that could have been obtained from unaffiliated third parties.
Pursuant to the Purchase Agreement (as defined), on August 15, 1996, the
Company issued and sold 196,720 Units consisting of $196,720,000 aggregate
principal amount Old Notes and 196,720 Warrants that initially entitle each
holder to purchase 11.638 shares of Common Stock upon the occurrence of an
Exercise Event (as defined) (the "Unit Offering"). Toronto-Dominion Securities
(USA) Inc., an affiliate of TDI, purchased Units in the Unit Offering as an
Initial Purchaser (as defined) at an aggregate discount of $ million from
the price to investors.
For a description of compensation of executive officers and directors of the
Company and the eligibility of executive officers and directors to participate
in the Stock Plan, see "Management--Executive Compensation," "--1994 Stock
Option/Stock Issuance Plan" and "--Director Compensation."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock and
Preferred Stock as of August 31, 1996 by (i) each person (or group of
affiliated persons) who is known by the Company to beneficially own more than
five percent of any class of the Company's capital stock, (ii) each of the
Company's directors, (iii) each Named Officer and (iv) the Company's directors
and executive officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------------------- -------------------------
NUMBER OF NUMBER OF
5% STOCKHOLDERS, SHARES PERCENT SHARES PERCENT
DIRECTORS, NAMED OFFICERS AND BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OFFICERS AND DIRECTORS AS A GROUP OWNED(1) OWNED(1)(2) OWNED(1) OWNED(1)(2)
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Vanguard Cellular Operating -- * 7,139,920 40.31
Corp.(3)..................
c/o Vanguard Cellular
Systems, Inc.
2002 Pisgah Church Road,
Suite 300
Greensboro, NC 27455
BEA Funds(4)............... -- * 1,504,920 8.90
c/o BEA Associates
153 East 53rd Street
New York, NY 10022
Gateway Venture Partners -- * 1,156,720 6.83
III, L.P.(5)..............
8000 Maryland Ave., Suite
1190
St. Louis, MO 63105
Electra Investment Trust -- * 1,124,640 6.65
PLC(6)....................
70 East 55th Street
New York, NY 10022
Toronto Dominion -- * 1,061,360 6.20
Investments, Inc.(7)......
31 West 52nd Street
New York, NY 10019-6101
Central Investment Holding, -- * 1,066,640 6.31
Inc.......................
KMT Business Management
Committee
9F. 6 Chung Hsing W. Road,
Section 1
Taipei, Taiwan ROC
Haynes G. Griffin(8)....... -- * 7,139,920 40.31
John D. Lockton(9)......... 383,280 42.79 510,000 3.02
Hugh B. L. McClung(9)...... 650,080 72.57 167,000 *
Clarence "Sam" Endy(10).... 180,000 22.62 -- *
Douglas S. Sinclair(11).... 156,000 20.21 4,000 *
Patrick Ciganer(12)........ 100,000 13.97 -- *
Stephen R. Leeolou(13)..... 80,000 11.50 7,139,920 40.31
Piers Playfair............. -- * -- *
John S. McCarthy(14)....... 12,000 1.91 1,156,720 6.83
Carl C. Cordova III(15).... -- * 1,124,640 6.65
Brian Rich(16)............. -- * 1,061,360 6.20
Carl F. Pascarella(17)..... 12,000 1.91 -- *
Stanley Wen................ -- * -- *
Van Snowdon(18)............ 76,080 12.36 7,143,840 40.34
All directors and executive
officers as a group (17
persons).................. 1,845,440 96.53 11,169,560 62.23
</TABLE>
- --------
*Less than 1%
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- --------
(1) Except as indicated in the other footnotes to this table, based on
information provided by such persons to the Company. Subject to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all of the shares of
Common Stock shown as beneficially owned by them.
(2) Percentage ownership is based on 615,760 shares of Common Stock and
16,906,400 shares of Preferred Stock outstanding on August 31, 1996. The
number of shares of Common Stock and Preferred Stock beneficially owned
includes the shares issuable pursuant to stock options and warrants that
are exercisable within 60 days of August 31, 1996. Shares of Common Stock
issuable upon exercise of the Warrants are not treated as exercisable
within such 60 day period. Shares issuable pursuant to stock options or
warrants are deemed outstanding for computing the percentage owned by the
person holding such options or warrants but are not deemed outstanding
for computing the percentage of any other person.
(3) Includes 804,720 shares of Series C, D and F-1 Preferred Stock issuable
upon exercise of warrants held by Vanguard Cellular Operating Corp. See
"Management" and "Certain Transactions--Private Placement Transactions."
Mr. Griffin, President and Chief Executive Officer of Vanguard, the sole
stockholder of Vanguard Cellular Operating Corp., and Mr. Leeolou, Chief
Operating Officer and Secretary of Vanguard, disclaim beneficial
ownership of capital stock held by Vanguard Cellular Operating Corp. The
capital stock of the Company held by Vanguard has been pledged to secure
certain indebtedness of Vanguard. In the event of a default by Vanguard
in respect of such indebtedness, the pledgee of such capital stock would
be entitled to exercise voting and investment power in respect of such
shares.
(4) Includes shares of Series D and F-1 Preferred Stock held by The Emerging
Markets Telecommunications Fund, Inc., The Emerging Markets
Infrastructure Fund, Inc., Latin America Investment Fund, Inc., Latin
America Equity Fund, Inc., Latin America Capital Partners, Argentina
Equity Investments Partnership, (collectively, the "BEA Funds"), all of
which are affiliated with and/or managed by BEA Associates. Also includes
3,720 shares of Series F-1 Preferred Stock issuable upon the exercise of
warrants held by BEA Funds.
(5) Includes 22,960 shares of Series D and F-1 Preferred Stock issuable upon
exercise of warrants held by Gateway. Mr. McCarthy is a General Partner
of Gateway Associates, the general partner of Gateway, and disclaims
beneficial ownership of shares held by Gateway except to the extent of
his pecuniary interest therein.
(6) Includes shares of Series A Preferred Stock and Series F-1 Preferred
Stock held by Electra. Mr. Cordova, a Vice President of Electra Inc., a
subsidiary of Electra Investment Trust P.L.C., disclaims beneficial
ownership of shares held by Electra, except to the extent of his
pecuniary interest therein.
(7) Includes 848,000 shares of Series F-2 Preferred Stock and 213,360 shares
of Series F-2 Preferred Stock issuable upon exercise of warrants held by
TDI. Mr. Rich, Managing Director and Group Head of Toronto Dominion
Capital, an affiliate of TDI, disclaims beneficial ownership of the
shares held by TDI.
(8) Includes shares of capital stock beneficially owned by Vanguard Cellular
Operating Corp. Mr. Griffin, President and Chief Executive Officer of
Vanguard, the sole stockholder of Vanguard Cellular Operating Corp.,
disclaims beneficial ownership of the shares held by this entity.
(9) Includes options to purchase 280,000 shares of Common Stock that are
immediately exercisable, subject to certain rights of repurchase held by
the Company. In addition, the number of shares of Common Stock
beneficially owned includes 103,280 shares of Common Stock issued to such
person pursuant to the CTP Exchange on December 18, 1995. Excludes 45,360
shares of Common Stock deposited in escrow pursuant to the CTP Exchange
in which such person has a beneficial interest. See "Certain
Transactions--Transactions with Founders."
(10) Includes options to purchase 180,000 shares of Common Stock that are
immediately exercisable, subject to certain rights of repurchase held by
the Company.
(11) Includes an option to purchase 156,000 shares of Common Stock that is
immediately exercisable, subject to certain rights of repurchase held by
the Company.
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(12) Includes options to purchase 100,000 shares of Common Stock that are
immediately exercisable, subject to certain rights of repurchase held by
the Company.
(13) Includes an option to purchase 80,000 shares of Common Stock that is
immediately exercisable, subject to repurchase by the Company, as well as
shares of capital stock beneficially owned by Vanguard Cellular Operating
Corp. Mr. Leeolou, Chief Operating Officer and Secretary of Vanguard, the
sole stockholder of Vanguard Cellular Operating Corp., disclaims
beneficial ownership of shares held by Vanguard Cellular Operating Corp.
(14) Includes an option to purchase 12,000 shares of Common Stock that is
immediately exercisable, subject to repurchase by the Company, as well as
shares of capital stock beneficially owned by Gateway. Mr. McCarthy is a
general partner of Gateway Associates, the a general partner of Gateway,
and disclaims beneficial ownership of shares held by Gateway except to
the extent of his pecuniary interest therein.
(15) Includes shares of capital stock beneficially owned by Electra. Mr.
Cordova, a Vice President of Electra Inc., an affiliate of Electra
Investment Trust PLC, disclaims beneficial ownership of shares held by
Electra Investment and Electra Associates, except to the extent of his
pecuniary interest therein.
(16) Includes shares of capital stock beneficially owned by TDI. Mr. Rich,
Managing Director and Group Head of Toronto Dominion Capital, an
affiliate of TDI, disclaims beneficial ownership of shares held by TDI.
(17) Includes an option to purchase 12,000 shares of Common Stock that is
immediately exercisable, subject to repurchase by the Company.
(18) Includes 76,080 shares of Common Stock and 3,920 shares of Series D
Preferred Stock, as well as shares of capital stock beneficially owned by
Vanguard Cellular Operating Corp. Mr. Snowdon, Vice President of Vanguard
Communications, Inc., a subsidiary of Vanguard, the sole stockholder of
Vanguard Cellular Operating Corp., disclaims beneficial ownership of
shares held by Vanguard Cellular Operating Corp.
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued, and the Old Notes were issued, under the
Indenture between the Company and Marine Midland Bank, as Trustee. The terms
of the Exchange Notes are substantially identical (including principal amount,
interest rate, maturity, security and ranking) to the terms of the Old Notes
for which they may be exchanged pursuant to the Exchange Offer, except that
the Exchange Notes (i) are freely transferable by holders thereof (except as
provided below) and (ii) are not entitled to certain registration rights and
certain additional interest provisions which are applicable to the Old Notes
under the Registration Rights Agreement.
The Exchange Notes will be secured pursuant to a Pledge Agreement (the
"Company Pledge Agreement") between the Company and IWC in favor of Bankers
Trust Company, as collateral agent (the "Collateral Agent"). The terms of the
Notes include those stated in the Indenture and the Company Pledge Agreement
and those made part of the Indenture by reference to the Trust Indenture Act.
The Notes are subject to all such terms, and holders of Notes are referred to
the Indenture, the Company Pledge Agreement and the Trust Indenture Act for a
statement of those terms.
A copy of each of the Indenture and the Company Pledge Agreement is filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
The following is a summary of certain provisions of the Notes, and the
Indenture and the Company Pledge Agreement. This summary does not purport to
be complete and is subject to the detailed provisions of, and is qualified in
its entirety by reference to, the Notes, the Indenture and the Company Pledge
Agreement. The definitions of certain terms used in the following summary are
set forth below under "--Certain Definitions." Unless the context otherwise
requires, all references herein to the "Notes" shall include the Old Notes and
the Exchange Notes.
RANKING AND SECURITY
The Old Notes rank, and the Exchange Notes will rank, senior in right of
payment to all future Subordinated Indebtedness of the Company. The Old Notes
rank, and the Exchange Notes will rank, pari passu in right of payment with
all other existing and future senior obligations of the Company. However, the
Old Notes are, and the Exchange Notes will be, effectively subordinated to all
existing and future Indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of the Company's Subsidiaries
and Minority Owned Affiliates. See "Risk Factors--Financing Risks--Holding
Company Structure; Limitations on Access to Cash Flow of Operating Companies."
As of the date of this Prospectus, only IWC, TeamTalk and NZW have been
designated as a Restricted Subsidiary for purposes of the Indenture. The
Company's other affiliated companies at the date hereof do not constitute
Restricted Subsidiaries or Restricted Affiliates under the Indenture and,
therefore, are not be subject to most of the restrictions set forth in the
Indenture unless and until they are designated as Restricted Subsidiaries or
Restricted Affiliates. In addition, under certain circumstances, the Company
is able to designate current or future Subsidiaries, other than IWC or any
Intermediate Holding Company, as Unrestricted Subsidiaries. Unrestricted
Subsidiaries and Unrestricted Affiliates are subject to few of the restrictive
covenants set forth in the Indenture.
The Old Notes are, and the Exchange Notes will be, secured by a first
priority pledge of (i) all of the Capital Stock of (A) IWC, a direct Wholly
Owned Restricted Subsidiary of the Company that (directly or indirectly) holds
all of the Company's interests in the operating companies and developmental
stage projects and (B) any Domestic Intermediate Holding Company, (ii) all
intercompany notes of IWC or any Intermediate Holding Company issued to the
Company and (iii) all intercompany notes of any Domestic Intermediate Holding
Company issued to IWC. Neither IWC nor any Intermediate Holding Company will
be permitted to be designated as an Unrestricted Subsidiary, and each will be
prohibited from incurring any Indebtedness or issuing any preferred stock
other than to the Company or in the case of an Intermediate Holding Company to
IWC. The Company is prohibited from incurring any Liens on the Collateral (as
defined) other than Liens securing the
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Notes and Liens securing a Permitted Bank Facility (as defined) which will
rank pari passu with the Lien on the Notes. See "--Certain Covenants--
Limitations on Liens" and "--Limitations on Subsidiary Structure."
The Company, IWC and Bankers Trust Company, as Collateral Agent, have
entered into the Company Pledge Agreement providing for a first priority
pledge (subject to the possible pari passu Lien arising in connection with a
Permitted Bank Facility) by the Company to the Collateral Agent, for the
benefit of Holders of the Notes, of all Capital Stock of IWC, whether
outstanding on the date of the Indenture or thereafter issued, and all
intercompany notes of IWC or any Intermediate Holding Company issued from time
to time to the Company. Pursuant to the Company Pledge Agreement, IWC has
undertaken to enter into a Pledge Agreement (an "Intermediate Holding Company
Pledge Agreement") prior to forming or acquiring any interest in a Domestic
Intermediate Holding Company. Each Intermediate Holding Company Pledge
Agreement will provide for a first priority pledge (subject to the possible
pari passu Lien arising in connection with a Permitted Bank Facility) by IWC
to the Collateral Agent, for the benefit of Holders of the Notes, of all
Capital Stock of any Domestic Intermediate Holding Company, whether then
outstanding or thereafter issued, and all intercompany notes of such Domestic
Intermediate Holding Company issued from time to time to IWC. The stock and
other assets subject to the liens granted under the Company Pledge Agreement
and each Intermediate Holding Company Pledge Agreement (the "Collateral") will
secure the payment and performance when due of all of the Obligations of the
Company under the Indenture and the Notes as provided in the Pledge Agreement.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the Indenture and the Company
Pledge Agreement and any Intermediate Holding Company Pledge Agreement
(collectively, the "Pledge Agreement"), the Company (or IWC, as the case may
be) is entitled to receive all cash dividends, interest and other payments
made upon or with respect to the Collateral and to exercise any voting and
other consensual rights pertaining to the Collateral. Upon the occurrence and
during the continuance of an Event of Default (or, after the Company has
entered into a Permitted Bank Facility, an "Event of Default" as defined in
the Intercreditor Agreement): (a) all rights of the Company and IWC to
exercise such voting or other consensual rights will cease, and all such
rights will become vested in the Collateral Agent, which, to the extent
permitted by law, will have the sole right to exercise such voting and other
consensual rights; (b) all rights of the Company and IWC to receive all cash
dividends, interest and other payments made upon or with respect to the
Collateral will cease and such cash dividends, interest and other payments
will be required to be paid to the Collateral Agent; and (c) the Collateral
Agent may sell the Collateral or any part thereof in accordance with the terms
of the Pledge Agreement and, if applicable, the Intercreditor Agreement. All
funds distributed under the Pledge Agreement and received by the Collateral
Agent for the benefit of the Holders of the Notes will be distributed by the
Collateral Agent in accordance with the provisions of the Pledge Agreement and
the Intercreditor Agreement, if any. Upon the occurrence and during the
continuance of an Event of Default, the Pledge Agreement will provide that all
funds held by the Collateral Agent (including all proceeds from the sale or
any other realization upon the Collateral) will be applied (after the payment
of certain fees and expenses of the Collateral Agent and the Trustee and
subject to the rights of the holder of Indebtedness (if any) under the
Permitted Bank Facility) to the ratable payment of the Accreted Value of, and
other Obligations with respect to, the Notes that are outstanding under the
Indenture.
There can be no assurance that the proceeds of any sale of the Collateral in
whole or in part pursuant to the Indenture and the Pledge Agreement following
an Event of Default will be sufficient to satisfy payments due on the Notes.
Moreover, the Collateral will be illiquid and may have no readily
ascertainable market value. Accordingly, there can be no assurance that the
Collateral can be sold in a short period of time, or at all. In addition, the
ability of the Holders of the Notes to realize upon the Collateral will be
subject to certain legal and contractual restrictions and to bankruptcy law
limitations in the event of a bankruptcy of the Company or IWC. Under
applicable federal bankruptcy laws, secured creditors are prohibited from
taking possession of their security from a debtor in a bankruptcy case, or
from disposing of security taken from such a debtor, without bankruptcy court
approval. Moreover, applicable federal bankruptcy laws generally permit the
debtor to continue to retain collateral even though the debtor is in default
under the applicable debt instruments, provided generally that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may
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vary according to the circumstances, but is intended in general to protect the
value of the secured creditor's interest in the collateral at the commencement
of the bankruptcy case. Adequate protection may include cash payments or the
granting of additional security, if and at such times as the court in its
discretion determines, for any diminution in the value of the collateral as a
result of the stay of repossession or disposition of the collateral by the
debtor during the pendency of the bankruptcy case. In view of the lack of a
precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, the Company cannot predict whether
any payments in respect of the Notes would be made following commencement of
and during a bankruptcy case, whether or when the Collateral Agent could
foreclose upon or sell the Collateral or whether or to what extent Holders of
the Notes would be compensated for any delay in payment or loss of value of
the Collateral through the requirement of "adequate protection." Furthermore,
in the event the bankruptcy court determines that the value of the Collateral
is not sufficient to repay all amounts due on the Notes, the Holders would
hold "undersecured claims." Applicable federal bankruptcy laws do not permit
the payment and/or accrual of interest, costs and attorney's fees for
"undersecured claims" during the debtor's bankruptcy case. See "Risk Factors
- -- Financing Risks."
The Pledge Agreement provides that it may be amended only in compliance with
all of the terms and provisions of the Indenture. As a result, the Pledge
Agreement generally may not be amended without the consent of each Holder
affected or, in certain instances, of the holders of a majority in principal
amount of the then outstanding Notes.
Under the terms of the Pledge Agreement, upon an Event of Default, the
Collateral Agent will determine the circumstances and manner in which the
Collateral will be disposed of, including, but not limited to the
determination of whether to release all or any portion of the Collateral from
the Liens created by the Pledge Agreement and whether to foreclose on the
Collateral following an Event of Default. Upon the full and final payment and
performance of all Obligations of the Company under the Indenture and the
Notes, the Pledge Agreement will terminate and the Collateral will be
released.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes offered hereby will be limited to $196.7 million in
aggregate principal amount at maturity (approximately $69.7 million, before
issuance costs of $5.8 million, of initial Accreted Value as of September 30,
1996 (assuming all of the Old Notes were exchanged for Exchange Notes as of
that date) that will fully accrete to face amount at maturity) and will mature
on August 15, 2001. No cash interest payments are scheduled to be made on the
Exchange Notes prior to maturity. Although for U.S. federal income tax
purposes a significant amount of original issue discount, taxable as ordinary
income, will be recognized by a Holder of Notes as such discount is amortized
from the date of issuance of the Notes, Holders of Notes will not receive any
payments on the Notes until maturity. See "Certain Federal Income Tax
Considerations."
The principal of the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or,
at the option of the Company, payment may be made by wire transfer to a
designated account within the United States or check mailed to the Holders of
the Notes at their respective addresses set forth in the register of Holders
of Notes. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of Bankers Trust Company, the initial
Paying Agent under the Indenture, maintained for such purpose. The Exchange
Notes will be issued in registered form, without coupons, and in denominations
of $1,000 and integral multiples thereof.
REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes prior to maturity.
The Old Notes are not, and the Exchange Notes will not be, redeemable at the
Company's option prior to maturity.
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REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
In the event of a Change of Control (as defined), the Company will be
required to make an offer to purchase all of the Notes outstanding at a
purchase price in cash equal to 101% of the Accreted Value thereof plus
accrued Additional Interest (as defined in the Registration Rights Agreement),
if any, to the date of repurchase in accordance with the terms set forth below
(a "Change of Control Offer").
Within 30 days following the occurrence of any Change of Control, the
Company shall mail to each Holder of Exchange Notes at such Holder's
registered address a notice stating: (i) that a Change of Control has occurred
and that such Holder has the right to require the Company to repurchase all or
a portion (equal to $1,000 principal amount or an integral multiple thereof)
of such Holder's Notes at a purchase price in cash equal to 101% of the
Accreted Value thereof plus Additional Interest, if any, to the date of
repurchase (the "Change of Control Purchase Date"), which shall be a business
day, specified in such notice, that is not earlier than 30 days or later than
60 days from the date such notice is mailed, (ii) the Accreted Value of the
Notes as of, and the Additional Interest due on, the Change of Control
Purchase Date, (iii) that any Note not tendered will continue to accrete, (iv)
that, unless the Company defaults in the payment of the purchase price for the
Notes payable pursuant to the Change of Control Offer, any Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrete after
the Change of Control Purchase Date, (v) the procedures, consistent with the
Indenture, to be followed by a Holder of Notes in order to accept a Change of
Control Offer or to withdraw such acceptance, and (vi) such other information
as may be required by the Indenture and applicable laws and regulations.
One Business Day prior to the Change of Control Purchase Date, the Company
will (i) accept for payment all Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent the aggregate
purchase price of all Notes or portions thereof accepted for payment as of the
Change of Control Purchase Date and (iii) deliver or cause to be delivered to
the Trustee all Notes tendered pursuant to the Change of Control Offer. The
Trustee shall promptly mail to each Holder of Notes or portions thereof
accepted for payment an amount equal to the purchase price for such Notes, and
the Trustee shall promptly authenticate and mail to any holder of Notes
accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Notes, and any Note not accepted for payment in
whole or in part shall be promptly returned to the Holder of such Note. On and
after a Change of Control Purchase Date, the Notes or portions thereof
accepted for payment will cease to accrete unless the Company defaults in the
payment of the purchase price therefor. The Company will announce the results
of the Change of Control Offer to Holders of the Notes on or as soon as
practicable after the Change of Control Purchase Date.
With respect to the sale of assets, the phrase "all or substantially all" as
used in the Indenture varies according to the facts and circumstances of the
subject transaction, has no clearly established meaning under relevant law and
is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a person and therefore it may be unclear whether a Change of Control
has occurred and whether the Notes are subject to a Change of Control Offer.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require
that the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring. There can be no guarantee that the
Company will have sufficient cash resources to honor its obligations in the
event of a Change of Control.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other
applicable securities laws and regulations in connection with any Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the Indenture,
the Company shall comply with the applicable securities laws and
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regulations and shall not be deemed to have breached its obligations under the
"Change of Control" provisions of the Indenture by virtue thereof.
Asset Sales
The Indenture provides that the Company may not, and shall not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale (other than a
Permitted Pledge Foreclosure) unless (i) the Company (or the applicable
Restricted Subsidiary, as the case may be) receives consideration at the time
of such Asset Sale at least equal to the fair market value (as evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets sold or otherwise disposed of and (ii)
at least 85% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash; provided, however, that the
amount of (A) any liabilities of any Restricted Subsidiary as shown on such
Restricted Subsidiary's most recent balance sheet or in the notes thereto
(other than liabilities that are incurred in connection with, or in
contemplation of, such Asset Sale) that are assumed by the transferee of any,
such assets and (B) any notes or other obligations received by the Company or
such Restricted Subsidiary from such transferee that are immediately converted
by the Company or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of this paragraph.
Notwithstanding the immediately preceding paragraph, the Company and its
Restricted Subsidiaries are permitted to consummate an Asset Sale without
complying with such paragraph if (i) the Company or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as evidenced by a resolution of the Company's Board of
Directors set forth in an Officer's Certificate delivered to the Trustee),
(ii) at least 85% of the consideration for such Asset Sale (other than any
Take-Along Asset Sale) constitutes assets or property of a kind usable by the
Company in accordance with the covenant described under "--Certain Covenants--
Limitations on Lines of Business" ("Related Business Assets") and (iii) at the
time of such Asset Sale (other than any Take-Along Asset Sale) and after
giving pro forma effect thereto, the Company would be permitted to incur at
least $1.00 of additional Subordinated Indebtedness pursuant to the first
paragraph of the covenant described under "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock;" provided that any consideration
received from such Asset Sale (including any Take-Along Asset Sale) by the
Company or any Restricted Subsidiary not constituting cash or Related Business
Assets shall constitute Net Proceeds subject to the provisions of the next
paragraphs.
Within 270 days after any Asset Sale (or, in the case of any Permitted
Pledge Foreclosure or Asset Sale compelled by a governmental authority, such
later date as the Company or the applicable Restricted Subsidiary shall
receive any Net Proceeds from such Asset Sale), the Company (or the applicable
Restricted Subsidiary, as the case may be) may apply the Net Proceeds from
such Asset Sale to make a Permitted Investment (other than an Investment in
Cash Equivalents). Any Net Proceeds from an Asset Sale that are not applied
within 270 days after such Asset Sale (or, in the case of any Permitted Pledge
Foreclosure or Asset Sale compelled by a governmental authority, such later
date as the Company or the applicable Restricted Subsidiary shall receive any
Net Proceeds from such Asset Sale) to make a Permitted Investment as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds," provided that, in the case of an Asset Sale by a Restricted
Subsidiary of the Company that is not a Wholly Owned Restricted Subsidiary of
the Company, only the Company's Pro Rata Portion of such Net Proceeds to the
extent not reinvested shall constitute Excess Proceeds. Pending final
application of any Net Proceeds of an Asset Sale to a Permitted Investment
(other than Cash Equivalents) or to an Asset Sale Offer, such Net Proceeds may
only be invested in Cash Equivalents. When the aggregate amount of Excess
Proceeds exceeds $5 million, the Company is required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased with the Excess Proceeds at an offer
price in cash equal to the Accreted Value thereof plus accrued Additional
Interest, if any, to the date of repurchase in accordance with the procedures
set forth in the Indenture. To the extent that the aggregate Accreted Value of
Notes tendered pursuant to an Asset Sale Offer plus accrued Additional
Interest, if any, is less than the Excess Proceeds to be applied to purchase
Notes, the Company may
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use any remaining Excess Proceeds for any purpose permitted by the other
provisions of the Indenture. If the aggregate Accreted Value of Notes
surrendered by Holders thereof plus accrued Additional Interest, if any,
exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be
purchased on a pro rata basis (based upon the Accreted Value outstanding).
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall
be reset at zero.
If an Asset Sale is (i)(A) compelled by action by a governmental authority
or (B) in the case of Mobilcom Mexico, is pursuant to a Take Along Asset Sale
and (ii) for consideration less than fair market value (as determined by the
Board of Directors), such sale shall not be deemed to be in contravention of
the requirement set forth in clause (i) of the first paragraph of this Section
to the extent that the difference between such fair market value and the
actual consideration received in such Asset Sale (and all other such Asset
Sales subject to this paragraph on a cumulative basis) is less than 10% of the
Total Market Value of Equity of the Company. Without limiting the foregoing,
any Asset Sale pursuant to that certain Agreement dated October 2, 1995
between the Company and Permata Merchant Bank Berhad (without giving effect to
any amendments or modifications thereto) shall not be deemed to be in
contravention of the requirement set forth in clause (i) of the first
paragraph of this Section.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company may not, and shall not permit any of
its Restricted Subsidiaries or Restricted Affiliates to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on
account of the Equity Interests of the Company (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company; (iii) purchase, redeem or otherwise
acquire or retire for value any Subordinated Indebtedness; or (iv) make or
permit to remain outstanding any Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments").
The foregoing provisions do not prohibit (a) the redemption, repurchase,
retirement or other acquisition for value of any Equity Interests of the
Company in exchange for, or out of the net cash proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); (b) the
defeasance, redemption or repurchase of any Subordinated Indebtedness (in
whole or in part) with the net proceeds from an incurrence of Permitted
Refinancing Indebtedness; (c) the repurchase of Subordinated Indebtedness
pursuant to a Permitted Offer to Purchase; (d) the making or retention of any
Permitted Investment; or (e) payments in aggregate amount not to exceed $1.0
million to redeem or repurchase at original issuance cost the Common Stock of
terminated or deceased employees under employee stock option or stock purchase
agreements.
Not later than the date of making any Restricted Payment (other than an
Investment in Cash Equivalents), the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which its calculations were computed.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company may not, and shall not permit any
Restricted or Unrestricted Subsidiary of the Company, Restricted Affiliate or
Subsidiary of a Restricted Affiliate to, directly or indirectly, create,
incur, issue, assume, guaranty or otherwise become directly or indirectly
liable with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt), and that the Company may not issue any Disqualified Stock and
shall not permit any Restricted or Unrestricted Subsidiary of the Company,
Restricted Affiliate or Subsidiary of a Restricted Affiliate to issue any
shares of preferred stock; provided, however, that the Company may incur
Subordinated Indebtedness (including Acquired Debt that is such Subordinated
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Indebtedness), or issue shares of Disqualified Stock, if: (i) the Company's
Consolidated Debt to Consolidated Cash Flow Ratio is less than 7 to 1, in the
case of any such incurrence or issuance on or before August 15, 1998, or less
than 5 to 1, in the case of any such incurrence or issuance at any time
thereafter, in each case determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of the applicable four-quarter period; or
(ii) the Company's Consolidated Debt does not exceed 25% of the Company's
Total Market Capitalization, calculated as of the date of incurrence or
issuance and on a pro forma basis after giving effect to such incurrence or
issuance (including a pro forma application of the net proceeds therefrom).
The provisions of the foregoing paragraph do not apply to (a) issuances of
preferred stock or Indebtedness by a Restricted Subsidiary or Unrestricted
Subsidiary of the Company, a Restricted Affiliate or a Subsidiary of a
Restricted Affiliate to the holders (or their Affiliates) of the common equity
of such Subsidiary, Restricted Affiliate or Subsidiary of a Restricted
Affiliate on a basis that is substantially proportionate to their common
equity interests; (b) the Notes; (c) intercompany Indebtedness between or
among the Company, a Restricted Subsidiary of the Company, a Restricted
Affiliate or a Restricted Subsidiary of a Restricted Affiliate to the extent
permitted by the other provisions of the Indenture; (d) the incurrence by the
Company, a Restricted Subsidiary of the Company, a Restricted Affiliate or a
Restricted Subsidiary of a Restricted Affiliate of Permitted Refinancing
Indebtedness; (e) the incurrence by a Restricted Subsidiary of the Company, a
Restricted Affiliate or a Restricted Subsidiary of a Restricted Affiliate of
Project Financing, the proceeds of which are used by such Restricted
Subsidiary, Restricted Affiliate or Restricted Subsidiary of a Restricted
Affiliate, directly or indirectly, to construct, develop, improve, acquire or
operate a Related Business; provided that no single Restricted Subsidiary
(together with its consolidated Restricted Subsidiaries and its Restricted
Affiliates) and no single Restricted Affiliate (together with its consolidated
Restricted Subsidiaries and its Restricted Affiliates), pro forma for such
incurrence and the application of the net proceeds therefrom, may, on the date
of such incurrence, have an aggregate principal amount of Project Financing
outstanding, determined without duplication, that exceeds the greater of (1)
five times the Consolidated Cash Flow of such Restricted Subsidiary or
Restricted Affiliate for the most recently completed four full fiscal quarters
for which internal financial statements are available as of the date of such
incurrence (calculated on a pro forma basis as if such Project Financing had
been incurred and the proceeds therefrom applied at the beginning of the
applicable four-quarter period) or (2) two times the Consolidated Invested
Equity Capital of such Restricted Subsidiary or Restricted Affiliate at such
time; (f) the issuance by Unrestricted Subsidiaries of the Company or
Unrestricted Subsidiaries of Restricted Affiliates of preferred stock or the
incurrence by Unrestricted Subsidiaries of the Company or Unrestricted
Subsidiaries of Restricted Affiliates of Non-Recourse Debt with respect to the
Company, a Restricted Subsidiary, Restricted Affiliate, or Restricted
Subsidiary of a Restricted Affiliate; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary with
respect to the Company and its Restricted Subsidiaries, its Restricted
Affiliates and Restricted Subsidiaries of Restricted Affiliates, such event
shall be deemed to constitute an incurrence by a Restricted Subsidiary of all
of such Indebtedness of such Subsidiary or a Restricted Affiliate of all of
such Indebtedness of such Minority Owned Affiliate, as the case may be; (g)
the incurrence by the Company of Subordinated Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any one time
outstanding (measured as of the date of incurrence and without giving effect
to subsequent accretion) not to exceed the sum of $100.0 million (or the
equivalent amount in one or more foreign currencies); (h) Guarantees by the
Company, a Restricted Subsidiary, Restricted Affiliate, or Restricted
Subsidiary of a Restricted Affiliate of the Company of Project Financing of
the Company's Restricted Subsidiaries, Restricted Affiliates or Restricted
Subsidiaries of its Restricted Affiliates not to exceed $10.0 million (or the
equivalent amount in one or more foreign currencies) at the time such Project
Financing was guaranteed in aggregate principal amount outstanding and related
accrued interest at any one time outstanding and related accrued interest (in
addition to Guarantees outstanding on the date of the Indenture); (i) the
guarantee by the Company, its Restricted Subsidiaries, Restricted Affiliates
or Restricted Subsidiaries of Restricted Affiliates of Indebtedness of
Unrestricted Affiliates, but only to the extent that after the incurrence of
such guarantee of such Indebtedness the Company would be able to make at least
$1.00 of additional Investments pursuant to clause (d) of the definition of
Permitted Investments; and (j) a Permitted Bank Facility in an
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aggregate amount not to exceed $20.0 million in principal amount, with any
letters of credit issued thereunder being deemed to have a principal amount
equal to the maximum exposure thereof.
Limitations on Liens
The Indenture provides that the Company may not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise cause or suffer to exist any Lien of any kind (other than
Permitted Liens) upon any property or assets, now owned or hereafter acquired,
of the Company or any such Restricted Subsidiary, or upon any income or
profits therefrom or assign or convey any right to receive income therefrom.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company may not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any such Restricted Subsidiary to (a)(i) pay dividends or make
any other distributions to the Company or any of its Restricted Subsidiaries
(A) on its Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits, or (ii) pay any Indebtedness
owed to the Company or any of its Restricted Subsidiaries, (b) make loans or
advances to the Company or any of its Restricted Subsidiaries, or (c) sell,
lease or transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) the Indenture, the Pledge Agreement and the Notes,
(ii) applicable law, (iii) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any Restricted Subsidiary as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired; provided that the Consolidated Cash Flow of
such Person is not taken into account in determining whether such acquisition
was permitted by the terms of the Indenture, (iv) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced,
(v) Indebtedness outstanding on the Issue Date, or (vi) Project Financing
permitted under the Indenture and any other Indebtedness consisting of Non-
Recourse Debt with respect to the Company or any other Restricted Subsidiary,
Restricted Affiliate, or Restricted Subsidiary of any Restricted Affiliate,
provided that the Consolidated Cash Flow of any Persons incurring such
Indebtedness is not taken into account when determining the Consolidated Cash
Flow of the Company. Notwithstanding the foregoing, the Indenture prohibits
IWC and any Intermediate Holding Company from creating or suffering to exist
any such encumbrances or restrictions, except those imposed by applicable law
or by the Indenture or Notes.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, under the Indenture, the Pledge
Agreement, the Intercreditor Agreement and the Notes; (iii) immediately after
such transaction, no Default or Event of Default exists; and (iv) the Company
or any entity or Person formed by or surviving any such consolidation or
merger, or to which such sale, assignment, transfer, lease, conveyance or
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other disposition shall have been made (A) will have Consolidated Net Worth
(immediately after the transaction but prior to any purchase accounting
adjustments resulting from the transaction) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction
and (B) would, at the time of such transaction and after giving pro forma
effect thereto (as if such transaction had occurred at the beginning of the
most recently ended four-quarter period for which internal financial
statements are available immediately preceding the date of such transaction,
for purposes of calculating the Consolidated Debt to Consolidated Cash Flow
Ratio, and as if such transaction had occurred as of such date for purposes of
calculating Consolidated Debt as a percentage of Total Market Capitalization),
be permitted to incur at least $1.00 of additional Subordinated Indebtedness
pursuant to the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock." Notwithstanding the foregoing, nothing in this covenant
shall restrict or limit the Company's ability to transfer all or substantially
all of its assets (other than those pledged pursuant to the Pledge Agreement)
to a Wholly Owned Restricted Subsidiary.
Transactions with Affiliates
The Indenture provides that the Company may not, and shall not permit any of
its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from,
or enter into any contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate of the Company (each of
the foregoing, an "Affiliate Transaction"), unless (a) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (b) the Company delivers to the Trustee (i) with respect
to any Affiliate Transaction involving aggregate payments in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate to the effect that such Affiliate Transaction complies with clause
(a) above and that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors and (ii) with respect
to any Affiliate Transaction involving aggregate payments in excess of $5.0
million, an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment banking firm
of national standing; provided, however, that none of the following shall be
deemed to be an Affiliate Transaction: (a) any employment agreement, stock
option agreement or other agreement relating to the terms of employment or
compensation entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business and consistent with the past practice of
the Company or such Restricted Subsidiary; (b) transactions effected pursuant
to the IRA, the Series F Purchase Agreement and the Registration Rights
Agreement; (c) transactions between or among the Company and/or any of its
Restricted Subsidiaries or Restricted Affiliates or Restricted Subsidiaries of
Restricted Affiliates that would not be deemed to be Affiliates but for the
Company's direct or indirect ownership interest therein; or (d) solely for
purposes of clause (b)(ii) above, transactions pursuant to a joint venture,
co-investment agreement or similar arrangement with an Affiliate in which the
Company or its Restricted Subsidiaries make an Investment in any Person who is
not an Affiliate of either the Company or its co-investing Affiliate at the
time such Investment is made, but only to the extent such Investment is
acquired solely for cash and the Company or its Restricted Subsidiary and such
co-investing Affiliate are investing on substantially identical terms.
Limitations on Lines of Business
The Indenture provides that the Company may not, and shall not permit any
Restricted Subsidiary to, directly or indirectly engage to any substantial
extent in any line or lines of business other than a Related Business.
Designation of Restricted Subsidiary as Unrestricted Subsidiary and
Restricted Affiliate as Unrestricted Affiliate; Designation of Unrestricted
Subsidiary as Restricted Subsidiary and Unrestricted Affiliate as Restricted
Affiliate
The Indenture provides that the Board of Directors may designate a
Restricted Subsidiary of the Company (other than IWC or any Intermediate
Holding Company) to be an Unrestricted Subsidiary and may designate a
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Restricted Affiliate to be an Unrestricted Affiliate if as a result of such
designation no Default or Event of Default shall have occurred and be
continuing, and if, after giving pro forma effect to such designation, the
Company would have been permitted to make at least $1.00 of additional
Investments pursuant to clause (d) of the definition of Permitted Investments.
Upon the designation of any Restricted Subsidiary as an Unrestricted
Subsidiary, or the designation of any Restricted Affiliate as an Unrestricted
Affiliate, all previous Investments by the Company in a Wholly Owned
Restricted Subsidiary and the Company's Pro Rata Portion of any Investments by
any of its Restricted Subsidiaries or Restricted Affiliates in such Restricted
Subsidiary or Restricted Affiliate (in all other cases) will be deemed to
constitute an Investment made on the date of such designation in an
Unrestricted Subsidiary or Unrestricted Affiliate, as applicable, in an amount
equal to the greatest of (x) the aggregate original fair market value of such
Investments (or the Company's Pro Rata Portion thereof, as applicable) as
determined in good faith by the Company's Board of Directors, (y) the net book
value of such Investments at the time of such designation (or the Company's
Pro Rata Portion thereof, as applicable), and (z) the fair market value of
such Investments at the time of such designation (or the Company's Pro Rata
Portion thereof, as applicable) as determined in good faith by the Company's
Board of Directors. Such designation will only be permitted if (i) such
Investment (or the Company's Pro Rata Portion thereof, as applicable) would be
permitted at such time by the terms of the covenant entitled "Restricted
Payments," (ii) such Restricted Subsidiary or Restricted Affiliate, as
applicable, otherwise meets the definition of an Unrestricted Subsidiary or an
Unrestricted Affiliate, as applicable, and has no Indebtedness other than
Non-Recourse Debt with respect to the Company and its Restricted Subsidiaries,
its Restricted Affiliates and Restricted Subsidiaries of Restricted
Affiliates, and (iii) any Guarantee by the Company of such Non-Recourse Debt
is permitted pursuant to clause (i) as described under "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock."
The Indenture also provides that the Board of Directors may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary and may
designate any Unrestricted Affiliate to be a Restricted Affiliate; provided,
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary or Restricted Affiliate, as applicable, of all
outstanding Indebtedness of such Unrestricted Subsidiary or Unrestricted
Affiliate, as applicable, and such designation shall only be permitted if (1)
as a result of such designation no Default or Event of Default shall have
occurred and be continuing, (2) immediately after giving pro forma effect to
such designation, all Indebtedness of the Subsidiary or Affiliate so
designated would be permitted under the covenant described above under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock" if it
were incurred by a Restricted Subsidiary or Restricted Affiliate, as
applicable, on the date of designation, and (3) such designation does not and
will not result in the creation of any Lien on any asset of the Company or any
of its Restricted Subsidiaries (including the Subsidiary so designated),
except Liens permitted by the Indenture to be incurred.
Limitations on Subsidiary Structure
Notwithstanding anything in the Indenture to the contrary, the Indenture
provides that the Company is not allowed to make any Investment in any Person,
directly or indirectly, other than through IWC, which is required to hold,
directly or indirectly through any Intermediate Holding Company, all
Investments made by the Company or any of its Restricted Subsidiaries or
Restricted Affiliates (except that the Company may hold cash or Cash
Equivalents in amounts necessary to meet payroll and other operating expenses
of the Company). The Indenture also provides (i) that IWC shall at all times
continue to be a direct Wholly Owned Restricted Subsidiary of the Company and
that the Company shall not have any other direct Subsidiaries, (ii) that IWC
shall not (although its Restricted Subsidiaries and Restricted Affiliates,
other than an Intermediate Holding Company, may, to the extent permitted by
the covenant described above under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock") incur any Indebtedness, except intercompany
Indebtedness from IWC to the Company that is pledged pursuant to the Pledge
Agreement, or issue any preferred stock, (iii) no Intermediate Holding Company
shall (although its Restricted Subsidiaries and Restricted Affiliates may, to
the extent permitted by the covenant described above under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock") incur any
Indebtedness, except intercompany Indebtedness from any such Intermediate
Holding Company to IWC or the Company that, in the case of a Domestic
Intermediate Holding Company, is pledged pursuant to the Pledge
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Agreement, (iv) that IWC will not consolidate or merge with or into any Person
other than an Intermediate Holding Company provided that IWC is the surviving
corporation and (v) no Intermediate Holding Company shall consolidate or merge
with or into any Person other than IWC provided that IWC is the surviving
corporation.
Limitation on Status as Investment Company
The Indenture provides that the Company may not, and shall not permit any of
its Restricted Subsidiaries to, conduct its business in a fashion that would
cause it to be required to register as an "investment company"(as that term is
defined in the Investment Company Act of 1940, as amended), or otherwise
become subject to regulation under the Investment Company Act of 1940, as
amended.
Reports
The Indenture provides that, following the first fiscal quarter ending after
the consummation of the Offering and whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company shall furnish to the Holders of Notes (i) all quarterly and annual
financial information that is substantially equivalent to that which would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-
K (or any successor Forms) if the Company were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants and
(ii) all reports that are substantially equivalent to that which would be
required to be filed with the Commission on Form 8-K (or any successor Form)
if the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company shall
file a copy of all such information with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to investors who request it in writing. The
Indenture also requires that, so long as any of the Notes remain outstanding,
the Company shall make available to any prospective purchaser of Notes or
beneficial owner of Notes in connection with any sale thereof the information
required by Rule 144A(d)(4) under the Securities Act, until such time as the
Company has either exchanged the Notes for securities identical in all
material respects which have been registered under the Securities Act or until
such time as the holders thereof have disposed of such Notes pursuant to an
effective registration statement under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default in payment when due of Additional Interest, premium,
principal or Accreted Value (as applicable) of the Notes, at maturity, upon
acceleration, repurchase or otherwise; (ii) failure by the Company or any of
its Restricted Subsidiaries or Restricted Affiliates to comply with the
provisions described above under the captions "--Repurchase at the Option of
Holders--Change of Control," "--Asset Sales," "--Restricted Payments," "--
Incurrence of Indebtedness and Issuance of Preferred Stock," "--Merger,
Consolidation or Sale of Assets" or "--Limitations on Subsidiary Structure";
(iii) failure by the Company for 60 days after notice to comply with any of
its other agreements in the Indenture or the Notes; (iv) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries or the payment of which is
Guaranteed by the Company or any of its Restricted Subsidiaries whether such
Indebtedness or Guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (v) failure by
the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $3.0 million, which judgments are not paid,
discharged or stayed
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for a period of 60 days; (vi) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries which have more
than $3.0 million in total assets and (vii) breach by the Company or IWC of
any material representation or warranty set forth in the Pledge Agreement or
the Intercreditor Agreement, or default by the Company or IWC in the
performance of any covenant set forth in the Pledge Agreement or the
Intercreditor Agreement, or repudiation by the Company of its obligations
under the Pledge Agreement or the Intercreditor Agreement or the
unenforceability of any substantive provision of the Pledge Agreement or the
Intercreditor Agreement for any reason.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Restricted
Subsidiary having more than $3.0 million in total assets, all outstanding
Notes will become due and payable without further action or notice. Except as
provided below in the following paragraph, in the event of any such
acceleration of Notes, the Company will become obligated to pay the Accreted
Value of the Notes plus in the case of the old Notes accrued Additional
Interest, if any, immediately. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture, the Pledge
Agreement and, if applicable, the Intercreditor Agreement. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
an offer to purchase or the payment of principal, premium or Additional
Interest or in the case of the Company's failure to comply with the covenant
described above under the caption "--Certain Covenants--Merger, Consolidation
or Sale of Assets") if it determines that withholding notice is in their
interest.
The Holders of a majority in principal amount of the Notes then outstanding
may, by notice to the Trustee, on behalf of the Holders of all of the Notes
outstanding, waive any existing Default or Event of Default and its
consequences under the Indenture except a Default or Event of Default relating
to the payment of principal of, or premium or Additional Interest, if any, on
the Notes (which would be required to be unanimous) or in respect of a
covenant or a provision of the Indenture which cannot be amended or modified
without the consent of all Holders of the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, currently has, or will have, any
liability for any obligations of the Company under the Notes, the Indenture or
the Pledge Agreement, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the Indenture, the Pledge Agreement and
the outstanding Notes ("Legal Defeasance") except for (i) the rights of
Holders of outstanding Notes to receive payments in respect of the principal
of, and premium and Additional Interest, if any, on such Notes when such
payments are due, from the funds held by the Trustee in the trust referred to
below, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, transfer of the Notes and the maintenance of an office or agency
for payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties
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and immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any failure
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee or the Paying Agent on
behalf of the Trustee, in trust, for the benefit of the Holders of the Notes,
cash in U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
and premium and Additional Interest, if any, on the outstanding Notes on the
stated maturity for payment thereof or on the applicable repurchase date, as
the case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under any material agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally, and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of the
Holders of the Notes; (vii) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders of Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
accepted for repurchase.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two paragraphs, the Indenture, the Notes or
the Pledge Agreement may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes
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then outstanding (including consents obtained in connection with a tender
offer or exchange offer for Notes), and any existing default or compliance
with any provision of the Indenture, the Notes or the Pledge Agreement may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder of Notes): (i)
reduce the amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note, (iii) reduce the rate of accretion on any Note, (iv)
reduce the repurchase price for the offers to purchase described above under
the caption "--Repurchase at the Option of the Holder", change the time at
which any Note may be repurchased or otherwise amend in any material respect
(including through amendment of any of the definitions relating thereto) or
waive the Company's obligation to make and consummate a Change of Control
Offer in the event of a Change of Control or an Asset Sale Offer in the event
of an Asset Sale, (v) waive a continuing Default or Event of Default in the
payment of principal of, or premium or Additional Interest, if any, on the
Notes (except a rescission of acceleration of the Notes that resulted from a
non-payment default by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (vi) make any Note payable in money other
than that stated in the Notes, (vii) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of, or premium or Additional Interest,
if any, on the Notes, (viii) modify or amend the Indenture or the Pledge
Agreement, or take or fail to take any action, that would have the effect of
impairing the Lien on the Collateral granted pursuant to the Pledge Agreement
or permitting any release of Collateral from such Lien except as expressly
contemplated by the Indenture or the Pledge Agreement, (ix) make any changes
in certain provisions dealing with waivers of past Defaults and the right of
the Holders of the Notes to receive payments or (x) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Trustee and the Collateral Agent, as applicable, may amend or
supplement the Indenture, the Pledge Agreement or the Notes to (i) cure any
ambiguity, defect or inconsistency (provided that such amendment or supplement
does not adversely affect the rights of any of the Holders of the Notes in any
material respect), (ii) provide for uncertificated Notes in addition to or in
place of certificated Notes, (iii) provide for the assumption of the Company's
obligations to Holders of the Notes in the case of a merger, consolidation or
sale of all or substantially all of the Company's assets, (iv) make any change
that would provide any additional rights or benefits to the Holders of the
Notes or that does not adversely affect the legal rights under the Indenture,
the Notes or the Pledge Agreement of any such Holder, (v) comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or (iv) to
provide for the issuance of exchange securities in accordance with the
Registration Rights Agreement.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee is permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee is required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accreted Value" means, as of any date of determination, for each $1,000 in
principal amount of Notes the sum of (a) $508.35 and (b) the portion of the
excess of the principal amount of each Note over the amount stated in clause
(a) that shall have been amortized through such date, such amount to be so
amortized on a daily basis and compounded semi-annually on February 15 and
August 15 of each year at the rate of 14% per annum from the date of issuance
of the Notes through the date of determination.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purpose of this definition: "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided, however, that: (i) holding office as an executive officer or
director of a Person or (ii) beneficial ownership of 10% or more of the equity
securities of a Person, either individually or as part of a group, shall be
deemed to be control.
"Asset Sale" means the sale, lease, conveyance or other disposition of any
assets other than a sale of Cash Equivalents for cash (including, without
limitation, by way of a sale-and-leaseback), whether in a single transaction
or a series of related transactions, (a) that have a fair market value in
excess of $500,000, or (b) for net proceeds in excess of $500,000.
Notwithstanding the foregoing, (i) a transfer of assets by the Company to a
Wholly Owned Restricted Subsidiary of the Company or by a Wholly Owned
Restricted Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company shall not be deemed to be an Asset Sale,
(ii) Permitted Investments made solely with cash and Cash Equivalents shall
not be deemed to be an Asset Sale and (iii) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company are
governed by the provisions of the Indenture described above under the caption
"--Repurchase at the Option of Holders -- Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions described above
under the caption "Repurchase at Option of Holders--Asset Sale."
"Bank Financing Conditions" means (i) the due execution and delivery by or
on behalf of the lender or lenders party to a Permitted Bank Facility of the
Intercreditor Agreement, (ii) the due acknowledgment of, and consent to, the
Intercreditor Agreement by the Company, and (iii) the receipt by the Trustee
of an Officers' Certificate and opinion of counsel that the conditions set
forth in the foregoing clauses (i) and (ii) have been complied with.
"Basket Investment" has the meaning specified in the definition of Permitted
Investments.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests
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(whether general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership.
"Cash Equivalents" means (i) United States dollars or other currencies, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities
of not more than six months from the date of acquisition, (iii) certificates
of deposit, eurodollar time deposits and bankers' acceptances with maturities
not exceeding six months and overnight bank deposits with any commercial bank,
depository institution or trust company incorporated or doing business under
the laws of the United States of America, any state thereof or the District of
Columbia or a branch or subsidiary of any such depository institution or trust
company operating outside the United States, provided, that such depository
institution or trust company has, at the time of the Investment, (A) capital
and surplus in excess of $250.0 million and (B) outstanding short-term debt
securities which are rated at least A-1 by Standard & Poor's Rating Services
or at least P-1 by Moody's Investors Service, Inc., or carry an equivalent
rating by a nationally recognized statistical rating organization if both the
two named rating agencies cease publishing ratings of investments, (iv)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having a rating in the highest rating
categories from Standard & Poor's Rating Services or Moody's Investors
Service, Inc. or carry an equivalent rating by a nationally recognized
statistical rating organization if both of the two named rating agencies cease
establishing ratings of investments and in each case maturing within six
months after the date of acquisition and (vi) money market mutual or similar
funds having assets in excess of $250.0 million, provided, that with respect
to any Non-Domestic Person, Cash Equivalents shall also mean those investments
that are comparable to clauses (iii) through (v) above in such Person's
country of organization or country where it conducts business operations.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, whether direct or
indirect (by way of a merger, consolidation or otherwise), by the Company or a
Restricted Subsidiary of the Company, in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole, to any Person other than a Wholly
Owned Restricted Subsidiary of the Company; (ii) the adoption of a plan
relating to the liquidation or disolution of the Company; (iii) any Person or
group (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), other than Permitted Holders, directly or indirectly acquires more than
50% of the total voting power of all classes of voting stock of the Company
and/or warrants or options to acquire such voting stock, calculated on a fully
diluted basis; or (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
"Closing Price" means, on any Trading Day with respect to any share of
Capital Stock, the last reported sale price regular way for a share of such
Capital Stock or, in case no such reported sale takes place on such day, the
reported closing bid price regular way, in either case on the New York Stock
Exchange or, if such shares of Capital Stock are not listed or admitted to
trading on such Exchange, on the principal national securities exchange on
which such shares are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to trading on
any national securities exchange or quoted on such Market but the issuer is a
"Foreign Issuer" (as defined in Rule 3b-4(b) under the Exchange Act) and the
principal securities exchange on which such shares are listed or admitted to
trading is a "Designated Offshore Securities Market" (as defined in Rule
902(a) under the Securities Act), the reported closing bid price regular way
on such principal exchange, or, if such shares are not listed or admitted to
trading on any national securities exchange or quoted on such automated
quotation system and the issuer and principal securities exchange do not meet
such requirements, the closing bid price in the over-the-counter market as
furnished by any New York Stock Exchange member firm that is selected from
time to time by the Company for that purpose and is reasonably acceptable to
the Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (a) an amount
equal to any extraordinary loss of such Person or any of its Restricted
Subsidiaries plus any net loss realized in connection with an Asset Sale by
such Person or any of its
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Restricted Subsidiaries (to the extent such losses were deducted in computing
such Consolidated Net Income), plus (b) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent such provision for taxes was included in computing Consolidated Net
Income, plus (c) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including
amortization of original issue discount, non-cash interest payments and the
interest component of any payments associated with Capital Lease Obligations
and net payments (if any) pursuant to Hedging Obligations), to the extent such
expense was deducted in computing Consolidated Net Income, plus
(d) depreciation and amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent such depreciation and amortization were deducted
in computing Consolidated Net Income, in each case, on a consolidated basis
with respect to such Person and its Restricted Subsidiaries and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, interest and the depreciation and
amortization of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of such Person only
to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to such Person by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter
and all agreements, instruments, judgments, decrees, orders, statutes, rules
and governmental regulations applicable to that Subsidiary or its
stockholders. In addition, for purposes of computing Consolidated Cash Flow,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including all mergers and consolidations and including any
related financing transactions, during the most recently completed four full
fiscal quarters for which financial statements are available or subsequent to
such four-quarter reference period and on or prior to the date on which the
calculation of the Consolidated Cash Flow is made (the "Calculation Date")
shall be deemed to have occurred on the first day of the four-quarter
reference period, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded.
"Consolidated Debt" means, with respect to any Person as of any date of
determination, the aggregate amount of Indebtedness and Disqualified Stock of
such Person and its Restricted Subsidiaries outstanding as of such date of
determination, determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP; provided that, for purposes
of calculating the Company's Consolidated Debt as a percentage of the
Company's Total Market Capitalization, all Project Financing of the Company's
Restricted Subsidiaries that has not been Guaranteed by the Company shall be
excluded in calculating the amount of such Consolidated Debt and the amount of
such Total Market Capitalization.
"Consolidated Debt to Consolidated Cash Flow Ratio" means, as at any date of
determination, the ratio of the Consolidated Debt of the Company as of such
date to the Consolidated Cash Flow of the Company for the most recently
completed four full fiscal quarters for which internal financial statements
are available as of such date of determination.
"Consolidated Invested Equity Capital" means, with respect to any Person as
of any date, the sum of the Invested Equity Capital of such Person as of such
date and, without duplication, the Invested Equity Capital of each of its
Restricted Subsidiaries and Restricted Affiliates (and their Restricted
Subsidiaries) as of such date. For purposes of calculating the Consolidated
Invested Equity Capital of any Person as of any date, in order to avoid
duplication, the Invested Equity Capital of a Restricted Subsidiary or
Restricted Affiliate (or their Restricted Subsidiaries) of such Person shall
not include any amounts that would be included in the Consolidated Invested
Equity Capital of any equity owner of such Restricted Subsidiary or Restricted
Affiliate (or their Restricted Subsidiaries), to the extent that such amounts
were utilized by such equity owner prior to such date to permit the Incurrence
of Project Financing pursuant to clause (e) of the second paragraph of the
covenant entitled "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." For example, if a direct Restricted Subsidiary
of the Company has Consolidated Invested Equity Capital of $100 and incurs
$200 of
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Project Financing, then a direct or indirect Restricted Subsidiary (or a
Restricted Affiliate) of such first Restricted Subsidiary will not be deemed
to have any Invested Equity Capital based on contributions or loans to it by
such first Restricted Subsidiary. In addition, the Invested Equity Capital of
a Restricted Subsidiary or Restricted Affiliate of a Person will never be
considered to be greater than the Invested Equity Capital of such Person,
except as a result of contributions of Invested Equity Capital to such
Restricted Subsidiary or Restricted Affiliate by third parties.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, that (i) the Net Income of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall
be included only to the extent of the amount of dividends or distributions
paid in cash to such Person or a Wholly Owned Restricted Subsidiary thereof;
(ii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; (iii) the cumulative effect of a change in accounting principles
shall be excluded and (iv) the Net Income of any Unrestricted Subsidiary of
such Person shall be excluded, whether or not distributed to such Person or
one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock).
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity of Notes.
"Domestic Intermediate Holding Company" means any Intermediate Holding
Company organized under the laws of the United States or any political
subdivision thereof and all of the outstanding Capital Stock of which is
pledged to the Collateral Agent pursuant to an Intermediate Holding Company
Pledge Agreement.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for Capital Stock).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession in the United States, which are in effect on the date of the
Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirectly, in any manner (including, without limitation, letters of credit
and reimbursement agreements in respect thereof), of all or any part of any
Indebtedness. The amount of any Guarantee shall be equal to the maximum
potential liability in respect of the Guarantee, even if less than the
Indebtedness supported by such Guarantee.
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"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness (other than
letters of credit) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person), except any Lien described in clause
(h) and (i) of the definition of Permitted Liens and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person (whether or not such Guarantee would be required to be reflected
on a balance sheet).
"Initial Public Offering" means the initial bona fide underwritten sale to
the public of common stock or any other Capital Stock of the Company that is
made pursuant to a registration statement (other than a registration statement
or Form S-8 or any other form relating to securities issuable under an
employee benefit plan of the Company) that is declared effective by the SEC.
"Intercreditor Agreement" means any Intercreditor and Collateral Agency
Agreement between the Collateral Agent, on the one hand, and the lender or
lenders party to a Permitted Bank Facility, on the other hand, and
acknowledged and consented to by the Company.
"Intermediate Holding Company" means any Direct Wholly Owned Subsidiary of
IWC formed solely for purposes of holding Permitted Investments.
"Invested Equity Capital" means, with respect to any Person as of any date,
the sum of (i) the total dollar amount contributed in cash plus the value of
all property contributed (valued at the lower of fair market value at the time
of contribution, determined in good faith by the Company's Board of Directors,
or the book value of such property at the time of contribution on the books of
the Person making such contribution) to such Person since the date of its
creation in the form of Equity Interests (other than Disqualified Stock),
plus, without duplication, (ii) the total dollar amount contributed in cash
plus the value of all property contributed (valued at the lower of fair market
value at the time of contribution, determined in good faith by the Company's
Board of Directors, or the book value of such property at the time of
contribution on the books of the Person making such contribution) to such
Person since the date of creation by the holders of its Equity Interests (and
their Affiliates) in consideration of the issuance of preferred equity or
Indebtedness, on a basis that is substantially proportionate to their Equity
Interests (with any disproportionately large equity interests received by the
Company, a Restricted Subsidiary of the Company, a Restricted Affiliate or a
Restricted Subsidiary of a Restricted Affiliate relative to their respective
contributions being ignored for this purpose), plus, without duplication,
(iii) the total dollar amount contributed in cash plus the value of all
property contributed (valued at the lower of fair market value at the time of
contribution, determined in good faith by the Company's Board of Directors, or
the book value of such property at the time of contribution on the books of
the Person making such contribution) to such Person since the date of its
creation by the Company or a Wholly Owned Restricted Subsidiary of the Company
in consideration of the issuance of preferred equity or Indebtedness, less
(iv) the fair market value of all interest, dividends and other distributions
(in whatever form and however designated) made by such Person since the date
of its creation to the holders of its Equity Interests (and their Affiliates),
provided that in no event shall the aggregate amount of interest, dividends
and other distributions made to any holder of Equity Interests of a Person (or
its Affiliates) operate to reduce the Invested Equity Capital of such Person
by more than the total contributions to such Person (per clauses (i) through
(iii) above) by such equity holder (and its Affiliates), and less (v) the
total amount of Basket Investments (measured as of the date made but without
giving effect to any proration) made by such Person or any of its Restricted
Subsidiaries or Restricted Affiliates since the date of the Indenture that are
outstanding as of such date.
"Investment" means, with respect to any Person, any investment by such
Person in other Persons (including Affiliates) in the form of loans (including
Guarantees), advances (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), capital
contributions, or other
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acquisitions for consideration of Indebtedness, Equity Interests or other
securities, or any binding contractual obligation not subject to a condition
within the sole control of the Company to make any such investment or enter
into any such transaction on a future date prior to the maturity of the Notes
or upon the happening of any event, and all other items that are or would be
classified as investments on a balance sheet in accordance with GAAP. Except
as otherwise specified, Investments will be valued as of the date made for all
purposes under the Indenture.
"Liens" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Minority Owned Affiliate" of any specified Person means any other Person in
which such specified Person owns Equity Interests other than a direct or
indirect Subsidiary of the specified Person.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or (b)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries, and (ii) any extraordinary
gain (but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale or the
liquidation of any Investment, net of the direct costs relating to such Asset
Sale or the liquidation of any Investment (including, without limitation,
reasonable legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), amounts required
to be applied to the repayment of Indebtedness secured by a Lien on the asset
or assets the subject of such Asset Sale or the liquidation of any Investment
(other than intercompany Indebtedness and Subordinated Indebtedness) and any
reserve for adjustment in respect of the sale price of such asset or assets.
"Non-Recourse Debt" means, with respect to any Person, Indebtedness or that
portion of Indebtedness (a) as to which the specified Person (i) does not
provide credit support of any kind (including, without limitation, pursuant to
any undertaking, agreement or instrument that would constitute Indebtedness),
(ii) is not directly or indirectly liable (as a guarantor or otherwise), or
(iii) does not constitute the lender; and (b) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of such Indebtedness to take any action against the
specified Person or would permit any holder of Indebtedness of the specified
Person to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and (c) as
to which the lenders have been notified in writing that they will not have any
recourse to the stock or assets of the specified Person.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Bank Facility" means, at any time, a single credit facility
between the Company and the lender or lenders party thereto provided for loans
(i) incurred in compliance with the covenant described above under "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and
(ii) as to which the Bank Financing Conditions shall have been satisfied.
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"Permitted Basket Investments" means Basket Investments in Unrestricted
Affiliates that do not exceed $40.0 million (or the equivalent amount in one
or more foreign currencies) at any one time (measured by the fair market value
of each such Investment at the time made as determined in good faith by the
Company's Board of Directors).
"Permitted Holders" means Vanguard Cellular Systems, Inc., a North Carolina
corporation, and its wholly-owned subsidiaries.
"Permitted Investments" means (a) Investments in Cash Equivalents, (b)
Investments in Restricted Subsidiaries of the Company, Restricted Affiliates
and Restricted Subsidiaries of any Restricted Affiliates of the Company, (c)
all Investments that were outstanding on the date hereof, and (d) Investments
by the Company or any Restricted Subsidiary or Restricted Affiliate in
Unrestricted Subsidiaries or Unrestricted Affiliates (collectively, "Basket
Investments"), in each case only to the extent that such Investments are in
Persons that are primarily engaged in Related Businesses; provided that the
aggregate amount of all Basket Investments, other than Permitted Basket
Investments, at any one time outstanding (measured by the fair market value of
each such Investment at the time made as determined in good faith by the
Company's Board of Directors) may not exceed the sum of (i) $10 million (or
the equivalent amount in one or more foreign currencies), plus (ii) the
aggregate net cash proceeds from the sale of Equity Interests other than
Disqualified Stock received by the Company since the date of the Indenture,
plus (iii) the aggregate net cash proceeds from sales of Subordinated
Indebtedness of the Company received by the Company since the date of the
Indenture, plus (iv) to the extent that any Investment pursuant to this clause
(d) was made in an Unrestricted Subsidiary or Unrestricted Affiliate and is
sold for cash or otherwise liquidated for cash, 50% of the Net Proceeds from
the sale or liquidation of such Investment, plus (v) to the extent that any
Unrestricted Subsidiary is properly designated as a Restricted Subsidiary in
accordance with the terms of the Indenture, or to the extent that any
Unrestricted Affiliate is properly designated as a Restricted Affiliate in
accordance with the terms of the Indenture, the lesser of (x) the initial
amount of all Investments made since the date of the Indenture in such
Unrestricted Subsidiary or Unrestricted Affiliate and (y) the fair market
value of all such Investments as of the date of such designation less the
amount of Indebtedness guaranteed by the Company, a Restricted Subsidiary,
Restricted Affiliate, or the Restricted Subsidiary of a Restricted Affiliate
pursuant to the covenant described under clause (i) in the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." For
purposes of this definition, only the Company's Pro Rata Portion of any Basket
Investment will be counted in determining the amount of Basket Investments
outstanding at any time or proposed to be made.
"Permitted Liens" means (a) Liens in favor of the Company or a Wholly Owned
Restricted Subsidiary of the Company; (b) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation by the Company of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (c) Liens on property existing
at the time of acquisition thereof by the Company or any Restricted Subsidiary
of the Company; provided that such Liens were in existence prior to the
contemplation by the Company of such acquisition; (d) Liens to secure the
performance of statutory obligations, surety or appeal bounds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (e) Liens existing on the date of the Indenture; (f) Liens for
taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (g) Liens incurred in the ordinary course
of business of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million (or the equivalent in
one or more foreign currencies) measured at the time such Lien was incurred
and that (A) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (B) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (h) Liens
on assets of Restricted Subsidiaries of the Company, Restricted Affiliates or
Restricted Subsidiaries of Restricted Affiliates
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securing Project Financing that is permitted by the Indenture to be incurred;
(i) Liens on assets or the Equity Interests of Unrestricted Subsidiaries,
Unrestricted Affiliates or Unrestricted Subsidiaries of Unrestricted
Affiliates that secure Indebtedness of such Unrestricted Subsidiaries,
Unrestricted Affiliates or Unrestricted Subsidiaries of Unrestricted
Affiliates that constitutes Non-Recourse Debt with respect to the Company and
its Restricted Subsidiaries, Restricted Affiliates and Restricted Subsidiaries
of Restricted Affiliates; (j) Liens created pursuant to the terms of the
Pledge Agreement; (k) Liens on the Collateral which secure a Permitted Bank
Facility and rank pari passu with the Lien securing the Notes; and (l) the
Lien in favor of the Trustee and Agents arising under the Indenture.
"Permitted Pledge Foreclosure" means any Asset Sale resulting from the
foreclosure on or judicial enforcement of any rights or remedies under or with
respect to any Lien described in clause (i) of the definition of Permitted
Liens, provided that the Company shall have delivered to the Trustee, with
respect to any such Lien, a resolution of the Board of Directors set forth in
an Officer's Certificate to the effect that such Lien arose in the ordinary
course of the Company's business pursuant to a bona fide pledge or similar
arrangement that was in the best interests of the Company.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company,
a Restricted Subsidiary of the Company, a Restricted Affiliate or a Restricted
Subsidiary of a Restricted Affiliate issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company, a Restricted Subsidiary of the
Company, a Restricted Affiliate or a Restricted Subsidiary of a Restricted
Affiliate; provided that, unless such Indebtedness is being incurred to
substantially concurrently repay the Notes in full at maturity: (1) the
principal amount (or accreted value, as applicable) of such Indebtedness does
not exceed the principal amount (or accreted value, as applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith); (2)
such Indebtedness has a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
Subordinated Indebtedness, then such Indebtedness is Subordinated
Indebtedness; and (4) such Indebtedness is incurred by the Company or the
Restricted Subsidiary or Restricted Affiliate (or Restricted Subsidiary
thereof) who is the obligor of the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Pro Rata Portion" means, when applied to the Company for purposes of
determining the amount of Net Proceeds from an Asset Sale made by a Restricted
Subsidiary (other than a wholly owned Restricted Subsidiary) that constitute
Excess Proceeds or for purposes of determining the amount of an Investment
that will be deemed to be outstanding under a particular covenant or
definition, that portion of such Net Proceeds or Investment as corresponds to
the Company's direct or indirect percentage ownership interest in the profits
of the Person who engaged in the Asset Sale or the Person in whom the
Investment was made, as applicable (which would be 100% in the case of any
Investments made by the Company in wholly owned Subsidiaries). The Pro Rata
Portion of the Net Proceeds from an Asset Sale shall be determined in good
faith by the Company's Board of Directors in connection with such Asset Sale.
The Pro Rata Portion of an Investment as of any date shall be determined in
good faith either by the Company's Board of Directors or in accordance with
procedures established as to such Investment by the Company's Board of
Directors.
"Project Financing" means any Indebtedness after the date of the Indenture
by a Restricted Subsidiary of the Company, a Restricted Affiliate or a
Restricted Subsidiary of a Restricted Affiliate that is Non-Recourse Debt with
respect to the Company (except to the extent permitted by the covenant
described under clause (h) in the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock) and each of its other Restricted
Subsidiaries, Restricted Affiliates and Restricted Subsidiaries of Restricted
Affiliates except any such Restricted Subsidiary, Restricted Affiliates and
Restricted Subsidiaries of a Restricted Affiliate that owns, either directly
or indirectly through a directly owned Restricted Subsidiary or Restricted
Affiliate, all or a portion of the business that will use the proceeds of such
Project Financing.
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"Qualified Reorganization" means any Reorganization that (a) occurs
simultaneously with or following a Change of Control and (b) results in there
being deliverable upon exercise of any Warrant cash and/or securities
registered under Section 12 of the Exchange Act that are freely tradeable and
listed on a national securities exchange or traded on a national quotation
service.
"Related Business" means any business in which the Company, its Subsidiaries
or Minority Owned Affiliates are engaged, directly or indirectly, (i) that
uses existing or future technology for the transmission and delivery of video,
voice or other data, or (ii) that supports or is incidental to any business
described in clause (i).
"Restricted Affiliate" means any direct or indirect Minority Owned Affiliate
of the Company that has been designated in a Board Resolution as a Restricted
Affiliate based on a determination by the Board of Directors that the Company
has, directly or indirectly, the requisite control over such Minority Owned
Affiliate to prevent it from incurring any Indebtedness or issuing any
preferred stock or taking any other action at any time in contravention of any
of the provisions of the Indenture described above under the captions "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"
and "--Certain Covenants--Limitations on Subsidiary Structure" that are
applicable to Restricted Affiliates. The Company will be required to deliver
an Officers' Certificate to the Trustee, including a copy of the Board
Resolution, upon designating any Minority Owned Affiliate as a Restricted
Affiliate.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the Company that by
its terms is expressly subordinated in right of payment to the prior payment
in full of the Notes and that does not provide for (i) any scheduled payment
of principal or interest or redemption prior to the maturity or repayment in
full of the Notes or (ii) any offer to purchase prior to the maturity or
repayment in full of the Notes other than an offer to purchase (a "Permitted
Offer to Purchase") that (x) arises from any event or circumstance that
obligates the Company to make an Asset Sale Offer or Change of Control Offer
and (y) provides that the repurchase obligation is subject to the prior
consummation of any such Asset Sale Offer or Change of Control Offer.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof and (ii) any partnership
of which more than 50% of the partnership's capital accounts, distribution
rights or general or limited partnership interests are owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Take Along Asset Sale" means any Asset Sale involving the sale, lease,
conveyance or other disposition of all or any portion of any Investment held
by the Company or any Restricted Subsidiary in any Minority Owned Affiliate
effected (i) at the direction of the holders of a majority of the Voting
Equity Interests of such Minority Owned Affiliate pursuant to the exercise of
any "drag-along" or similar rights available to such holders or (ii) pursuant
to the exercise of any "take along" or similar rights available to the Company
or such Restricted Subsidiary.
"Threshold Initial Public Offering" means an Initial Public Offering that
results in net cash proceeds to the Company of at least $50 million.
"Total Market Capitalization" of any Person means, as of any date of
determination, the sum of (1) the Consolidated Debt of such Person on such
date, plus (2) the Total Market Value of Equity of such Person on such date.
"Total Market Value of Equity" of any Person means, as of any date of
determination, the sum of (1) the product of (i) the aggregate number of
outstanding primary shares of common stock of such Person (which shall
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not include any options or warrants on, or securities convertible or
exchangeable into, shares of such common stock) and (ii) the average Closing
Price of such common stock over the 20 consecutive Trading Days immediately
preceding such date of determination, plus (2) the stated liquidation
preference of any outstanding shares of preferred stock of such Person
outstanding as of such date of determination. If no such Closing Price exists
with respect to any class of common stock, the value of such shares for
purposes of clause (1) of the preceding sentence will be determined by the
Board of Directors of such Person on the basis of a valuation opinion issued
by an investment banking firm of national standing with experience in such
valuations that has been filed with the Trustee.
"Unrestricted Affiliate" means any direct or indirect Minority Owned
Affiliate of the Company other than a Restricted Affiliate.
"Unrestricted Subsidiary" means any Person that is designated by the Board
of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but
in each case only to the extent that such Person: (a) is not a party to any
contract, agreement, understanding or other arrangement of any kind with the
Company or any of its Restricted Subsidiaries other than on terms no less
favorable to the Company or such Restricted Subsidiary than those that could
be obtained from Persons who are not Affiliates of the Company; (b) is a
Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (c) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries except insofar as such subscription, maintenance or
preservation of financial condition or achievement of operating results, or
guarantee or credit support would be permissible under the Indenture; and (d)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors will be required to be evidenced to the Trustee by filing
with the Trustee a certified copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
If at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant).
"Voting Equity Interests" of a Person means Equity Interests of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
Board of Directors (irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each of the remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary"' of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than the directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of that Person or a combination thereof.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 26,000,000 shares of
Common Stock, par value $0.01 per share ("Common Stock"), and 23,080,000
shares of Preferred Stock, par value $0.01 per share ("Preferred Stock"). As
of August 31, 1996, there were 615,760 shares of Common Stock outstanding held
of record by four stockholders and 16,906,400 shares of Preferred Stock
outstanding held of record by 52 stockholders. The information contained
herein gives effect to (i) a reclassification of the Company's capital stock
on May 19, 1993, in which each then outstanding share of Common Stock was
converted into 100 shares of Common Stock, each then outstanding share of
Series A Preferred Stock was converted into 151.0892 shares of Series A
Preferred Stock and each then outstanding share of Series B Preferred Stock
was converted into 184.3802 shares of Series A Preferred Stock and (ii) a
reclassification of the Company's capital stock on January 7, 1994, in which
each then outstanding share of Common Stock was converted into one share of
Series A Preferred Stock and each then outstanding share of Series A Preferred
Stock was converted into one share of Series B Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share and shall be
entitled to vote upon such matters and in such manner as may be provided by
law. Subject to preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. As described more fully
below under "--Preferred Stock--Liquidation," in the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably with the Existing Preferred (as defined below) in
all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock then outstanding (including the
Existing Preferred) and the right of holders of Common Stock to receive an
amount equal to $0.50 per share plus any declared and unpaid dividends per
such share. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are
fully paid and non-assessable, and the Warrant Shares to be reserved for
issuance upon completion of this Offering will be fully paid and non-
assessable when issued in accordance with the terms of the Warrants.
PREFERRED STOCK
General
The Preferred Stock has been divided into seven series of shares of the same
class, as follows: 1,200,000 shares are designated Series A Preferred Stock
("Series A Preferred Stock"), 933,200 of which are issued and outstanding;
1,229,240 shares are designated Series B Preferred Stock ("Series B Preferred
Stock"), all of which are issued and outstanding; 2,460,000 shares are
designated Series C Preferred Stock ("Series C Preferred Stock"), 1,762,280 of
which are issued and outstanding; 5,800,000 shares are designated Series D
Preferred Stock ("Series D Preferred Stock"), 3,652,960 of which are issued
and outstanding; 3,972,240 shares are designated Series E Preferred Stock
("Series E Preferred Stock"), all of which are issued and outstanding;
7,000,000 shares are designated Series F-1 Preferred Stock ("Series F-1
Preferred Stock"), 4,508,480 of which are issued and outstanding; and
1,080,000 shares are designated Series F-2 Preferred Stock ("Series F-2
Preferred Stock;" together with the Series F-1 Preferred Stock, the "Series F
Preferred Stock"), 848,000 of which are issued and outstanding. The Series A,
Series B, Series C, Series D, Series E, Series F-1 and Series F-2 Preferred
Stock are sometimes collectively referred to as the "Existing Preferred
Stock."
Subject to certain preferences of the Existing Preferred Stock, the Board of
Directors has the authority to issue Preferred Stock in one or more series and
to fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption
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prices, liquidation preferences and the number of shares constituting any
series or the designation of such series, without further vote or action by
the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and
other rights of the holders of Common Stock. The issuance of Preferred Stock
with voting and conversion rights may adversely affect the voting power of the
holders of Common Stock, including the loss of voting control to others. The
Company currently has no plans to issue any other shares of Preferred Stock,
other than shares of Existing Preferred Stock issuable upon exercise of
outstanding warrants.
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Existing Preferred Stock and Common Stock shall be entitled to
receive the following amounts in the following order of priority, subject to
the prior distribution rights of any Preferred Stock hereafter issued by the
Company:
(i) Holders of Series F Preferred Stock shall first be entitled to receive
an amount per share equal to $4.6875, plus any declared but unpaid
dividends on such share;
(ii) Holders of Series B, Series C, Series D and Series E Preferred Stock
(the "Junior Preferred Stock") shall next be entitled to receive
amounts per share equal to $0.5055, $1.2228, $3.6025 and $3.4615,
respectively, plus any declared and unpaid dividends on such share;
(iii) Holders of Series B, Series C, Series D, Series E and Series F
Preferred Stock shall next be entitled to receive amounts per share
equal to $0.4597, $1.1115, $3.2750, $3.2750 and $4.6875,
respectively, plus any declared and unpaid dividends on such share;
(iv) Holders of the Series A Preferred Stock shall next be entitled to
receive an amount per share equal to $0.85, plus any declared and
unpaid dividends on such share;
(v) Holders of Common Stock shall be entitled to receive an amount per
share equal to $0.50, plus any declared and unpaid dividends on such
share; and
(vi) The remaining assets of the Company available for distribution shall
be distributed among the holders of Existing Preferred Stock and
Common Stock pro rata on an as-converted basis.
Notwithstanding the foregoing, in the event of the sale of the Company for
consideration in excess of $18.75 per share of Common Stock, then, in lieu of
the distributions set forth above, the proceeds from such sale shall be
distributed ratably to the stockholders based on the number of shares of
Common Stock outstanding on an as-converted basis.
Dividends
Subject to the preferences of any Preferred Stock hereafter issued by the
Company, holders of Existing Preferred Stock are entitled to receive ratably
such noncumulative dividends, at the same time and on the same basis, as
holders of Common Stock when, as and if declared by the Company's Board of
Directors; provided, however, that so long as any shares of Junior Preferred
Stock or Series F-1 Preferred Stock are outstanding, any payment of dividends
must be approved by the holders of at least 50% in the aggregate of such then
outstanding shares.
Redemption
On or after the later of (i) December 31, 1998, or (ii) the date on which
the Notes shall have been repaid in full, upon the written request of the
holders of at least a majority of the outstanding shares of the Junior
Preferred Stock and Series F-1 Preferred, all shares of each such series shall
be redeemed at a price per share payable in cash equal to the greater of (a)
the fair market value of such share on an as-converted basis and (b) the
liquidation preference with respect to such shares indicated in subsections
(i) through (iii) of "Liquidation" above (the "Redemption Price"). In
addition, on or after December 31, 2000 or a Change of Control (as defined in
the Certificate) not approved by the directors of the Company designated by
the holders of Series F Preferred
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Stock, the holders of a majority of the outstanding shares of Series F-1
Preferred Stock may, subject to the prior repayment in full of the Notes,
cause the Company to redeem the then outstanding shares of Series F Preferred
at the Redemption Price then applicable to such shares.
Conversion
At the option of the holder, each share of Existing Preferred Stock may be
converted at any time and from time to time into one share of Common Stock,
subject to adjustment for, among other things, stock splits, stock dividends
and issuances of additional shares of Common Stock and securities convertible
into Common Stock at a per share price less than the original issue price of
such share of Existing Preferred Stock. In addition, each share of Existing
Preferred Stock shall automatically be converted into Common Stock upon the
sale of the Common Stock in a firm commitment underwritten public offering in
which the offering price is not less than $13.10 per share, subject to
adjustment, and $8.0 million in the aggregate; provided, however, the Series F
Preferred Stock shall not automatically be converted unless such a public
offering occurs on or prior to December 31, 1998 and the offering price is not
less than $18.75 per share, subject to adjustment, and $25.0 million in the
aggregate (a "Threshold Public Offering").
Certain shares of Series F-1 Preferred are entitled to be converted at the
option of the holder into one share of Series F-2 Preferred. Subject to
certain limitations, each share of Series F-2 Preferred held by Toronto
Dominion, its affiliates or any transferee thereof shall be convertible, at
the option of the holder, into one share of Series F-1 Preferred.
Voting
Holders of Preferred Stock are entitled to vote, on an as-converted basis,
together with holders of Common Stock, on all matters on which holders of
Common Stock are entitled to vote and as otherwise provided by law, except
that the Series F-2 Preferred Stock is non-voting. The holders of Series E
Preferred Stock are entitled to elect three directors to the Company's Board
of Directors; and for so long as 20% of the shares of Series F Preferred Stock
remain outstanding, the holders of Series F-1 Preferred Stock are entitled to
elect three directors, one of whom Electra has the right to elect, one of whom
CIH has the right to elect and one of whom TDI has the right, subject to
certain limitations and the conversion of its Series F-2 Preferred Stock into
Series F-1 Preferred Stock, to elect (subject, in each case, to minimum stock
ownership requirements). In addition, the holders of Series F-1 Preferred
Stock have the right, exercisable on one occasion, to cause the number of
directors constituting the Board of Directors to be increased by one and to
elect such additional director.
Until the earlier of a Threshold Public Offering and the date on which less
than 20% of the presently issued shares of Series F Preferred remain
outstanding, the majority of the Board of Directors may not be comprised of
representatives of Vanguard and officers of the Company.
Protective Provisions
The protective provisions of the Certificate require that the Company obtain
the approval of certain stockholders prior to taking the following actions:
(A) The approval of the holders of at least 50% of the outstanding shares
of Series B, Series C, Series D, Series E and Series F-1 Preferred
Stock (the "Protected Stock") is required to:
(i) authorize a series of capital stock with voting, dividend or
liquidation rights on parity with or superior to the Protected
Stock;
(ii) authorize, issue, redeem or acquire any shares of capital stock of
the Company, except pursuant to employee benefit plans or similar
arrangements to a maximum of 2.4 million shares of Common Stock,
as adjusted;
(iii) approve a Corporate Transaction (generally defined in the
Certificate to include certain acquisitions, mergers or sales);
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(iv) approve any amendment to the Certificate or the By-Laws of the
Company;
(v) organize or acquire an interest in any business unrelated to the
core businesses of the Company;
(vi) declare or pay any dividends in cash, stock or other property;
(vii) reinvest more than $3.0 million in proceeds from the sale or
liquidation of any single investment by the Company; or
(viii) liquidate or dissolve the Company;
(B) The approval of the holders of at least 66 2/3% of the Protected Stock
is required to:
(i) change the number of authorized directors of the Company; or
(ii) remove any officer or director of the Company, except that any
director separately elected by the holders of a series of Existing
Preferred Stock may only be removed by such holders;
(C) The approval of the holders of at least 75% and, in certain instances,
80% of the Series F-1 Preferred Stock is required to take various other
actions, including any action that requires the consent of the holders
of any other series of Preferred Stock voting as a class and actions
that would violate provisions of the Series F Purchase Agreement,
unless in certain cases such actions are approved by specified members
of the Company's Board of Directors;
(D) The approval of the holders of at least a majority of any series of the
Existing Preferred Stock is required to amend the provisions of the
Certificate to adversely affect the rights of such series;
(E) The approval of the holders of at least 66 2/3% of the shares of Series
E Preferred or Series F-1 Preferred Stock, as the case may be, is
required to amend the provisions of the Certificate to adversely affect
their respective rights to elect directors.
Registration Rights
The IRA provides the holders of Common Stock issued or issuable upon the
conversion of the Series B, Series C, Series D, Series E and the October 1994
Vanguard Notes or upon the exercise of currently outstanding warrants to
purchase Preferred Stock, demand, piggyback and other registration rights with
respect to such Common Stock. The demand registration rights commence on the
earlier of December 18, 1998 or six months after the effective date of the
first registration statement for the initial public offering of the Company
securities. Such stockholders are entitled to a maximum of two demand
registrations. The piggyback registration rights of any holder terminate at
such time on or after the closing of the first Company-initiated public
offering of the Common Stock as all of such stockholder's registrable
securities may immediately be sold under Rule 144 of the Securities Act during
any 90-day period. The rights of such stockholders to include shares of
registrable securities in a registration pursuant to either a demand or
piggyback registration are subject to restrictions on the number of shares to
be included in the offering at the discretion of the underwriters and are
subordinate to the rights of the holders of Series F Preferred Stock
summarized below. Stockholders who are parties to the IRA are also entitled to
registration rights on Form S-3 registration statements under the Securities
Act. The expenses of the demand and piggyback registrations, and, with certain
exceptions, other registrations, except underwriting discounts and
commissions, are to be borne by the Company. The IRA also limits the Company's
ability to grant subsequent registration rights.
The Company and the purchasers in the Series F Financing (the "Series F
Investors") are parties to a Registration Rights Agreement dated as of
December 18, 1995 (the "Series F Registration Rights Agreement") which grants
registration rights (the "Series F Rights") to the Series F Investors with
respect to Common Stock issued or issuable upon conversion of Series F-1
Preferred Stock and Series F-2 Preferred Stock or acquired pursuant to
exercises of the rights of first offer contained in the IRA. The IRA contains
an acknowledgment of the Series F Rights. The Series F Rights include (i)
demand registration rights which commence on the earlier of
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December 31, 1997 or the consummation of an initial public offering of the
Common Stock or a merger of the Company with or into a public company, (ii)
piggyback registration rights, and (iii) registration rights on Form S-3
registration statements under the Securities Act. A demand registration may be
initiated by the holders of at least 20% of the Series F Registrable
Securities (as defined in the Series F Registration Rights Agreement). The
Series F Rights are pari passu with the registration rights under the Warrant
Agreement with respect to any Initial Public Offering. The Series F Rights
generally have precedence, however, with respect to the registration rights of
other stockholders, to the extent that the Company's underwriters require a
limit on the number of additional shares in the offering. All expenses of
registrations pursuant to the Series F Rights, except underwriting discounts
and commissions, are to be borne by the Company. The Company agrees not to
enter into any agreements inconsistent with the Series F Rights. The Series F
Registration Rights Agreement also limits the Company's ability to grant
subsequent registration rights.
Holders of the Warrants have certain rights to cause the shares of Common
Stock issuable upon exercise thereof to be registered under the Securities Act
and applicable state securities laws. Whenever the Company proposes to effect
an Initial Public Offering (as defined) in which shares will be offered by any
stockholder of the Company, the Company must provide prompt written notice
thereof to the holders of the Warrants and the shares of Common Stock issuable
upon exercise of the Warrants (the "Warrant Shares"). Each such holder will
have the right, within 20 business days after receipt of such notice, to
request that the Company include any or all of such holder's Warrant Shares
for sale pursuant to such registration statement.
The Company will include in any such registration statement all the Warrant
Shares for which it receives the request-described in the preceding paragraph,
unless the managing underwriter for the Initial Public Offering (the "Managing
Underwriter") determines that, in its opinion, the number of Warrant Shares
that the holders of Warrants (the "Requesting Holders") have requested to be
sold in such Initial Public Offering, plus the total number of shares of such
Common Stock that the Company and any other selling stockholders entitled to
sell shares in such Initial Public Offering propose to sell in such Initial
Public Offering, exceed the maximum number of shares that may be distributed
without materially adversely affecting the marketing, price, timing or
distribution of the shares to be sold in such offering. In such event, the
Company will be required to include in such Initial Public Offering only that
number of shares which the Managing Underwriter believes maybe sold without
causing such adverse effect in the following order: (i) all the shares that
the Company proposes to sell in such Initial Public Offering, and (ii) shares
of the Requesting Holders and all other shares that are proposed to be sold by
any holder of Common Stock of the Company on a pro rata basis based on the
number of shares held by the Requesting Holders and such other holders. The
Company will have the right to postpone or withdraw any registration statement
prior to the effective date without obligation to any Requesting Holder.
On the date 181 days following an Initial Public Offering (or if such day is
not a business day, then the next succeeding business day), the Company has
agreed to file a registration statement (the "Warrant Registration Statement")
on the appropriate form covering the Warrant Shares, to take all necessary
action to make such registration statement effective as promptly as
practicable, and to keep such registration statement effective until 30 days
after the earliest date on which all of the Warrants shall have expired or
been exercised. During any consecutive 365-day period, the Company may suspend
availability of the Warrant Registration Statement for up to two 30 day
periods (or one 60-day period), except for the 60-day period beginning
immediately after the Warrant Registration Statement is declared effective by
the Commission and the 60-day period ending on August 15, 2001, if the
Company's Board of Directors determines in the exercise of its reasonable
judgment that there is a valid business purpose for such suspension.
WARRANTS
The holders of Warrants issued in connection with the Unit Offering are
entitled to purchase, on or after the occurrence of (i) a Change in Control of
the Company, (ii) the closing of an Initial Public Offering, (iii) the
dissolution, liquidation or winding up of the affairs of the Company or (iv)
August 14, 2001, 11.638 shares of Common Stock per Warrant, representing in
aggregate approximately 10% of the outstanding Common Stock on a fully diluted
basis on the Issue Date. In the event that a Threshold Initial Public Offering
or a Qualified
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Reorganization has not occurred on or before May 15, 1997, each unexercised
Warrant will entitle the holder thereof to purchase 14,283 shares of Common
Stock, which will represent in the aggregate (assuming no Warrants have been
exercised) approximately 12% of the outstanding Common Stock on a fully
diluted basis on the Issue Date.
CERTAIN INCOME TAX CONSIDERATIONS
The following summary describes certain material United States federal
income tax consequences as of the date hereof of the exchange of Exchange
Notes for Old Notes pursuant to the Exchange Offer and the ownership and
disposition of Exchange Notes. Except where noted, it deals only with Exchange
Notes held as capital assets by holders that are United States Holders (as
defined below) and acquired in the Exchange Offer by holders who acquired
their Old Notes directly from the Company. The following summary does not deal
with special situations, such as those of dealers in securities or currencies,
financial institutions, life insurance companies, persons holding Exchange
Notes as a part of a hedging or conversion transaction or a straddle or
holders whose functional currency is not the U.S. dollar. Furthermore, the
discussion below is based upon the current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the applicable Treasury Regulations
("Regulations") and public judicial interpretations of the Code and the
Regulations, as of the date hereof, and such authorities may be repealed,
revoked or modified so as to result in U.S. federal income tax consequences
different from those discussed below. In particular, the discussion below is
based upon Regulations issued under section 1273 and related sections of the
Code relating to "original issue discount" ("OID") (the "OID Regulations").
The Company intends to treat the Exchange Notes as debt for all purposes and
such characterization by the Company is binding on all holders unless contrary
treatment is disclosed on a holder's tax return. Such classification is not
binding on the Internal Revenue Service, however, and there can be no
assurance that the Internal Revenue Service will agree that the Exchange Notes
qualify as debt for federal income tax purposes. If the Exchange Notes are not
respected as debt for such purposes, they would likely be recharacterized as
an equity interest in the Company and the interest that accretes on the
Exchange Notes would not be deductible by the Company when accrued or paid.
Loss of such interest deductions could increase income taxes ultimately
payable by the Company, and thus, reduce cash flow otherwise available to
repay the Exchange Notes. Recharacterization of the Exchange Notes as equity
could also adversely affect non-corporate holders as well as non-United States
holders of the Exchange Notes. The discussion of material federal income tax
consequences set forth below assumes that the Exchange Notes will be respected
as debt of the Company.
THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY. PERSONS CONSIDERING
EXCHANGING OLD NOTES FOR EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER STATE, LOCAL
OR FOREIGN LAWS.
As used herein, a "United States Holder" means (i) an individual that is a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, or (iv) any other person whose income or gain in respect of an
Exchange Note is effectively connected with the conduct of a United States
trade or business.
EXCHANGE OFFER
The exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer
should not be treated as an "exchange" for federal income tax purposes because
the Exchange Notes should not be considered to differ materially in kind or
extent from the Old Notes. Rather, the Exchange Notes received by a holder
should be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there should be no federal
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income tax consequences to holders exchanging the Old Notes for the Exchange
Notes pursuant to the Exchange Offer, and the federal income tax consequences
of holding and disposing of the Exchange Notes should be the same as the
federal income tax consequences of holding and disposing of the Old Notes.
Accordingly, the holder must, among other things, continue to include OID in
income as if the exchange had not occurred. See "--The Exchange Notes--
Original Issue Discount" for a description of the OID rules applicable to the
Exchange Notes.
THE EXCHANGE NOTES
Original Issue Discount
The Old Notes were issued as part of a unit (the "Units") comprised of
$1,000 principal amount of Old Notes and one Warrant to purchase Company
shares of Common Stock of the Company. The Company and the initial purchasers
(the "Initial Purchasers") of the Old Notes allocated in the purchase
agreement for the Old Notes a purchase price of $354.32 to each $1,000
principal amount at maturity of Old Notes. This allocation reflected their
judgment as to the relative values of the Old Notes and such Warrants at the
time of issuance, but is not binding on the Internal Revenue Service (the
"IRS").
The Company and the Initial Purchasers' allocation of the issue price of the
Units will be binding on holders of the Exchange Notes who acquire such Notes
in the Exchange Offer in exchange for Old Notes that were in turn acquired by
such holder directly from the Company, unless such a holder discloses the use
of a different allocation on its U.S. federal income tax return for the year
including the acquisition date of such Unit. If such a holder acquired a Unit
at a price different from that on which the Company's allocation is based,
such holder may be treated as having acquired its Old Notes for an amount
greater or less than the amount allocated to such Notes as set forth above
thereby resulting in "acquisition premium" or "market discount," as defined
below. Holders considering the use of an issue price allocation different from
that described above should consult their tax advisors as to the consequences
thereof.
The Old Notes will have OID in an amount equal to the excess of the stated
redemption price at maturity over the issue price of such Old Notes (as
discussed above) and the Exchange Notes that are acquired in exchange for such
Old Notes will have the same amount of OID. Under the OID Regulations, all
payments under a debt instrument, whether denominated as principal or
interest, are included in the stated redemption price at maturity unless they
are "qualified stated interest." The Old Notes do not, and therefore the
Exchange Notes will not, have "qualified stated interest" since the Notes do
not provide for the payment of any cash interest throughout their term. As a
consequence, the difference between the face amount of the Exchange Notes,
which is the only amount payable thereunder, and the issue price of the Old
Notes will constitute OID. Holders of Exchange Notes will generally be
required to include in gross income the OID in advance of the receipt of the
face amount of the Exchange Notes, which will be paid in full at maturity of
the Exchange Notes.
The amount of OID includible in income by a holder of Exchange Notes who
acquired such Notes in the Exchange Offer in exchange for Old Notes that were
in turn acquired by such holder directly from the Company is the sum of the
"daily portions" of OID with respect to such Exchange Notes for each day
during the taxable year or portion of the taxable year in which such holder
held such Exchange Notes ("accrued OID"). The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. The "accrual period" for Exchange Notes may
be of any length and may vary in length over the term of the Exchange Notes,
provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the
final day of an accrual period.
The amount of OID allocable to any accrual period is an amount equal to the
product of the adjusted issue price of the Exchange Notes at the beginning of
such accrual period and the "yield to maturity" of such Exchange Notes
(determined on the basis of compounding at the close of each accrual period
and properly adjusted for the length of the accrual period). OID allocable to
a final accrual period is the difference between the amount payable at
maturity and the adjusted issue price at the beginning of the final accrual
period. The "adjusted issue price" of an Exchange Note at the beginning of any
accrual period is equal to the issue price of
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the Old Note that was exchanged for such Exchange Note increased by the
accrued OID for all prior accrual periods (determined without regard to the
amortization of any acquisition premium, as described below) with respect to
such Exchange Note and any Old Note that was exchanged for such Exchange Note,
and reduced by any payments made on such Notes on or before the first day of
the accrual period. The yield to maturity is the discount rate that, when used
in computing the present value of all principal and interest payments to be
made under an Exchange Note, produces an amount equal to the issue price of
the Old Note that was exchanged
for such Exchange Note. The initial accrual period of a Note is the short
period beginning on the Issue Date and ending on the day before the first day
of the first full accrual period. The amount of OID attributable to such
initial accrual period may be computed under any reasonable method.
The Company is required to furnish certain information to the IRS, and will
furnish annually to record holders of Exchange Notes, information with respect
to OID accruing during the calendar year. The OID information will be based
upon the adjusted issue price of the Old Note that was exchanged for the
Exchange Note as if the holder were the original holder of the Old Note.
Holders who purchased Old Notes or who purchase Exchange Notes for an amount
other than the adjusted issue price and/or on a date other than the last day
of an accrual period will be required to determine for themselves the amount
of OID, if any, they are required to include in gross income for U.S. federal
income tax purposes.
IN GENERAL, HOLDERS WHO HOLD EXCHANGE NOTES WILL HAVE TO INCLUDE IN INCOME
INCREASINGLY GREATER AMOUNTS OF OID OVER THE LIFE OF THE EXCHANGE NOTES.
Market Discount, Acquisition Premium
If a holder purchases Exchange Notes or has purchased Old Notes for an
amount that is less than the adjusted issue price of such Exchange Notes, the
amount of the difference will be treated as "market discount" for U.S. federal
income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a holder will be required to
treat any principal payment on, or any amount received on the sale, exchange,
retirement or other disposition of, Exchange Notes as ordinary income to the
extent of any market discount which has not previously been included in income
and is treated as having accrued on such Exchange Notes or Old Notes that were
exchanged for such Exchange Notes, by the time of such payment or disposition.
If a holder makes a gift of an Exchange Note, accrued market discount, if any,
will be recognized as if such holder had sold such Exchange Note for a price
equal to its fair market value. In addition, the holder may be required to
defer, until the maturity of the Exchange Notes or their earlier disposition
in a taxable transaction, the deduction of a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such Exchange
Notes or Old Notes that were exchanged for such Exchange Notes.
Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the
Exchange Notes, unless the holder elects to accrue market discount under a
constant interest method. A holder of Exchange Notes may elect to include
market discount in income currently as it accrues (under either a straight-
line or constant interest method), in which case the rules described above
regarding the deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent
of the IRS.
A holder that purchases Exchange Notes for an amount that is greater than
the adjusted issue price of such Exchange Notes but equal to or less than the
sum of all amounts payable on such Exchange Notes after the purchase date will
be considered to have purchased such Exchange Notes at an "acquisition
premium." Under the acquisition premium rules, the amount of OID which such
holder must include in its gross income with respect to such Exchange Notes
for any taxable year will be reduced by the portion of such acquisition
premium properly allocable to such year.
Sale, Exchange and Retirement of Exchange Notes
A holder of Exchange Notes who acquired such Notes in the Exchange Offer in
exchange for Old Notes that were in turn acquired by such holder directly from
the Company will initially have a tax basis in Exchange
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Notes that is equal to the issue price of the Old Notes that were exchanged
for such Exchange Notes, as discussed above, increased by the OID or market
discount previously included in income by the holder with respect to such Old
Notes and Exchange Notes and reduced by any cash payments on such Notes other
than payments of qualified stated interest. Upon the sale, exchange,
retirement or other disposition of Exchange Notes, a holder will generally
recognize gain or loss equal to the difference between the amount realized
upon such sale, exchange, retirement or other disposition and the adjusted tax
basis of the Exchange Notes. Except with respect to market discount and
payments for
accrued interest not previously included in income, such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the
Exchange Notes have been held for more than one year (including for this
purpose the period of time such holders held the Old Notes that were exchanged
for such Exchange Notes). The deductibility of capital losses is subject to
limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to OID on the
Exchange Notes and to the proceeds of a disposition of an Exchange Note, other
than a disposition by certain exempt recipients (including, among others,
corporations). A 31% backup withholding tax will generally apply to any
"reportable payment" if, among other things, the holder fails to provide a
taxpayer identification number or certification of exempt status or fails to
report in full dividend and interest income and the payor is notified by the
IRS of such failure. A "reportable payment" includes, among other things, OID.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or credit against such holder's U.S. federal income tax liability,
provided the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
Exchange Notes. A non-United States Holder will not be subject to United
States federal income taxes on payment of principal, original issue discount
or interest on an Exchange Note pursuant to the so-called "portfolio interest
exemption" to the general tax withholding rules of the Code unless such non-
United States Holder is (i) a direct or indirect ten percent (10%) or greater
shareholder of the Company, (ii) a controlled foreign corporation, as that
term is defined in the Code, related to the Company or (iii) a bank receiving
interest described in Code Section 881(c)(3)(A). A non-United States Holder
who does not qualify for the portfolio interest exemption generally would be
subject to United States withholding tax at a flat rate of thirty percent
(30%), or a lower rate that may be permitted by application of a tax treaty,
on interest payments and payments (including redemption proceeds) attributable
to OID on the Exchange Notes.
To qualify for the portfolio exemption from taxation, the last United States
payor in the chain of payments to the non-United States Holder (the
"Withholding Agent") must have received in the year in which a payment of
principal, original issue discount or interest occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial
owner of the Exchange Note under penalties of perjury, (ii) certifies that
such owner is not a United States Holder and (iii) provides the name and
address of the beneficial owner. The statement may be made on an IRS Form W-8
or a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If an Exchange Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department has proposed certain
additional certification requirements that may be applicable if adopted in
their present form.
Generally, a non-United States Holder will not be subject to federal income
taxes on any amount which constitutes capital gain upon retirement or
disposition of an Exchange Note, provided the gain is not effectively
connected with the conduct of a trade or business in the United States by the
non-United States Holder. Certain other exceptions may be applicable and a
non-United States Holder should consult its own tax advisor as to these
matters.
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EMPLOYEE BENEFIT PLANS
Prior to acquiring an Exchange Note, a prospective holder who is a fiduciary
with respect to an "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), must
comply with the fiduciary responsibility requirements of ERISA, including the
prudency and diversification requirements, in making a decision to acquire an
Exchange Note. In addition, such plans, together with plans described in
Section 4975(e)(1) of the Code, must consider the prohibited transaction
provisions of ERISA and the Code and determine that the Company is not a
"disqualified person" (as defined in the Code) or a "party in interest" (as
defined in ERISA) with respect to such plan or that an exemption from the
prohibited transaction provisions of ERISA or the Code is available.
OLD NOTES REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration Rights
Agreement pursuant to which the Company agreed, for the benefit of the holders
of the Old Notes, that it would, at its own cost, (i) within 45 days after the
Issue Date, file a registration statement (the "Exchange Offer Registration
Statement") with the Commission with respect to the Exchange Offer for the
Exchange Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions), (ii) use its best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 90 days after the Issue Date, and (iii) use its best
efforts to consummate the Exchange Offer within 135 days after the Issue Date.
Upon the Exchange Offer Registration Statement being declared effective, the
Company shall offer the Exchange Notes in exchange for surrender of the Old
Notes. The Company shall keep the Exchange Offer open for not less than 20
business days (or longer if required by applicable law) after the date notice
of the Exchange Offer is mailed to the holders of the Old Notes. For each of
the Old Notes surrendered pursuant to the Exchange Offer, the holder who
surrendered such Old Note will receive an Exchange Note having a principal
amount equal to that of the surrendered Old Note.
In the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer, or if for
any other reason the Exchange Offer is not consummated within 135 days after
the Issue Date, or, under certain circumstances, if the Initial Purchasers
shall so request, the Company will, at its cost, (a) as promptly as
practicable, file a shelf registration statement covering resales of the Old
Notes (a "Shelf Registration Statement"), (b) use its best efforts to cause
such Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its best efforts to keep effective such Shelf
Registration Statement until the earlier of three years after the Issue Date
and such time as all of the applicable Old Notes have been sold thereunder.
The Company will, in the event of the filing of a Shelf Registration
Statement, notify each such holder when such Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Old Notes. A holder that sells its Old Notes
pursuant to a Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations).
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Although the Company intends to file the registration statement described
above, there can be no assurance that such registration statement will be
filed, or, if filed, that it will become effective. If the Company fails to
comply with the above provisions or if such registration statement fails to
become effective, then, as liquidated damages, additional interest
("Additional Interest") shall become payable with respect to the Old Notes as
follows:
(i) if the Exchange Offer Registration Statement or Shelf Registration
Statement is not filed within 45 days following the Issue Date, Additional
Interest shall accrue on the Old Notes over and above the stated interest
at a rate of 0.50% per annum for the first 90 days commencing on the
46th day after the Issue Date, such Additional Interest shall increase by
an additional 0.50% per annum at the beginning of each subsequent 90-day
period;
(ii) if the Exchange Offer Registration Statement or Shelf Registration
Statement is not declared effective within 90 days following the Issue
Date, Additional Interest shall accrue on the Old Notes over and above the
stated interest at a rate of 0.50% per annum for the first 90 days
commencing on the 91st day after the Issue Date, such Additional Interest
shall increase by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(iii) If (A) the Company has not exchanged all Old Notes validly tendered
in accordance with the terms of the Exchange Offer on or prior to 135 days
after the Issue Date or (B) the Exchange Offer Registration Statement
ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (C) if applicable, the Shelf Registration Statement
has been declared effective and such Shelf Registration Statement ceases to
be effective at any time prior to the third anniversary of the Issue Date
(unless all the Old Notes have been sold thereunder), then Additional
Interest shall accrue on the Old Notes over and above the stated interest
at a rate of 0.50% per annum for the first 90 days commencing on (x) the
day 136 days after the Issue Date with respect to the Old Notes validly
tendered and not exchanged by the Company, in the case of (A) above, or (y)
the day the Exchange Offer Registration Statement ceases to be effective or
usable for its intended purpose in the case of (B) above, or (z) the day
such Shelf Registration Statement ceases to be effective in the case of (C)
above, such Additional Interest shall increase by an additional 0.50% per
annum at the beginning of each subsequent 90-day period; provided, however,
that the Additional Interest on the Old Notes may not exceed 2.0% per annum
in the aggregate; and provided, further that (1) upon the filing of the
Exchange Offer Registration Statement or Shelf Registration Statement (in
the case of clause (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or Shelf Registration Statement (in the case
of (ii) above), or (3) upon the exchange of Exchange Notes for all Old
Notes tendered (in the case of clause (iii)(A) above), or upon the
effectiveness of the Exchange Offer Registration Statement which had ceased
to remain effective in the case of clause (iii)(B) above, or upon the
effectiveness of the Shelf Registration Statement which had ceased to
remain effective (in the case of clause (iii)(C) above), Additional
Interest on the Old Notes as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on February 15 and August 15 of each
year, commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of the Additional Interest will be
determined by multiplying the applicable rate of Additional Interest by the
principal amount of the Old Notes multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable
during such period (determined on the basis of a 360-day year comprised of
twelve 30-day months), and the denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which will be available upon request to the Company.
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OLD NOTES TRANSFER RESTRICTIONS
Because the following restrictions will apply to any Old Notes held by
holders who do not participate in the Exchange Offer, holders of Old Notes are
advised to consult legal counsel prior to making any offer, resale, pledge or
transfer of any of the Old Notes.
None of the Old Notes have been registered under the Securities Act and they
may not be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. Accordingly, the Old Notes were offered and sold only (A) to a limited
number of "qualified institutional buyers" (as defined in Rule 144A) ("QIBs")
in compliance with Rule 144A, (B) to a limited number of other institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) ("Accredited Investors") that, prior to
their purchase of any Old Notes, deliver to the Initial Purchasers a letter
containing certain representations and agreements, and (C) to non-U.S. persons
(which term shall include dealers or other professional fiduciaries in the
United States acting on a discretionary basis for foreign beneficial owners
(other than an estate or trust) outside the United States in an offshore
transaction in reliance upon Regulation S under the Securities Act
("Regulation S"). As used herein, the terms "United States," "U.S. person" and
"offshore transaction" have the meanings given to them in Regulation S under
the Securities Act.
Each purchaser of Old Notes has been deemed to have represented and agreed
as follows:
1. It purchased the Old Notes for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is (A) a QIB, and is aware that the sale to it is being
made in reliance on Rule 144A, (B) an Accredited Investor, or (C) a non-
U.S. Person that is outside the United States, and is aware that the sale
to it is being made in reliance on Regulation S under the Securities Act.
2. It understood and acknowledged that none of the Old Notes have been
registered under the Securities Act or any other applicable securities
laws, and may not be sold except as set forth in paragraph (3) below.
3. It agreed not to resell or otherwise transfer any of such Old Notes
within three years after the later of the original issue date of the Old
Notes or the last date on which the Company or any affiliate (within the
meaning of Rule 144 under the Securities Act) of the Company was the owner
of such Old Notes (or any predecessor thereto) except (A) to the Company or
any of its subsidiaries, (B) for so long as such security is eligible for
resale pursuant to Rule 144A, to a QIB in compliance with Rule 144A, (C) to
non-U.S. persons outside the United States in an offshore transaction in
accordance with Regulation S, (D) to an institutional Accredited Investor
that, prior to such transfer, furnishes (or has furnished on its behalf by
a U.S. broker-dealer) to the Trustee for the Old Notes, a signed letter
certifying to the Company and the Trustee that such transferee is an
institutional Accredited Investor and is acquiring the Old Notes for
investment purposes and not for distribution, (E) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act or (F)
pursuant to an effective registration statement under the Securities Act.
Each purchaser acknowledged that the Company and the Trustee reserved the
right prior to any proposed resale of the Old Notes to require delivery of
an opinion of counsel, certification and/or information satisfactory to the
Company and the Trustee.
4. It agreed that it will give to each person to whom it transfer the Old
Notes notice of any restrictions on transfer of such securities.
5. It understood that the Old Notes will bear a legend substantially to
the following effect unless otherwise agreed by the Company and the holder
thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF,
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THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2), (3), OR (7) UNDER
THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
THE COMPANY WAS THE OWNER OF SUCH SECURITY (OR ANY PREDECESSOR THERETO) (THE
"RESALE RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG
AS SUCH SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A, (C) TO NON-U.S. PERSONS OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (D) TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE
CERTIFYING TO THE COMPANY AND SUCH TRUSTEE THAT SUCH TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR AND IS ACQUIRING SUCH SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS SECURITY PRIOR TO THE RESALE RESTRICTION TERMINATION
DATE, THE HOLDER SHALL, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS ANY OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
6. It shall not sell or otherwise transfer such Old Notes to, and each
purchaser represented and covenanted that it was not acquiring such
securities for or on behalf of, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), except that such a purchase for or on behalf of a
pension or welfare plan shall be permitted:
a. to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which, at any
time while the Old Notes are held by the purchaser, no plan (together
with any other plans maintained by the same employer or employee or
organization) has an interest in excess of 10% of the total assets in
such collective investment fund and the conditions of Section III of
Prohibited Transaction Class Exemption 91-38 issued by the Department
of Labor are satisfied;
b. to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser
in which, at any time while the Old Notes are held by the purchaser, no
plan (together with any other plans maintained by the same employer or
employee organization) has an interest in excess of 10% of the total of
all assets in such pooled separate account and the conditions of
Section III or Prohibited Transaction Class Exemption 90-1 issued by
the Department of Labor are satisfied;
c. to the extent such purchase is made on behalf of a plan by (i) an
investment adviser registered under the Investment Advisers Act of 1940
that had as of the last day of its most recent fiscal year
141
<PAGE>
total assets under its management and control in excess of $50.0
million and had stockholders' or partners' equity in excess of
$750,000, as shown in its most recent balance sheet prepared in
accordance with generally accepted accounting principles, (ii) a bank
as defined in Section 202(a)(2) of the Investment Advisers Act of 1940
with equity capital in excess of $1.0 million as of the last day of its
most recent fiscal year, (iii) an insurance company which is qualified
under the laws of more than one state to manage, acquire or dispose of
any assets of a plan, which insurance company has, as of the last day
of its most recent fiscal year, net worth in excess of $1.0 million and
which is subject to supervision and examination by a state authority
having supervision over insurance companies, or (iv) a savings and loan
association, the accounts of which are insured by the Federal Savings
and Loan Insurance Corporation, that has made application for and been
granted trust powers to manage, acquire or dispose of assets of a plan
by a State or Federal authority having supervision over savings and
loan associations, which savings and loan association has, as of the
last day of its most recent fiscal year, equity capital or net worth in
excess of $1.0 million and, in any case, such investment adviser, bank,
insurance company or savings and loan is otherwise a qualified
professional asset manager, as such term is used in Prohibited
Transaction Exception 84-14 issued by the Department of Labor, and the
assets of such plan when combined with the assets of other plans
established or maintained by the same employer (or affiliate thereof)
or employee organization and managed by such investment adviser, bank,
insurance company or savings and loan do not represent more than 20% of
the total client assets managed by such investment adviser, bank,
insurance company or savings and loan and the conditions of Section I
of such exemption are otherwise satisfied; or
d. to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA) which is not subject to the provisions of Title I
or ERISA or Section 4975 of the Internal Revenue Code.
7. It acknowledged that the Trustee will not be required to accept for
registration of transfer any Old Notes acquired by it, except upon
presentation of evidence satisfactory to the Company and the Trustee that
the restrictions set forth herein have been complied with.
8. It acknowledged that the Company and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and
agreements and agrees that if any of the acknowledgments, representations
or agreements deemed to have been made by its purchase of the Old Notes are
no longer accurate, it shall promptly notify the Company. If it is acquired
the Old Notes as a fiduciary or agent for one or more investor accounts, it
represented that it had sole investment discretion with respect to each
such account and it had full power to make the foregoing acknowledgments,
representations, and agreements on behalf of each account.
PLAN OF DISTRIBUTION
Under existing Commission interpretations, the Exchange Notes would be
freely transferable by holders thereof other than affiliates of the Company
after the Exchange Offer without further registration under the Securities Act
if the holder of the Exchange Notes represents that it is acquiring the
Exchange Notes in the ordinary course of business, that it has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Notes and that it is not an affiliate of the Company, as such terms
are interpreted by the Commission; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange
Offer will have a prospectus delivery requirement with respect to resales of
such Exchange Notes. The Commission has taken the position that the
Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Old Notes) with the prospectus
contained in the Exchange Offer Registration Statement. The Company has agreed
for a period of 180 days after the consummation of the Exchange Offer to make
available a prospectus meeting requirements of the Securities Act to
Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements, that requests such documents in the Letter
of Transmittal, for use in connection with any resale of such Exchange Notes.
142
<PAGE>
Each holder who wishes to exchange its Old Notes for Exchange Notes in the
Exchange Offer will be required to represent that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and
that at the time of the commencement of the Exchange Offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Old
Notes and that it is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company or, if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities
Act to the extent practicable
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of
the applicable Exchange Notes. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making, activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Exchange Notes.
Any broker-dealer that resells Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concession of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in
the Registration Rights Agreement.
BOOK-ENTRY; DELIVERY AND FORM
The Old Notes were issued in the form of a single global note that was
deposited with or on behalf of The Depository Trust Company, New York, New
York, as depositary ("DTC"), and registered in the name of a nominee of DTC.
Except as set forth below, the Exchange Notes exchanged for Old Notes
represented by the global note will be issued in the form of a single global
Exchange Note (the "Global Note") that will be deposited with DTC and
registered in the name of a nominee of DTC.
Old Notes transferred to "foreign purchasers" or Accredited Investors who
are not qualified institutional buyers (in each case, as defined in "Old Notes
Transfer Restrictions") (collectively referred to herein as the "Non-Global
Purchasers") will be issued certificated notes in registered form registered
in the name of DTC or its nominee and deposited with or on behalf of DTC. Any
Exchange Notes issued in exchange for Old Notes held by Non-Global Purchasers
will be issued certificated notes in registered forms ("Certificated Notes")
registered in the name of DTC or its nominees and deposited with or on behalf
of DTC. Upon the transfer to a qualified institutional buyer of any
Certificated Notes initially issued to a Non-Global Purchaser, such
Certificated Notes will, unless the transferee requests otherwise or an
interest in the Global Note has previously been exchanged in whole for
Certificated Notes, be exchanged for an interest in the Global Note.
143
<PAGE>
The Global Note. The Company expects that pursuant to procedures established
by DTC (i) upon deposit of the Global Unit, DTC will credit the accounts of
persons who have accounts with DTC ("participants") or persons who hold
interests through participants designated by the Initial Purchasers with
portions of the Global Unit which shall be comprised of the corresponding
respective principal amount of the Global Note and (ii) ownership of the
Exchange Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants). Qualified institutional buyers
may hold their interests in the Global Note directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee will be considered the sole owner or
holder of the Exchange Notes represented by the Global Note for all purposes
under the Indenture. No beneficial owner of an interest in the Global Note
will be able to transfer such interest except in accordance with DTC's
applicable procedures, in addition to those provided for under the Indenture.
Payments of the principal of, and premium, if any, on, the Global Note will
be made to DTC or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee nor any Paying Agent (as defined)
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, and premium, if any, on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note,
as shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in any such Global
Note held through such participants will be governed by standing instructions
and customary practice, as is now the case with securities held for the
accounts of customers registered to the names of nominees for such customers.
Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of a
Certificated Note for any reason, including to sell Exchange Notes to persons
in jurisdictions which require physical delivery of such securities or to
pledge such securities, such holder must transfer its interest in the Global
Note in accordance with the normal procedures of DTC and including the
procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account interests in the applicable Global Note is
credited and only in respect of such portion of the Global Note, as to which
such participant or participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform such procedures, and such
144
<PAGE>
procedures may be discontinued at any time. None of the Company or the Trustee
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue as
a depositary for any Global Note and a successor depositary is not appointed
by the Company within 90 days, Certificated Notes will be issued in exchange
for the Global Note.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1994 and
1995 and the related consolidated statements of operations, of stockholders'
equity (deficit) and cash flows for each of the three years in the period
ended December 31, 1995 included herein have been audited by KPMG Peat Marwick
LLP, independent accountants, as stated in their report appearing herein,
which report indicates a reliance on other auditors relative to certain
amounts relating to the Company's investment in PT Rajasa Hazanah Perkasa
("RHP") as of and for the year ended December 31, 1995, and have been included
herein in reliance upon the authority of said firm as experts in accounting
and auditing. The balance sheet of RHP as of December 31, 1995 and the related
statements of income, deficit and cash flows for the year then ended included
herein have been audited by Prasetio, Utomo & Co., independent accountants, as
stated in their report appearing herein, and have been included herein in
reliance upon the authority of said firm as experts in accounting and
auditing. The consolidated balance sheets of STW as of December 31, 1994 and
1995 and the related consolidated profit and loss accounts, statements of
shareholders equity and cash flows for the three years ended December 31, 1995
included herein have been audited by KPMG Peat Marwick, independent
accountants, as stated in their report appearing herein, and have been
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Palo Alto,
California. A partner of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP owns 6,720 shares of Preferred Stock and warrants to purchase
80 shares of Preferred Stock.
145
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
International Wireless Communications Holdings, Inc. and Subsidiary
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995............ F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994, and 1995................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1993, 1994 and 1995................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994, and 1995................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Interim Consolidated Condensed Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996... F-25
Consolidated Statements of Operations for the six months ended June 30,
1995 and 1996.......................................................... F-26
Consolidated Condensed Statements of Cash Flows for the six months ended
June 30, 1995 and 1996................................................. F-27
Notes to Consolidated Condensed Financial Statements.................... F-28
Financial Statements of Significant 50% or less Owned Affiliates
PT Rajasa Hazanah Perkasa for the year ended December 31, 1995.......... F-33
Syarikat Telefon Wireless (M) SDN BHD and its Subsidiary as of and for
the three years ended December 31, 1995................................ F-57
</TABLE>
International Wireless Communications Holdings, Inc. (IWC Holdings) is a
holding company which conducts all of its operations though its sole direct
subsidiary, International Wireless Communications, Inc. and subsidiaries (IWC)
and has no assets, liabilities or operations other than its investment in IWC
as of December 31, 1994 and 1995 and June 30, 1996. Separate consolidated
financial statements of IWC would be substantially the same as the
consolidated financial statements of IWC Holdings and, although required by
Regulation S-X, are not included since management believes that presentation
of such financial statements would not be meaningful to investors.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
International Wireless Communications Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of
International Wireless Communications Holdings, Inc. and subsidiary (IWC
Holdings) as of December 31, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of IWC Holdings'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of PT Rajasa Hazanah Perkasa (RHP), an investment which is
reflected in the accompanying consolidated financial statements using the
equity method of accounting as of and for the year ended December 31, 1995
(see Note 3). The investment in this company represents 25% of consolidated
assets as of December 31, 1995. The equity in its net loss was approximately
$1,310,000 for the year ended December 31, 1995. Those statements were audited
by other auditors whose report has been furnished to us and our opinion,
insofar as it relates to the amounts included for that company, is based on
the report of other auditors.
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.
In our opinion, based on our audit and the report of other auditors for
1995, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of IWC Holdings as of
December 31, 1994 and 1995, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1995,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
July 12, 1996,
except for Note 1, as to
which the date is August 8, 1996
F-2
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1994 1995
ASSETS --------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 10,298 25,398
Notes receivable from affiliates.................... 2,245 338
Advance to affiliate................................ -- 728
Other current assets................................ 37 387
--------- ---------
Total current assets.............................. 12,580 26,851
Property and equipment, net........................... 88 4,269
Investments in affiliates............................. 5,427 52,280
Telecommunication licenses, net....................... -- 12,106
Other assets.......................................... 329 137
--------- ---------
Total assets...................................... $ 18,424 95,643
========= =========
<CAPTION>
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses............... $ 200 5,757
Notes payable to related party...................... 1,800 1,800
Note payable........................................ -- 4,000
--------- ---------
Total current liabilities......................... 2,000 11,557
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock, $.01 par value
per share; 21,541,480 shares designated; 5,222,080
and 15,698,400 shares issued and outstanding in 1994
and 1995, respectively; net of note receivable from
stockholder of $26 in 1994 and 1995; liquidation and
minimum redemption value of $105,509 as of
December 31, 1995.................................... 19,446 98,254
Stockholders' deficit:
Convertible preferred stock, $.01 par value per
share; 1,200,000 shares designated, issued, and
outstanding in 1994 and 1995; liquidation
preference of $1,020 as of December 31, 1995....... 12 12
Common stock, $.01 par value per share; 26,000,000
shares authorized; 76,080 and 328,000 shares issued
and outstanding in 1994 and 1995, respectively 1 3
Additional paid-in capital.......................... 625 748
Note receivable from stockholder.................... (152) (152)
Accumulated deficit................................. (3,508) (14,779)
--------- ---------
Total stockholders' deficit....................... (3,022) (14,168)
--------- ---------
Total liabilities, redeemable convertible
preferred stock and stockholders' deficit........ $ 18,424 95,643
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Operating revenue................................ $ -- -- --
Operating expenses:
General and administrative expenses............ 809 2,481 6,365
Equity in losses of affiliates................. -- -- 3,756
-------- -------- --------
Loss from operations......................... (809) (2,481) (10,121)
Other income (expense):
Interest income................................ 2 106 232
Interest expense............................... (33) (115) (1,354)
Other.......................................... (1) (13) (28)
-------- -------- --------
Net loss..................................... $ (841) (2,503) (11,271)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
------------------ ------------------
NOTE TOTAL
ADDITIONAL RECEIVABLE STOCKHOLDERS'
PAID-IN FROM ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER DEFICIT (DEFICIT)
---------- ------ ---------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of December
31, 1992............... 271,960 $ 3 1,200,000 $12 $ 635 $ -- $ (164) $ 486
Exercise of warrant..... 108,760 -- -- -- -- -- -- --
Conversion of notes
payable to Series A
preferred stock........ 108,800 1 -- -- 99 -- -- 100
Issuance of Series A
preferred stock........ 739,720 7 -- -- 673 -- -- 680
Net loss................ -- -- -- -- -- -- (841) (841)
---------- --- ---------- --- ------ ----- -------- --------
Balances as of December
31, 1993............... 1,229,240 11 1,200,000 12 1,407 -- (1,005) 425
Conversion of Series A
preferred stock to
Series B redeemable
preferred stock........ (1,229,240) (11) -- -- (933) -- -- (944)
Conversion of common
stock to Series A
preferred stock........ 1,200,000 12 (1,200,000) (12) -- -- -- --
Issuance of common
stock.................. -- -- 76,080 1 151 (152) -- --
Net loss................ -- -- -- -- -- -- (2,503) (2,503)
---------- --- ---------- --- ------ ----- -------- --------
Balances as of December
31, 1994............... 1,200,000 12 76,080 1 625 (152) (3,508) (3,022)
Issuance of common
stock.................. -- -- 251,920 2 123 -- -- 125
Net loss................ -- -- -- -- -- -- (11,271) (11,271)
---------- --- ---------- --- ------ ----- -------- --------
Balances as of December
31, 1995............... 1,200,000 $12 328,000 $ 3 $ 748 $(152) $(14,779) $(14,168)
========== === ========== === ====== ===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $ (841) (2,503) (11,271)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation.................................. 3 15 37
Amortization.................................. 40 40 294
Equity in losses of affiliates................ -- -- 3,756
Changes in operating assets and liabilities:
Other current assets......................... (42) 5 (350)
Accounts payable and accrued expenses........ 155 45 5,557
-------- -------- --------
Net cash used in operating activities....... (685) (2,398) (1,977)
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment............ (8) (88) (4,218)
Notes receivable from affiliates............... -- (2,245) (113)
Advances to affiliate.......................... -- -- (728)
Investments in affiliates...................... (1,401) (3,704) (19,589)
Telecommunication licenses..................... -- -- (12,153)
Other assets................................... (40) (169) 70
-------- -------- --------
Net cash used in investing activities....... (1,449) (6,206) (36,731)
-------- -------- --------
Cash flows from financing activities:
Loan proceeds.................................. 2,160 5,180 28,138
Repayment of principal......................... (50) (2,060) (2,050)
Net proceeds from issuance of stock and
warrant....................................... 680 15,122 27,720
-------- -------- --------
Net cash provided by financing activities... 2,790 18,242 53,808
-------- -------- --------
Net increase in cash and cash equivalents........ 656 9,638 15,100
Cash and cash equivalents at beginning of year... 4 660 10,298
-------- -------- --------
Cash and cash equivalents at end of year......... $ 660 10,298 25,398
======== ======== ========
Supplemental cash flow information:
Cash paid for interest......................... $ 16 103 949
======== ======== ========
Noncash financing and investing activities:
Conversion of loans to equity.................. $ 100 3,380 24,307
======== ======== ========
Conversion of note receivable to investment in
affiliate..................................... $ -- -- 2,020
======== ======== ========
Note receivable from sale of stock............. $ -- 178 --
======== ======== ========
Exchange of preferred stock for investment in
affiliates.................................... $ -- -- 25,000
======== ======== ========
Exchange of common stock for investment in
CTP........................................... $ -- -- 125
======== ======== ========
Note payable in connection with RHP
investment.................................... $ -- -- 4,000
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
International Wireless Communications, Inc. and subsidiaries (IWC or the
Company) was incorporated in Delaware in 1992. The Company develops, owns,
and operates wireless communications companies in emerging markets
throughout Asia and Latin America. These local wireless businesses (LWBs)
provide a variety of communications services. Together with local and
strategic partners, the Company has interests in Brazil, India, Indonesia,
Malaysia, Mexico, New Zealand, Pakistan, Peru, and the Philippines.
In prior years, the Company was considered a development stage enterprise.
During 1995, the Company's interests in Malaysia, Indonesia, New Zealand,
and Mexico commenced operations. Entities in which the Company has
ownership interests and have commenced operations are referred to as
"operating entities." As such, the Company's management has ceased to
report the operations as a development stage enterprise.
International Wireless Communications Holdings, Inc. ("IWC Holdings") was
incorporated in Delaware in July 1996 as a holding company whose primary
asset is the capital stock of IWC. Subsequent to the formation of IWC
Holdings, the Company completed a reorganization in which each share of the
then outstanding capital stock of IWC, which became a wholly owned
subsidiary of IWC Holdings, was converted into 40 shares of the
corresponding class and series of capital stock of IWC Holdings. IWC
Holdings assumed and became the successor to the agreements of IWC relating
to capital stock. All data related to shares and per share amounts for all
periods presented have been adjusted to reflect the effect of the
reorganization and the stock conversion.
Consistent with industry practice, the Company considers itself to be
operating in one business segment.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
International Wireless Communications, Inc. and its wholly owned
subsidiary, Servicos de Radio Comunicacoes Ltda. (SRC) located in Brazil.
In addition, the accompanying consolidated financial statements include the
accounts of two majority owned subsidiaries, M/S Mobilcom (Pte) Ltd.
(Mobilcom) located in Pakistan, and PeruTel S.A. (PeruTel) located in Peru.
All significant intercompany accounts and transactions have been eliminated
in consolidation. Minority interests are not reflected in the accompanying
consolidated financial statements as they are immaterial.
Foreign Currency Translation
The functional currency for the Company's foreign operating entities is the
applicable local currency, except for those located in highly inflationary
countries. Translation from the applicable foreign currencies to U.S.
dollars is performed for monetary assets and liabilities using current
exchange rates in effect at the balance sheet date and for revenue and
expense accounts using a weighted average exchange rate during the period.
The gains or losses, net of applicable deferred income taxes, resulting
from such translation, if material, are included in stockholders' equity.
Gains or losses resulting from foreign currency transactions are included
in other income. The functional currency of the Company's non-operating
foreign investees is the U.S. dollar.
F-7
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of 90
days or less at the time of acquisition to be cash equivalents. Cash
equivalents as of December 31, 1995 consisted of money market mutual funds.
For all such investments, cost approximates fair market value.
Property and Equipment
Property and equipment are stated at original cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the respective assets, generally three to five years for domestic assets
and three to twenty years for foreign assets.
Investments in Affiliated Companies
Investments in affiliated companies consist of the costs incurred to
acquire development stage projects or interests in entities that have been
awarded telecommunication licenses to provide various wireless services.
The cost method of accounting is used for the Company's investments in
affiliated companies where the Company's voting interest is less than 20%
and the Company does not exert significant influence. Under the cost
method, the investment is recorded at cost, and income is recognized only
to the extent distributed by the investee as dividends. No such dividends
were declared or distributed for the years ended December 31, 1994 and
1995. Write-downs to the recorded historical cost are recognized when the
Company believes that an impairment in value has occurred.
Where the Company's voting interest is 20% to 50% and the Company does not
exercise control, the equity method of accounting is used. Under this
method, the investment, originally recorded at cost, is adjusted to
recognize the Company's share of net earnings or losses of the investee,
limited, in the case of losses, to the extent of the Company's investment
therein. The amount of the purchase price that exceeded the Company's
percentage of ownership of the LWB's net book value at the date of the
acquisition is separately attributed to the value of the underlying LWB's
operating telecommunication license. Such telecommunication licenses are
amortized over 20 years commencing upon the completion of the acquisition
with such amortization included as a component of equity in losses of
affiliates.
The Company consolidates entities it controls, generally through greater
than 50% ownership interest.
Telecommunication Licenses of Majority Owned Subsidiaries
The Company has acquired majority ownership interest in various LWBs. These
acquisitions have been accounted for under the purchase method and are
included in the accompanying consolidated financial statements. The amount
of the purchase price that exceeded the Company's percentage ownership of
the LWB's net book value at the date of the acquisition is separately
attributed to be the value of the underlying LWB's operating
telecommunication license. Licenses are amortized over 20 years, commencing
upon the completion of the acquisition. Amortization expense of $47,000 was
recorded in 1995. No amortization was recorded in 1993 or 1994.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
F-8
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from these estimates.
Business and Credit Concentrations and Risk Factors
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist of cash and cash equivalents. The
Company's investments are comprised of investment grade short-term debt
instruments. Management believes that the financial risks associated with
such deposits are minimal.
Included in the Company's consolidated balance sheet as of December 31,
1994 and 1995, are long-term investments in various LWBs in such developing
countries as Malaysia, Indonesia, Brazil, Pakistan and Mexico (see Note 8).
These investments make up a significant portion of IWC's balance sheet (see
Note 3).
Each IWC affiliate has a unique and distinct market, operating environment,
and local economy with different subscription rates and costs to build and
operate the systems. Achieving each operating plan is dependent upon
successfully contending not only with normal risks associated with
constructing and operating wireless properties, but also risks unique to
operating in foreign countries, such as regulatory compliance, contractual
restrictions, labor laws, expropriation, nationalization, political,
economic or social instability, and confiscatory taxation.
The Company anticipates that it will often have a minority interest in
operating companies, in part because applicable laws often limit foreign
investors to minority equity positions. As such, the Company may be unable
to access the cash flow, if any, of its operating companies. Additionally,
the Company's ability to sell or transfer its ownership interest in its
operating companies is generally subject to limitations based on agreements
with its strategic and financial partners, as well as provisions in local
operating licenses and local government regulations that may prohibit or
restrict the transfer of the Company's ownership interest in such operating
companies.
The Company's ability to retain and exploit its existing telecommunication
licenses, and to obtain new licenses in the future, is essential to the
Company's operations. However, these licenses are typically granted by
governmental agencies in developing countries, and there can be no
assurance that these governmental agencies will not seek to unilaterally
limit, revoke, or otherwise adversely modify the terms of these licenses in
the future, any of which could have a material adverse effect on the
Company, and the Company may have limited or no legal recourse if any of
these events were to occur. In addition, licenses typically require renewal
from time to time and there can be no assurance that renewals to these
licenses will be granted.
Most of the LWBs currently operating have incurred operating losses and
negative cash flow from operations since inception, and the Company expects
that most of its operating companies will continue to generate operating
losses and negative cash flow from operations for the foreseeable future.
Most of these operating companies have only recently initiated providing
commercial services and have a limited subscriber base. This is not
uncommon in the wireless communications industry, which requires
significant capital investments in the initial years prior to obtaining a
sufficient subscriber revenue base to support
F-9
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
operations. Achievement of positive cash flow from operations will depend
on successful execution of management's business plans. Those plans assume
significant additional capital investment, in some cases, to expand the
wireless network. There can be no assurance that such funding capacity will
be available in the future.
Nonoperating risks include substantial use of borrowings by unconsolidated
investee companies to leverage equity capital employed and risks with
respect to foreign currency exchange rates.
Recoverability of Long-Lived Assets
The recoverability of property and equipment, investments in equity and
cost investee companies is dependent upon the successful build-out of
system infrastructure, obtaining additional licenses by investee companies,
and successful development of systems in each of the respective markets in
which the Company's investees operate or through the sale of such assets.
The Company's policy is to assess annually any impairment in value based
upon a comparison of projected operating cash flows from each of the
underlying investee companies over their expected period of operation, on
an undiscounted basis, to the carrying amount of the related assets.
Fair Value of Financial Instruments
The carrying value of the Company's cash and cash equivalents, notes
receivable from and advance to affiliates, accounts payable and accrued
expenses, notes payable to related party and note payable approximates the
fair market value due to the relatively short maturity of these
instruments.
Acquisition, Transaction, and Development Costs
The Company expenses direct and incremental costs incurred relative to
pursuing potential investments due to the relative uncertainty of the
future realization of such costs principally due to the nature of early
stage development projects in foreign countries.
Reclassifications
Certain amounts in the accompanying 1993 and 1994 consolidated financial
statements have been reclassified to conform with the 1995 consolidated
financial statement presentation.
Recent Accounting Pronouncements
The Financial Accounting Standards Board recently adopted SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. This statement requires long-lived assets to be
evaluated for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. The
Company adopted SFAS No. 121 in fiscal 1995. The adoption of SFAS No. 121
did not have a material effect on the Company's results of operations.
The Financial Accounting Standards Board recently adopted SFAS No. 123,
Accounting for Stock-Based Compensation. This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans, including stock option/stock issuance plans. The
Company will adopt SFAS No. 123 in fiscal 1996. Management plans to
continue conforming to APB No. 25, Accounting for Stock Issued to
Employees, for purposes of measurement of compensation expense. Therefore,
adoption of SFAS No. 123 is not expected to have a material effect on the
Company's results of operations in the year of adoption.
F-10
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) BALANCE SHEET COMPONENTS
Balance sheet components as of December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Property and equipment
Furniture and fixtures..................................... $ 36 40
Equipment.................................................. 71 126
Automobiles................................................ -- 34
Construction in process.................................... -- 4,125
------ ------
107 4,325
Less accumulated amortization.............................. 19 56
------ ------
Property and equipment, net.............................. $ 88 4,269
====== ======
Telecommunication licenses
SRC........................................................ $ -- 6,714
Mobilcom................................................... -- 5,439
------ ------
-- 12,153
Less accumulated amortization.............................. -- 47
------ ------
Telecommunication licenses, net.......................... $ -- 12,106
====== ======
Accounts payable and accrued expenses
Professional services...................................... $ -- 3,041
Employee compensation and benefits......................... 89 189
Interest................................................... 30 256
Equipment purchases........................................ -- 1,719
Accounts payable and other................................. 81 552
------ ------
$ 200 5,757
====== ======
</TABLE>
F-11
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) INVESTMENTS IN AFFILIATES
The Company's investments in affiliates represent interests in various LWBs
in several developing countries. These investments are accounted for under
the equity or cost methods.
Equity Investments
For those investments in companies in which the Company's voting interest
is 20% to 50%, or for investments in companies in which the Company exerts
significant influence through board representation and management
authority, the equity method of accounting is used. Under this method, the
investment, originally recorded at cost, is adjusted to recognize the
Company's share of losses of affiliates, limited to the extent of the
Company's investment in and advances to affiliates, including any debt
guarantees or other contractual funding commitments. All affiliated
companies have fiscal years ended December 31. Investments in affiliated
companies are as follows as of December 31, 1994 and 1995 (dollars in
thousands):
<TABLE>
<CAPTION>
PORTION OF
INVESTMENT
EXCEEDING
COMPANY'S
SHARE OF THE
PERCENTAGE INVESTMENTS UNDERLYING
AFFILIATED OF IN AFFILIATED HISTORICAL
COUNTRY COMPANY OWNERSHIP COMPANIES(2) NET ASSETS
------- ---------- -------------- ------------- -------------
1994 1995 1994 1995 1994 1995
----- ---- ------ ------ ------ ------
<C> <S> <C> <C> <C> <C> <C> <C>
Syarikat Telefon
Malaysia Wireless (STW).......... 2%(1) 30% $1,400 20,879 $1,311 17,459
PT Rajasa Hazanah
Indonesia Perkasa (RHP)........... -- 25% -- 24,539 -- 23,680
TeamTalk Limited
New Zealand (TeamTalk).............. 25% 50% 284 2,345 -- 1,712
India HFCL Mobile Radio
Limited (HFCL)......... -- 49% -- 243 -- 243
PT Binamulti Visualindo
Indonesia (PTBV).................. -- 49% -- 206 -- 206
------ ------ ------ ------
1,684 48,212 1,311 43,300
Less accumulated amortization.............. -- 966 -- 966
------ ------ ------ ------
$1,684 47,246 $1,311 42,334
====== ====== ====== ======
</TABLE>
--------
(1)In 1994 this investment was accounted for under the cost method.
(2)Adjusted for the Company's share of equity in losses of affiliated
companies.
The Company acquired its interest in RHP, HFCL, and PTBV during 1995 and
accounted for them using the purchase method (see Note 4). The following
condensed financial statement data, presented in accordance with U.S.
generally accepted accounting principles and stated in U.S. dollars, has
been derived from audited and unaudited financial statements. The financial
information pertaining to RHP was derived from financial statements audited
by other auditors. Both HFCL and PTBV are nonoperating entities with
insignificant operations as of December 31, 1995, and as such, selected
financial information is not included. For the year ended December 31,
1993, no significant operations existed for any equity investment.
F-12
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Financial information for affiliated companies accounted for by the equity
method is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1994
---------------------------------
STW RHP TEAMTALK
-------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets.............. $ 1,506 -- 24
Noncurrent assets........... 11,374 -- 239
Current liabilities......... 878 -- 100
Noncurrent liabilities...... 7,565 -- --
Net revenues................ 83 -- --
Net loss.................... (1,746) -- --
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1995
---------------------------------
STW RHP(A) TEAMTALK(B)
-------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets.............. $ 2,576 5,156 167
Noncurrent assets........... 32,128 12,014 6,311
Current liabilities......... 2,948 13,920 3,890
Noncurrent liabilities...... 21,636 59 1,493
Net revenues................ 749 7,284 300
Net loss.................... (5,898) (3,280) (1,133)
--------
(A)For the period March 28, 1995 through December 31, 1995
(B)For the period May 18, 1995 through December 31, 1995
Cost Investments
The Company uses the cost method of accounting for three other investments.
They are Corporacion Mobilcom, S.A. de C.V. (Mobilcom Mexico), PT Mobilkom
Telekomindo (Mobilkom), and Universal Telecommunications Service, Inc.
(UTS). The Company's ownership percentage is 2.47%, 15% and 19%,
respectively. Both Mobilcom Mexico and Mobilkom are operating entities.
UTS, owned directly, and indirectly through Mobilcom Corporation, is
nonoperating.
The Company's carrying value and estimated fair value of these investments
as of December 31 are as follows (in thousands):
<CAPTION>
1994 1995
--------------------- -----------------------
CARRYING FAIR MARKET CARRYING FAIR MARKET
AMOUNT VALUE AMOUNT VALUE
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mobilcom Mexico............. $ 2,062 3,510 2,062 3,510(A)
Mobilkom.................... 1,500 1,500 1,500 2,400(B)
UTS......................... 181 181 1,472 1,472(C)
-------- -------- ------ -----
$ 3,743 5,191 5,034 7,382
======== ======== ====== =====
</TABLE>
The Company considers these investments to be long-term in nature and are
not held for trading purposes. Fair value for these investments was
determined as follows:
(A) Fair value determined based upon the minimum value available through
the exercise of a put option.
(B) Fair value based upon recent investments by other shareholders. The
Company has undertaken to pledge all of its stock of Mobilkom to secure
Mobilkom's borrowings under a bank credit facility.
(C) Management has determined that the carrying cost approximates market
value.
F-13
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) RELATED PARTY TRANSACTIONS
Advances to Affiliate
The advances to affiliate as of December 31, 1995 represented advances to
TeamTalk in the amount of $728,000. The advances are interest-free with no
stated terms.
Notes Receivable from Affiliates
Notes receivable from affiliates as of December 31, 1994, consisted
primarily of a working capital loan to STW of $2,020,000, bearing interest
at market rates, which was converted to an equity interest in STW during
1995.
Notes receivable from affiliates as of December 31, 1995, consisted
primarily of a note due from Mobilcom Mexico for $158,000, which earns
interest at 6% per annum; and a note due from RHP for $128,000, bearing
interest at market rates. The notes expired on January 5, 1996 and April
15, 1996, respectively, and have subsequently been extended.
Notes Payable to Related Party
Notes payable as of December 31, 1994 and 1995, consisted of two notes
payable to Vanguard Cellular Operating Corp. (Vanguard), a significant
stockholder, each in the amount of $900,000 and bearing interest at 9%
compounded annually. The notes are due on the earlier of April 26, 1996 or
the close of an initial public offering. These notes are convertible, at
the option of the holder, into 274,800 shares of redeemable convertible
Series D preferred stock. Subsequent to year-end, these notes were
converted (see Note 9).
Vanguard Merger
On December 18, 1995, the Company merged with Vanguard International
Telecommunications, Inc. (VIT) (see Note 5), a wholly owned subsidiary of
Vanguard. In exchange for 3,972,240 shares of redeemable convertible Series
E preferred stock with a liquidation preference of $6.29 per share, the
Company acquired VIT's interests in TeamTalk and VIT's rights to acquire an
interest in various international LWBs. The resulting total value of
$25,000,000, was allocated to the various LWBs based on their respective
stage of development and an independent valuation study of the LWBs.
The excess of the allocated portion of the merger value to TeamTalk over
the net book value of TeamTalk was attributed to telecommunication
licenses. This excess amounted to $1,712,000 and is amortized on a
straight-line basis over 20 years.
The Company also acquired VIT's rights to participate in RHP, SRC,
Mobilcom, HFCL and PTBV and other yet to be developed projects.
Approximately $23,288,000 was allocated to telecommunication licenses in
each LWB based on their relative stage of development. These amounts are
amortized on a straight-line basis over 20 years.
F-14
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited pro forma consolidated results of operations, as if the merger
with VIT had occurred on January 1, 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Revenues................................................ $ -- --
Operating loss.......................................... (3,731) (11,713)
Net loss................................................ (3,753) (12,863)
</TABLE>
(5) REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
The Company is authorized to issue 23,080,000 shares of preferred stock, of
which 21,541,480 are designated redeemable convertible preferred stock,
1,200,000 are designated nonredeemable convertible preferred stock, 338,520
are undesignated, and 26,000,000 shares of common stock, each with a par
value of $0.01 per share.
Redeemable convertible preferred stock as of December 31, 1995, was
comprised of the following (in thousands except share and per share
amounts):
<TABLE>
<CAPTION>
SHARES LIQUIDATION AGGREGATE
SHARES ISSUED AND VALUE PER LIQUIDATION
REDEEMABLE CONVERTIBLE DESIGNATED OUTSTANDING SHARE VALUE
PREFERRED STOCK: ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Series B...................... 1,229,240 1,229,240 .9652 $ 1,186
Series C...................... 2,460,000 1,762,280 2.3343 4,114
Series D...................... 5,800,000 3,378,160 6.8775 23,233
Series E...................... 3,972,240 3,972,240 6.7365 26,759
Series F-1.................... 7,000,000 4,508,480 9.3750 42,267
Series F-2.................... 1,080,000 848,000 9.3750 7,950
---------- ---------- --------
21,541,480 15,698,400 $105,509
========== ========== ========
</TABLE>
Nonredeemable convertible preferred stock as of December 31, 1994 and 1995,
was comprised of 1,200,000 designated, issued, and outstanding shares of
Series A preferred stock with a liquidation per share of $.85 and an
aggregate liquidation value of $1,020,000.
The rights, preferences, and privileges of the holders of preferred stock
are as follows:
.Liquidation
In the event of Company liquidation, holders of Series F-1 and F-2
preferred stock (collectively referred to as Series F preferred stock)
shall be entitled to receive, prior and in preference to the holders of
Series A, B, C, D and E preferred stock ("Junior preferred stock") and
common stock an amount per share equal to the sum of (i) the product of
(A) .50 multiplied by (B) the liquidation value per share specified
above, as adjusted, and (ii) any declared but unpaid dividends thereon.
Holders of Series B, C, D and E preferred stock shall next be entitled
to receive an amount per share equal to the sum of (i) the product of
(A) .55 multiplied by (B) an amount per share of .9192, 2.2232, 6.55
and 6.2937, respectively, as adjusted and (ii) any declared but unpaid
dividends thereon. Holders of the Junior preferred stock and Series F
preferred stock shall next be entitled to receive the product of
(1) .50 multiplied by (2) an amount per share of .9193, 2.223, 6.55,
6.55 and 9.375, respectively, as adjusted.
F-15
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Holders of the Series A preferred stock shall be entitled to receive an
amount per share equal to the liquidation value per share specified
above, as adjusted, plus any declared but unpaid dividends thereon.
After the distributions described above, and after the distribution
related to common stock described below, the remaining assets of the
Company shall be distributed among the holders of the preferred stock
and common stock pro rata assuming full conversion of preferred stock
into common stock.
.Distributions
The holders of preferred stock are entitled to receive noncumulative
dividends at the same time and on the same basis as holders of common
stock when, and if, declared by the Board of Directors. No dividends
had been declared through December 31, 1995.
.Redemption
Each share of Series B, C, D, E, and F preferred stock is redeemable at
any time on or after December 31, 1998, but within 45 days after the
receipt by the Company of a written request from the holders of a
majority of the then outstanding shares of Series B, C, D, E and F-1
preferred stock. The Company shall redeem all such shares by paying in
cash a sum per share equal to the greater of (1) the then fair market
value of such share of preferred stock on an as-converted basis, or (2)
the liquidation value of such share of preferred stock (hereinafter
referred to as the redemption price). In the event the assets of the
Company are insufficient to effect such redemption in full, the shares
of preferred stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein.
In addition to the above redemption, at any time on or after December
31, 2000, but within 45 days after the receipt by the Company of a
written request from the majority of the holders of Series F-1
preferred stock, the Company shall redeem all outstanding shares of
such stock by paying, in cash, an amount per share equal to the
redemption price of such stock.
Upon the occurrence of a change of control of the Company that is not
approved by certain directors designated by the holders of Series F
preferred stock, then the holders of a majority of the shares of Series
F-1 preferred stock then outstanding shall have the right, by written
demand to the Company, to require the Company to redeem immediately all
the shares of Series F preferred stock then outstanding, at a price per
share equal to the redemption price of the Series F preferred stock.
.Conversion and Voting Rights
Each share of preferred stock is convertible, at the option of the
holder, into such number of fully paid and nonassessable shares of
common stock as is determined by dividing the original preferred stock
issue price by the conversion price applicable to such preferred share.
The conversion price per share for each series of preferred stock is
equal to the preferred stock issue price of the respective series of
preferred stock, subject to adjustment under certain circumstances. An
automatic conversion into common stock will occur in the event of a
firm commitment underwritten public offering of at least $13.10 per
share, as adjusted, and $8,000,000 in the aggregate. However, the
Series F preferred stock shall not automatically be converted in Common
Stock unless: (i) the underwritten public offering is consummated on or
prior to December 31, 1998, (ii) the public offering per share is at
least $18.75, as adjusted and (iii) the aggregate offering price is not
less than $25,000,000.
Each share of preferred stock has voting rights equal to that of common
stock on an "as if converted" basis. The holder of Series E preferred
stock is entitled to elect three directors to the Company's Board of
Directors, and, for so long as 20% of the shares of Series F preferred
stock remain outstanding, the holders of Series F-1 preferred stock are
entitled to elect three directors. As of December 31, 1995, the Company
had 16,898,400 shares of common stock reserved for the conversion of
preferred stock.
F-16
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Preferred Stock Transactions
.The Series A and B Financings
The Company sold an aggregate of 848,520 shares of Series A preferred
stock in May 1993 for an aggregate purchase price of $780,000 (a
purchase price of $.92 per share), including cancellation of notes
payable in the amount of $100,000.
In January 1994, each share of then outstanding common stock was
converted to an equal number of shares of Series A preferred stock.
Concurrently, shares of Series A preferred stock were converted into an
equal number of shares of Series B preferred stock.
.The Series C Financing
In a series of transactions during January and February 1994, the
Company sold an aggregate of 1,762,280 shares of Series C preferred
stock for an aggregate purchase price of $3,918,000 (a purchase price
of $2.22 per share), (the "Series C Financing"), including cancellation
of notes payable to investors totaling $1,351,000.
In connection with the Series C Financing, the Company issued to an
investor warrants to purchase (a) 50,440 shares of Series C preferred
stock at an exercise price of $2.22 per share (b) 222,200 shares of
preferred stock at an exercise price of $7.15 per share, and (c)
444,360 shares of preferred stock at an exercise price of $3.58 per
share. Warrants (a), (b) and (c) were exercisable until December 18,
1995, April 15, 1995 and January 15, 1995, respectively. The warrants
were subsequently amended in July 1995 (see below).
.The Series D Financing
In connection with bridge financing obtained in May 1994, the
purchasers received warrants exercisable for an aggregate of 46,440
shares of Series D preferred stock. The warrants have an exercise price
of $6.55 per share and are exercisable until May 6, 1997.
In a series of transactions in September and October 1994, the Company
sold an aggregate of 2,230,560 shares of Series D preferred stock for
an aggregate purchase price, net of a $26,000 note receivable, of
approximately $14,584,000 (a purchase price of $6.55 per share), (the
"Series D Financing"), including cancellation of notes payable in the
principal amount of $2,029,000.
In connection with the issuance of Bridge Notes on April 6, 1995, the
Company issued a warrant (the "April Bridge Warrants") to purchase
10,720 shares of Series D preferred stock at $6.55 per share. The April
Bridge Warrants are outstanding and are exercisable until April 6, 1998
or, if earlier, upon the closing of the Company's initial public
offering.
In connection with the Series D Financing, Vanguard loaned $1.8 million
to the Company in exchange for two convertible notes in the amount of
$900,000 each (see Note 4). Each note was due upon the earlier of April
26, 1996 or the occurrence of certain events which did not occur prior
to that date. On April 26, 1996, Vanguard converted both notes into an
aggregate of 274,800 shares of Series D preferred Stock (see Note 9).
In July 1995, convertible secured bridge financing notes issued on
April 24, 1995 were converted into 1,147,600 shares of Series D
preferred stock for an aggregate purchase price of $7,517,000 (a
purchase price of $6.55 per share).
F-17
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
.The Series E Financing
In July 1995, the Company entered into a merger agreement with Vanguard
and VIT, a wholly-owned subsidiary of Vanguard, whereby VIT would merge
their international interests in numerous international wireless
projects into the Company in exchange for 3,972,240 shares of Series E
preferred stock. This merger was completed on December 18, 1995,
concurrent with the issuance of Series F preferred stock (see Note 4).
In connection with the Vanguard Merger, the Company entered into an
agreement with an investor to amend previously existing warrant
agreements granted in connection with the Series C Financing. The
investor's original warrant to purchase 50,440 shares of Series C
preferred stock was amended to extend the warrant through December 18,
1997. The investor's original warrant to purchase 222,200 shares of
preferred stock was amended to increase the number of shares to 393,120
and to define the preferred stock as Series D preferred stock at $6.55
per share. The warrant is exercisable until December 18, 1997. The
investor's original warrant to purchase 444,360 shares of preferred
stock was amended to decrease the number of shares to 273,440 and to
define the preferred stock as Series C preferred stock at $2.22 per
share. The warrant is exercisable until May 15, 1997.
.The Series F Financing
In connection with the issuance of a note payable to an investor in
July 1995, the Company issued for a purchase price of $15,000, a
warrant to purchase 32,000 shares of Series F-1 preferred stock at an
exercise price of $9.38 per share. The number of shares and the
exercise price are subject to adjustment in certain circumstances. The
warrant is exercisable until December 18, 1998.
Concurrent with the July 1995 Financing, for an aggregate purchase
price of $72,000, the Company issued warrants to purchase an aggregate
of 153,760 shares of Series F-1 preferred stock (not including the
warrant issued to Vanguard in connection with the first July 1995 note)
at an exercise price of $9.38 per share. All share amounts and the
exercise price are subject to adjustment in certain circumstances. The
warrants are exercisable until December 18, 1998.
On August 15, 1995 pursuant to a Note and Warrant Purchase Agreement
dated as of August 14, 1995, the Company issued for a purchase price of
$50,000 a warrant (the "First Warrant") to purchase 106,680 shares of
Series F-2 preferred stock at an exercise price of $9.38 per share,
with the number of shares and exercise price subject to adjustment in
certain circumstances. The First Warrant is exercisable until December
18, 1998.
Pursuant to a Loan Agreement dated August 14, 1995 between the Company
and an investor, the Company issued a second warrant (the "Second
Warrant") to purchase 106,680 shares of Series F-2 preferred stock at
an exercise price of $9.38 per share, with the number of shares and the
exercise price subject to adjustment in certain circumstances. The
Second Warrant is exercisable until the same date, with the date being
subject to change in the same circumstances, as the First Warrant.
On December 18, 1995, the Company sold and issued 5,356,480 shares of
Series F preferred stock for $50,217,000. Prior to the share issuance
of the Series F preferred stock, the Company entered into bridge
financing agreements with certain existing shareholders. Certain bridge
loans were repaid with proceeds from the issuance of shares of Series F
preferred stock, while the remaining bridge loans were converted into
1,147,600 shares of Series D preferred stock.
Pursuant to the Series F Purchase Agreement, the Company agreed to
covenants customary in financing transactions of such type, including
limits on incurring debt and granting liens and pledges and other
negative covenants including limitations on payments, dividends,
investments, mergers, asset sales,
F-18
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
amendments of its Certificate of Incorporation or Bylaws that would
adversely impact the rights of the Series F-1 preferred stock and the
Series F-2 preferred stock, changes to its business, changes in
control, and sales of equity securities.
Warrants
The Company had the following warrants outstanding as of December 31, 1995:
<TABLE>
<CAPTION>
WARRANTS EXERCISE
PREFERRED STOCK OUTSTANDING PRICE EXPIRATION
--------------- ----------- -------- -----------------
<S> <C> <C> <C>
Series C............................ 273,440 $2.22 May 15, 1997
Series C............................ 50,440 2.22 December 18, 1997
Series D............................ 393,120 6.55 December 18, 1997
Series D............................ 46,440 6.55 May 6, 1997
Series D............................ 10,720 6.55 April 6, 1998
Series F-1.......................... 185,760 9.38 December 18, 1998
Series F-2.......................... 213,360 9.38 December 18, 1998
---------
1,173,280
=========
</TABLE>
Common Stock
In the event of a liquidation, holders of common stock will be entitled to
receive an amount equal to $.50 per share, as adjusted, plus any declared
and unpaid dividends, after completion of distributions to the holders of
preferred stock.
The remaining assets of the Company, after satisfaction of the stipulated
distribution requirements related to the various preferred stock and common
stock liquidation preferences, will be distributed on a pro rata basis
among all of the holders of common stock and all of the holders of the
preferred stock, assuming full conversion of the preferred stock into
common stock.
In January 1994, the Company entered into an agreement to acquire a 70%
interest in Corporate Technology Partners (CTP), a partnership established
to develop a Personal Communications Services (PCS) business, in exchange
for 251,920 shares of common stock in the Company. CTP is owned, in part,
by officers of the Company. This agreement was completed on December 18,
1995, concurrent with the issuance of Series F preferred stock. A total of
45,360 of these shares remain in escrow as of December 31, 1995 pending
finalization of an ex-employee matter.
In October 1994, the Company loaned a Director of the Company, $178,000 to
purchase 76,080 shares of common stock at a purchase price of $2.00 per
share and 3,920 shares of redeemable convertible Series D preferred stock
at a purchase price of $6.55 per share. The note bears interest at 7.69%
per annum. Principal and accrued interest are due in October 2004. The note
is secured by a pledge of the stock by the Director and is non-recourse to
the Director. The note principal is included as a component of
stockholders' equity and redeemable convertible preferred stock on the
accompanying consolidated balance sheets as of December 31, 1994 and 1995.
Stock Option/Stock Issuance Plan
During 1994, the Board of Directors adopted the 1994 Stock Option/Stock
Issuance Plan (the Plan) under which incentive stock options may be granted
to employees and officers and nonqualified (supplemental) stock options may
be granted to employees, officers, directors, and consultants to purchase
shares of the Company's common stock. Accordingly, the Company, as of
December 31, 1995, had reserved a total of
F-19
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1,000,000 shares of the Company's common stock for issuance upon the
exercise of options granted pursuant to the Plan. Options granted under the
Plan generally expire 10 years following the date of grant and are subject
to limitations on transfer.
Option grants under the Plan are subject to various vesting provisions, all
of which are contingent upon the continuous service of the optionee and may
not impose vesting criterion more restrictive than 20% per year. The
exercise price of options granted under the Plan must equal or exceed the
fair market value of the Company's common stock on the date of grant.
Unless otherwise terminated by the Board of Directors, the Plan
automatically terminates in January 2004.
A summary of stock option/stock issuance transactions under the Plan
follows:
<TABLE>
<CAPTION>
SHARES
AVAILABLE
FOR GRANT OUTSTANDING OPTIONS
--------- ----------------------
NUMBER PRICE
OF SHARES PER SHARE
--------- ------------
<S> <C> <C> <C>
Initial shares reserved................... 1,000,000 -- --
Options granted........................... (761,920) 761,920 $ .25 - 2.50
--------- ------- ------------
Balances as of December 31, 1994........ 238,080 761,920 $ .25 - 2.50
Options granted........................... (160,000) 160,000 $6.25 - 6.88
Options canceled.......................... 40,000 (40,000) $ .25
--------- ------- ------------
Balances as of December 31, 1995........ 118,080 881,920 $6.25 - 6.88
========= =======
</TABLE>
As of December 31, 1995, there were 399,448 vested options.
(6)INCOME TAXES
The Company has incurred net losses since inception and has not recorded
any provision for income taxes. The reconciliation between the amount
computed by applying the U.S. federal statutory tax rate of 34% to net loss
before income taxes and the actual provision for income taxes as of
December 31, 1993, 1994, and 1995 follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----- ---- ------
<S> <C> <C> <C>
Income tax (benefit) at statutory rate.............. $(286) (851) (3,832)
Equity in losses of foreign affiliates.............. -- -- 1,277
License amortization................................ -- -- 344
Net operating loss and temporary differences for
which no tax benefit was recognized................ 286 851 2,211
----- ---- ------
$ -- -- --
===== ==== ======
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets as of December 31, 1994 and 1995 are as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Deferred tax assets:
Loss carryovers and deferred start-up expenditures $1,360 3,911
Less valuation allowance................................. (1,360) (3,911)
------ ------
Total deferred tax assets.............................. -- --
====== ======
</TABLE>
F-20
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Management has established a valuation allowance for the portion of
deferred tax assets for which realization is uncertain. The valuation
allowance as of December 31, 1994 and 1995 was $1,360,000 and $3,911,000,
respectively. The net changes in valuation allowance during 1994 and 1995
was an increase of $960,000 and $2,551,000, respectively.
As of December 31, 1995, the Company has cumulative U.S. federal net
operating losses of approximately $9,200,000, which can be used to offset
future income subject to federal income taxes. The federal tax loss
carryforwards will expire from 2008 through 2010. The Company has
cumulative California net operating losses of approximately $5,900,000,
which can be used to offset future income subject to California income
taxes. The California tax loss carryforwards will expire from 1998 through
2000.
The Tax Reform Act of 1986 imposes substantial restrictions on the
utilization of net operating losses and tax credits in the event of an
"ownership change" as defined. All U.S. federal and California net
operating loss carryforwards are subject to limitation as a result of these
restrictions. The ownership change restrictions are not expected to impair
the Company's ability to utilize the affected carryforward items. If there
should be a subsequent ownership change, as defined, of the Company, its
ability to utilize its carryforwards could be reduced.
(7) COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases a facility under a noncancelable operating lease
expiring in May 1999. Future minimum lease payments due under the lease
total approximately $62,000, $63,000, $63,000, and $26,000 in 1996 through
1999, respectively.
Rent expense was approximately $14,000, $47,000, and $60,000 for the years
ended December 31, 1993, 1994, and 1995, respectively.
Capital Contributions
In order to protect the Company's investments in affiliates from ownership
dilution, the Company has committed to make additional capital
contributions to the LWBs as needed.
The Company also anticipates making additional investments in various
operating companies totalling $16,500,000, including the acquisition of the
remaining 50% interest in TeamTalk Limited for $3,198,000 (see Note 9).
Note Payable
The Company is jointly and severally liable on a $16,000,000 note payable
to an unrelated party in connection with its RHP investment. The note bears
interest at 6.95% with principal and interest due October 10, 1996. The
Company has recorded its pro rata share of this note on the accompanying
consolidated balance sheet. In the event that the other payors, which are
also shareholders of RHP, and RHP itself are unable to honor their pro rata
obligation, the Company would be wholly liable.
Guarantee of Debt of Equity Investee
In connection with a Ringgit 91,000,000 (approximately $35,800,000 as
translated using effective exchange rates at December 31, 1995) senior
credit facility with a Malaysian bank obtained by the Company's 30% equity
investee, STW, the Company along with other STW shareholders, executed a
financial "keep well" covenant pursuant to which they have agreed (i) to
ensure that STW will remain solvent and be able to meet its financial
liabilities when due and (ii) to ensure that the project is timely
completed and to make additional debt and equity investments in STW to meet
cost overruns. The loan is repayable by STW in
F-21
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
eleven semi-annual installments beginning October 8, 1997. The Company and
other STW shareholders have separately executed an agreement, whereby each
shareholder has agreed to share in the liability on a pro rata basis in
relation to their interest in STW. In the event that the bank were to seek
repayment from the STW shareholders and the other shareholders were unable
to honor their pro rata share in the liability, the Company might be liable
for the full amount of the outstanding amount of the loan. As of
December 31, 1995, the balance on this loan was Ringgit 54,640,000 or
$21,500,000.
The Company does not believe it is practicable to estimate the fair value
of the guarantee and does not believe exposure to loss is likely.
Accordingly, no provision has been made in the accompanying consolidated
financial statements.
The Company, through its affiliate, New Zealand Wireless Limited, owns 15%
of PT Mobilkom Telekomindo (Mobilkom). Mobilkom expects to fund the
continued buildout of its network and the acquisition of subscriber
terminals primarily through a seven-year $50 million revolving/reducing
credit facility which it has obtained from a syndicate of Thai banks.
Borrowings under the credit facility bear interest at a floating rate based
on LIBOR and are secured by substantially all of Mobilkom's assets and a
pledge of all the capital stock held by the Company and Mobilkom's other
shareholders. Another Mobilkom shareholder has guaranteed borrowings of up
to $25 million under the credit facility. As of June 30, 1996, borrowings
of approximately $20 million were outstanding under this facility.
The Company indirectly owns a 17.5% equity interest in PT Mobile Selular
Indonesia ("Mobisel"), a provider of cellular services in Indonesia through
its 25% ownership in RHP. Mobisel has obtained a five-year $60 million
credit facility from Nissho Iwai International (Singapore) Pte. Ltd.
("Nissho Iwai") to finance the construction of its network and the purchase
of subscriber terminals. Borrowings under the credit facility bear interest
at a floating rate based on LIBOR and are secured by all of Mobisel's
assets and a pledge of all the capital stock held by RHP. RHP has also
guaranteed the credit facility. As of June 30, 1996, borrowings of
approximately $35 million were outstanding under this facility.
(8) GEOGRAPHIC INFORMATION
Information about the Company's consolidated operations in different
geographic areas for the three years ended December 31, 1993, 1994 and 1995
is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Operating loss:
Latin America................................... -- -- (154)
Southeast Asia.................................. -- -- --
Pacific and Far East............................ -- -- (3,756)
United States................................... (809) (2,481) (6,211)
------ ------ -------
$ (809) (2,481) (10,121)
====== ====== =======
Identifiable assets:
Latin America................................... 668 2,157 13,017
Southeast Asia.................................. -- 10 5,658
Pacific and Far East............................ 1,056 3,429 50,017
United States................................... 916 12,828 26,951
------ ------ -------
$2,640 18,424 95,643
====== ====== =======
</TABLE>
The Company's consolidated operations in Latin America are in Brazil and
Peru. The Company's consolidated operations in Southeast Asia are in
Pakistan. The Company's equity method and cost investees are included in
the geographic areas in which principal operations exist or will exist (see
Note 3).
F-22
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) SUBSEQUENT EVENTS
On March 6, 1996, the Board of Directors approved the amendment and
restatement to the 1994 Stock Option/Stock Issuance Plan which authorizes
the issuance of an additional 1,000,000 shares of common stock thereunder.
On April 26, 1996, two notes payable, each in the amount of $900,000, plus
accrued interest were converted into 274,800 shares of the Company's Series
D preferred stock.
On June 10, 1996, the Board approved a $3,080,000 bridge loan to the
Company's local partner in its Mexican ECTR joint venture. On June 11,
1996, the Board of Directors approved the amendment and restatement to the
1994 Stock Option/Stock Issuance Plan which authorizes the issuance of an
additional 400,000 shares of common stock thereunder.
On June 28, 1996, the Board approved and the Company funded $3,042,000 for
its 20% interest in a National Taiwan Trunking Project. The funds have been
placed in an interest bearing account pending favorable government approval
of their various telecommunication license applications.
On July 12, 1996, the Board approved an initial investment of up to
$5,250,000 for a 30% interest in the Taiwan Paging Project (a portion of
this amount was funded in July 1996).
On July 26, 1996, the Company acquired 1,700,000 shares of TeamTalk Limited
for a purchase price of approximately $3,198,000. The acquisition resulted
in IWC obtaining a 100% ownership interest in TeamTalk Limited.
On July 26, 1996, the Company entered into a Loan Agreement (the "1996 TD
Loan Agreement") with Toronto Dominion (Texas), Inc., an affiliate of
Toronto Dominion, providing for a $10.0 million revolving credit facility.
Subject to the terms and conditions of the 1996 TD Loan Agreement, the
Company is able to borrow funds in an initial amount of at least $2,000,000
and additional amounts in integral multiples of at least $1.0 million. All
borrowings are evidenced by a promissory note bearing interest at a
specified base rate plus a margin increasing from 2.25% to 3.75% over the
term of the facility or a specified LIBOR rate plus a margin increasing
from 3.5% to 5.0% over the term of the facility and are due in July 1997,
subject to mandatory repayment, without premium, from the net proceeds from
any public or private sale of debt or equity securities, the net proceeds
from certain asset sales by the Company or its subsidiaries, or certain
other events. The obligations of the Company under the 1996 TD Loan
Agreement and the note issued pursuant thereto are secured by a pledge by
the Company of all capital stock of certain of the Company's subsidiaries
and affiliates. On July 26, 1996, the Company borrowed $7,000,000 under the
1996 TD Loan Agreement.
F-23
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND JUNE 30, 1996
(UNAUDITED)
F-24
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
ASSETS ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 25,398 $ 5,249
Accounts receivable................................. -- 197
Notes receivable from affiliates.................... 338 1,433
Note receivable..................................... -- 3,106
Advances to affiliates.............................. 728 102
Other receivables................................... 153 515
Other current assets................................ 234 428
-------- --------
Total current assets.............................. 26,851 11,030
Property and equipment, net........................... 4,269 11,051
Investments in affiliates............................. 52,280 47,524
Telecommunication licenses, net....................... 12,106 13,389
License deposit....................................... -- 3,042
Other assets.......................................... 137 971
-------- --------
Total assets...................................... $ 95,643 $ 87,007
======== ========
<CAPTION>
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses............... $ 5,757 $ 5,954
Notes payable to related party...................... 1,800 --
Note payable........................................ 4,000 4,000
-------- --------
Total current liabilities......................... 11,557 9,954
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $.01 par value
per share; 21,541,480 shares designated; 15,698,400
and 15,973,200 shares issued and outstanding in 1995
and 1996, respectively; net of note receivable from
stockholder of $26 in 1995 and 1996; liquidation
preference of $107,399 as of June 30, 1996........... 98,254 100,306
Stockholders' deficit:
Convertible preferred stock, $.01 par value per
share; 1,200,000 shares designated, issued, and
outstanding in 1995 and 1996; liquidation
preference of $1,020 as of June 30, 1996........... 12 12
Common stock, $.01 par value per share; 26,000,000
shares authorized; 328,000 shares issued and
outstanding in 1995 and 1996....................... 3 3
Additional paid-in capital.......................... 749 749
Note receivable from stockholder.................... (152) (152)
Cumulative translation adjustment................... (1) 40
Accumulated deficit................................. (14,779) (23,905)
-------- --------
Total stockholders' deficit....................... (14,168) (23,253)
-------- --------
Total liabilities, redeemable convertible
preferred stock and stockholders' deficit........ $ 95,643 $ 87,007
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-25
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Operating revenue............................................ $ -- $ 183
Cost of sales -- 180
------- -------
Gross margin............................................... -- 3
Operating expenses:
General and administrative expenses........................ 2,073 6,353
Equity in losses of affiliates............................. 525 2,986
------- -------
Loss from operations..................................... (2,598) (9,336)
Other income (expense):
Interest income............................................ 112 424
Interest expense........................................... (201) (201)
Other...................................................... (10) (13)
------- -------
Net loss................................................. $(2,697) $(9,126)
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-26
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
Net cash used in operating activities...................... $ (2,027) $(11,124)
-------- --------
Cash flows from investing activities:
Notes receivable from affiliates......................... -- (1,095)
Note receivable.......................................... -- (3,106)
Advances to affiliates................................... -- (102)
Purchases of property and equipment...................... (26) (852)
Investments in affiliates................................ (13,294) (215)
License deposit.......................................... -- (3,042)
Other assets............................................. 211 (651)
-------- --------
Net cash used in investing activities.............. (13,109) ( 9,063)
-------- --------
Cash flows from financing activities:
Loan proceeds............................................ 5,875 --
-------- --------
Net cash provided by financing activities.......... 5,875 --
-------- --------
Effect of foreign currency exchange rates on cash and cash
equivalents............................................... -- 38
-------- --------
Net decrease in cash and cash equivalents.................. (9,261) (20,149)
Cash and cash equivalents at beginning of year/period...... 10,298 25,398
-------- --------
Cash and cash equivalents at end of year/period............ $ 1,037 $ 5,249
======== ========
Supplemental cash flow information:
Cash paid for interest................................... $ -- $ 4
======== ========
Noncash financing and investing activities:
Conversion of note receivable from affiliate to
investment in affiliate................................. $ 2,020 $ --
======== ========
Conversion of notes payable to related party and interest
to redeemable convertible preferred stock............... $ -- $ 2,052
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
International Wireless Communications, Inc. and subsidiaries (IWC or the
Company) was incorporated in Delaware in 1992. The Company develops, owns,
and operates wireless communications companies in emerging markets
throughout Asia and Latin America. These local wireless businesses (LWBs)
provide a variety of communications services. Together with local and
strategic partners, the Company has interests in Brazil, China, India,
Indonesia, Malaysia, Mexico, New Zealand, Pakistan, Peru, and the
Philippines, Taiwan and Thailand.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation of the Company's
financial condition, results of operations, and cash flows for the periods
presented. These financial statements should be read in conjunction with
IWC's audited consolidated financial statements as of December 31, 1994 and
1995, and for each of the years in the three-year period ended December 31,
1995, including notes thereto. The results of operations for the six months
ended June 30, 1996 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996.
International Wireless Communications Holdings, Inc. ("IWC Holdings") was
incorporated in Delaware in July 1996 as a holding company whose primary
asset is the capital stock of IWC. Subsequent to the formation of IWC
Holdings, the Company completed a reorganization in which each share of the
then outstanding capital stock of IWC, which became a wholly owned
subsidiary of IWC Holdings, was converted into 40 shares of the
corresponding class and series of capital stock of IWC Holdings. IWC
Holdings assumed and became the successor to the agreements of the Company
relating to capital stock. All data related to shares and per share amounts
for all periods presented have been adjusted to reflect the effect of the
stock conversion.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
IWC, its wholly owned subsidiary, Servicos de Radiocommunicacoes S/C Ltda.
("SRC"), and two majority-owned subsidiaries, M/S Mobilcom (Pte) Ltd.
("Mobilcom") and PeruTel SA ("PeruTel"). Effective April 30, 1996, the
Company acquired the remaining 50% of TeamTalk Limited ("TeamTalk"), and as
such, the accompanying consolidated balance sheet as of June 30, 1996 also
includes the accounts of TeamTalk. The consolidated statement of operations
for the six month period ended June 30, 1996 also include the accounts of
the now wholly-owned TeamTalk subsidiary since April 30, 1996, the
effective date of the acquisition (see Note 3). Prior to April 30, 1996,
the consolidated financial statements reflect TeamTalk as an investment
accounted for by the equity method. All significant intercompany accounts
and transactions have been eliminated in consolidation. Minority interests
are not reflected in the accompanying consolidated financial statements as
they are immaterial.
(2) BALANCE SHEET COMPONENTS
Balance sheet components are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Property and equipment
Furniture and fixtures............................ $ 40 $ 263
Office equipment.................................. 126 260
Automobiles....................................... 34 70
Telecommunication equipment....................... -- 8,707
Construction in process........................... 4,125 2,109
------ -------
4,325 11,409
Less accumulated depreciation..................... 56 358
------ -------
Property and equipment, net..................... $4,269 $11,051
====== =======
</TABLE>
F-28
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(2) BALANCE SHEET COMPONENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, 30,
1995 1996
------------ ------
<S> <C> <C>
Telecommunication licenses
SRC................................................. $ 6,714 6,680
Mobilcom............................................ 5,439 5,439
TeamTalk............................................ -- 1,630
-------- ------
12,153 13,749
Less accumulated amortization......................... 47 360
-------- ------
Telecommunication licenses, net..................... $ 12,106 13,389
======== ======
Accounts payable and accrued expenses:
Accounts payable.................................... $ -- 757
Professional services............................... 3,041 917
Employee compensation and benefits.................. 189 573
Interest............................................ 256 201
Equipment purchases................................. 1,719 --
TeamTalk acquisition................................ -- 3,206
Other............................................... 552 300
-------- ------
$ 5,757 5,954
======== ======
</TABLE>
(3)INVESTMENTS IN AFFILIATES
The Company's investments in affiliates represent interests in various LWBs
in several developing countries. These investments are accounted for under
the equity or cost methods.
Equity Investments
For those investments in companies in which the Company's voting interest
is 20% to 50%, or for investments in companies in which the Company exerts
significant influence through board representation and management
authority, the equity method of accounting is used. Under this method, the
investment, originally recorded at cost, is adjusted to recognize the
Company's share of net earnings or losses of the affiliates, limited to the
extent of the Company's investment in and advances to the affiliates,
including any debt guarantees or other contractual funding commitments. The
Company's share of net earnings or losses of affiliates includes the
amortization of purchase accounting adjustments for the excess of cost over
the net book value of the interest acquired. Investments in affiliated
companies as of December 31, 1995 and June 30, 1996 are as follows:
<TABLE>
<CAPTION>
PORTION OF
INVESTMENT
EXCEEDING THE
COMPANY'S
SHARE OF THE
PERCENTAGE INVESTMENTS IN UNDERLYING
OF AFFILIATED HISTORICAL NET
OWNERSHIP COMPANIES(1) ASSETS
----------- -------------- --------------
COUNTRY AFFILIATED COMPANY 1995 1996 1995 1996 1995 1996
------- ------------------------ ----- ----- ------- ------ ------- ------
<C> <S> <C> <C> <C> <C> <C> <C>
Syarikat Telefon
Malaysia Wireless (STW).......... 30% 30% $20,879 19,500 $17,459 17,459
PT Rajasa Hazanah
Indonesia Perkasa (RHP)........... 25% 25% 24,539 24,405 23,680 23,680
TeamTalk Limited
New Zealand (TeamTalk).............. 50% 100%(2) 2,345 -- 1,712 --
HFCL Mobile Radio
India Limited (HFCL).......... 49% 49% 243 243 243 243
PT Binamulti Visualindo
Indonesia (PTBV).................. 49% 49% 206 206 206 206
Wireless Data Services
New Zealand Ltd. (WDS).............. -- 50% -- 135 -- --
------- ------ ------- ------
48,212 44,489 43,300 41,588
Less accumulated amortization........ 966 1,999 966 1,999
------- ------ ------- ------
$47,246 42,490 $42,334 39,589
======= ====== ======= ======
</TABLE>
-------
(1)Adjusted for the Company's share of equity losses of affiliated
companies.
(2)Reflects acquisition of remaining 50% of TeamTalk pursuant to agreement
dated June 24, 1996.
F-29
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
On June 24, 1996, the Company entered into an agreement with the other 50%
owner of TeamTalk to acquire their 1,700,000 shares of TeamTalk's common
stock, as well as to assume TeamTalk's existing note payable to the
shareholder totaling $3,022,000, for a purchase price of approximately
$3,198,000. The agreement was effective April 30, 1996, with the purchase
price paid in July 1996. As of June 30, 1996, the Company has reflected the
purchase price as a liability in the accompanying consolidated balance
sheet and TeamTalk is consolidated into the books of the Company. In
connection with the incremental investment, the Company reclassified the
associated portion of investment exceeding the Company's share of the
underlying historical net assets to telecommunication licenses. The fair
value of the assets acquired and the liabilities assumed in connection with
the acquisition was $8,327,000 and $3,584,000, respectively.
Cost Investments
The Company uses the cost method of accounting for three other investments.
They are Corporacion Mobilcom, S.A. de C.V. and subsidiaries (Mobilcom
Mexico), PT Mobilkom Telekomindo (Mobilkom), and Universal
Telecommunication Service, Inc. (UTS). The Company's ownership percentage
is 2.47%, 15% and 19%, respectively. Both Mobilcom Mexico and Mobilkom are
operating entities. UTS, owned directly and indirectly through Mobilcom
Corporation, is nonoperating as of June 30, 1996.
The following represents the Company's carrying value of these cost
investments:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Mobilcom Mexico..................................... $2,062 2,062
Mobilkom............................................ 1,500 1,500
UTS................................................. 1,472 1,472
------ -----
$5,034 5,034
====== =====
</TABLE>
(4) RELATED PARTY TRANSACTIONS
Notes receivable from Affiliates
Notes receivable from affiliates as of December 31, 1995, consisted
primarily of a note due from Mobilcom Mexico for $158,000, which earns
interest at 6% per annum; and an interest-free note due from RHP for
$128,000. The notes became due on January 5, 1996 and April 15, 1996,
respectively, and have subsequently been extended.
During the six months ended June 30, 1996, the Company loaned RHP a total
of $1,090,000 in exchange for a series of 90 day interest-free promissory
notes due from RHP, bringing the total amount loaned to RHP to $1,218,000.
These notes to RHP have subsequently been extended.
Advances to Affiliates
The advances to affiliates as of December 31, 1995, represented advances to
TeamTalk in the amount of $728,000. As a result of the acquisition of the
remaining 50% interest in TeamTalk, the Company now eliminates advances to
TeamTalk as a result of its consolidation.
In January 1996, the Company advanced $102,000 to UTS. The advance is
interest-free with no stated terms.
Notes Payable to Related Party
Notes payable to a related party as of December 31, 1995, consisted of two
notes payable to Vanguard Cellular Operating Corp. (Vanguard), a
significant stockholder, each in the amount of $900,000 plus accrued
interest and bearing interest at 9% compounded annually. On April 26, 1996,
these notes, plus $252,000 of accrued interest, were converted into 274,800
of the Company's shares of Series D Redeemable Convertible Preferred Stock.
F-30
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(5) NOTE RECEIVABLE
On June 6, 1996, the Company loaned $3,080,000 to a co-shareholder of
Mobilcom Mexico, a trunked radio services operator in Mexico. The Company
owns a 2.3% equity interest in Mobilcom Mexico. The loan, in the form of a
promissory note, accrues interest at 13% per annum and is due upon written
demand by IWC. The Company expects that this loan will facilitate future
strategic investments in projects in which this co-shareholder is involved.
(6) LICENSE DEPOSIT
On June 28, 1996, the Company deposited $3,042,000 with a Taiwanese
corporation that is pursuing telecommunication licenses in Taiwan. This
deposit represents a 20% interest in 12 telecommunication license
applications currently being pursued. During the application process, the
deposit will be held in an interest-bearing escrow account in the name of
the Company. Once a license is granted, the deposit will become the
Company's initial capital of the venture that is ultimately formed. For
unsuccessful applications, a pro rata portion of the deposit will be
returned.
(7) STOCK OPTION/STOCK ISSUANCE PLAN
On March 6, 1996, the Board of Directors approved the amendment and
restatement to the 1994 Stock Option/Stock Issuance Plan which authorizes
the issuance of an additional 1,000,000 shares of common stock thereunder.
The Board of Directors then granted an additional 764,000 options at an
exercise price of $8.13.
On June 11, 1996, the Board of Directors approved the amendment and
restatement to the 1994 Stock Option/Stock Issuance Plan which authorized
the issuance of an additional 400,000 shares of common stock thereunder.
(8) COMMITMENTS AND CONTINGENCIES
Capital Contributions
In order to protect the Company's investments in affiliates from ownership
dilution, the Company has committed to make additional capital
contributions to the LWBs as needed.
The Company anticipates making additional investments in various operating
companies totaling $14,500,000.
Note Payable
The Company is jointly and severally liable on a $16,000,000 note payable
to an unrelated party in connection with its RHP investment. The note bears
interest at 6.95% with principal and interest due October 10, 1996. The
Company has recorded its 25% pro rata share of this note on the
accompanying consolidated balance sheets. In the event that the other
payors, which are also shareholders of RHP, and RHP itself, are unable to
honor their pro rata obligation, the Company would be wholly liable.
Guarantee of Debt of Equity Investee
In connection with a Ringgit 91,000,000 (approximately $35,800,000 as
translated using effective exchange rates at December 31, 1995) senior
credit facility with a Malaysian bank obtained by the Company's 30% equity
investee, STW, the Company along with other STW shareholders, executed a
financial "keep well" covenant pursuant to which they have agreed (i) to
ensure that STW will remain solvent and be able to meet its financial
liabilities when due and (ii), to ensure that the project is timely and
completed, to make additional debt and equity investments in STW to meet
cost overruns. The loan is repayable by STW in eleven semi-annual
installments beginning October 8, 1997. The Company and other STW
shareholders have separately executed an agreement, whereby each
shareholder has agreed to share in the liability on a pro rata basis in
relation to their interest in STW. In the event that the bank were to seek
repayment from the STW shareholders and the other shareholders were unable
to honor their pro rata share in the liability,
F-31
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
the Company might be liable for the full amount of the outstanding amount
of the loan. The balance on this loan was Ringgit 54,640,000 or $21,500,000
and Ringgit 91,000,000 or $36,400,000 as of December 31, 1995 and June 30,
1996, respectively. No provision has been made in the accompanying
consolidated financial statements for any loss that might result from this
arrangement.
The Company, through its affiliate, New Zealand Wireless, owns 15% of PT
Mobilkom Telekcomindo (Mobilkom). Mobilkom expects to fund the continued
buildout of its network and the acquisition of subscriber terminals
primarily through a seven-year $50 million revolving/reducing credit
facility which it has obtained from a syndicate of Thai banks. Borrowings
under the credit facility bear interest at a floating rate based on LIBOR
and are secured by substantially all of Mobilkom's assets and a pledge of
all the capital stock held by the Company and Mobilkom's other
shareholders. Another Mobilkom shareholder has guaranteed borrowings of up
to $25 million under the credit facility. As of June 30, 1996, borrowings
of approximately $20 million were outstanding under this facility.
The Company indirectly owns a 17.5% equity interest in PT Mobile Selular
Indonesia ("Mobisel"), a provider of cellular services in Indonesia through
its 25% interest in RHP. Mobisel has obtained a six-year $60 million credit
facility from Nissho Iwai International (Singapore) PTE., LTD. ("Nissho
Iwai") to finance the construction of its network and the purchase of
subscriber terminals. Borrowings under the credit facility bear interest at
a floating rate based on LIBOR and are secured by all of Mobisel's assets
and a pledge of all the capital stock held by RHP and Mobisel's other
shareholders. RHP has also guaranteed the credit facility. As of June 30,
1996, borrowings of approximately $35 million were outstanding under this
facility.
(9) SUBSEQUENT EVENTS
On July 12, 1996, the Board approved an initial investment of up to
$5,250,000 for a 10% interest in the Taiwan Paging Project. The Company has
subsequently funded the full amount.
On July 26, 1996, the Company entered into a Loan Agreement (the "1996 TD
Loan Agreement") with Toronto Dominion (Texas), Inc., an affiliate of
Toronto Dominion, providing for a $10.0 million revolving credit facility.
Subject to the terms and conditions of the 1996 TD Loan Agreement, the
Company is able to borrow funds in an initial amount of at least $2,000,000
and additional amounts in integral multiples of at least $1.0 million. All
borrowings are evidenced by a promissory note bearing interest at a
specified base rate plus a margin increasing from 2.25% to 3.75% over the
term of the facility or a specified LIBOR rate plus a margin increasing
from 3.5% to 5.0% over the term of the facility and are due in July 1997,
subject to mandatory repayment, without premium, from the net proceeds from
any public or private sale of debt or equity securities, the net proceeds
from certain asset sales by the Company or its subsidiaries, or certain
other events. The obligations of the Company under the 1996 TD Loan
Agreement and the note issued pursuant thereto are secured by a pledge by
the Company of all capital stock of certain of the Company's subsidiaries
and affiliates. On July 26, 1996, the Company borrowed $7,000,000 under the
1996 TD Loan Agreement.
On August 15, 1996, the Company issued 196,720 units, each consisting of a
$1,000 principal amount 14% Senior Secured Discount Note due 2001 and one
warrant to purchase 11.638 shares of common stock, $0.01 par value, for
total gross proceeds of $100 million. Net proceeds, after full repayment of
the $7.4 million, including interest and fees, borrowed under the 1996 TD
Loan Agreement as noted above plus other underwriter and legal fees,
totaled $88,561,000.
In August 1996, the Company acquired a 70% interest in Mainstream Limited,
a company to be renamed Star Telecom Overseas (Cayman Islands) Limited,
("STOL"), which holds minority equity interests in paging projects in India
and Taiwan and is currently pursuing additional paging opportunities in
Indonesia and Thailand, for an aggregate purchase price of $13.5 million.
The Company's partner in STOL is Star Telecom Holdings Limited, a company
that owns one of the largest paging operators and Internet service
providers in Hong Kong.
F-32
<PAGE>
PRASETIO, UTOMO & CO.
REGISTERED PUBLIC ACCOUNTANTS
PT RAJASA HAZANAH PERKASA
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
AND
INDEPENDENT AUDITORS' REPORT
INDONESIAN CURRENCY
F-33
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-34
<PAGE>
PRASETIO UTOMO
ARTHUR ANDERSEN & CO. SC
INDEPENDENT AUDITORS' REPORT
Prasetio, Utomo & Co.
Registered Public Accountants
Report No. 25779S
Chase Plaza
Jalan Jend. Sudirman Kav. 21
Jakarta 12920
Indonesia
The Board of Directors and Stockholders
PT RAJASA HAZANAH PERKASA
We have audited the balance sheet of PT Rajasa Hazanah Perkasa as of
December 31, 1995, and the related statements of income, deficit and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of PT Rajasa Hazanah Perkasa for the years ended December 31, 1993
and 1994 which are presented for comparative purposes, were audited by other
independent auditors whose report dated June 2, 1995 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with auditing standards established by
the Indonesian Institute of Accountants, which are substantially similar to
the generally accepted auditing standards in the United States of America.
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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PT Rajasa Hazanah Perkasa
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
Generally accepted accounting principles in Indonesia vary in certain
respects with those in the United States of America. A description of the
significant differences between those two generally accepted accounting
principles and the approximate effects of those differences on net income and
stockholders' equity are set forth in Notes 17 and 18 to the financial
statements.
PRASETIO, UTOMO & CO.
Drs M.P. Sibarani
Registered Accountant No. D-514
May 28, 1996
F-35
<PAGE>
PT RAJASA HAZANAH PERKASA
BALANCE SHEET
DECEMBER 31, 1995
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
<TABLE>
<CAPTION>
1993 1994 1995
-------------- --------------- --------------------------
U.S.$
NOTES RP RP RP (NOTE 3)
ASSETS ----------- -------------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash
equivalents............ 2,4,8,12 8,976,853,168 6,970,844,011 5,543,708,243 2,401,953
Accounts receivable
Trade--net of allowance
for doubtful accounts
of Rp 5,908,861,000 in
1993, Rp 505,744,829
in 1994 and Rp
568,483,998 in 1995... 2,5,8,12,19 2,211,907,000 2,950,032,018 2,617,547,345 1,134,119
Others................. -- 5,295,250 59,039,898 25,580
Inventories--net of
allowance for
obsolescence of Rp
891,089,416 in 1994 and
Rp 3,858,732,612 in
1995................... 2,6,8,19 5,425,094,000 6,779,410,442 3,462,954,359 1,500,414
Prepaid taxes........... -- 327,163,736 63,564,058 27,541
Prepaid expenses........ 2 2,883,615,000 253,324,494 153,282,855 66,414
-------------- --------------- -------------- ----------
Total Current Assets.... 19,497,469,168 17,286,069,951 11,900,096,758 5,156,021
-------------- --------------- -------------- ----------
DUE FROM STOCKHOLDERS... 2 1,689,479,000 4,041,764,800 -- --
-------------- --------------- -------------- ----------
DUE FROM AN AFFILIATE... 2 -- -- 8,210,270,047 3,557,309
-------------- --------------- -------------- ----------
ADVANCE FOR INVESTMENT
IN SHARES OF STOCK..... 1,15 -- -- 29,112,810,000 12,613,869
-------------- --------------- -------------- ----------
PROPERTY AND EQUIPMENT 2,7,8,12
Cost.................... 4,373,235,000 4,373,725,945 3,915,182,447 1,696,353
Accumulated
depreciation........... (1,493,990,000) (2,450,647,331) (2,454,803,666) (1,063,606)
-------------- --------------- -------------- ----------
Net Book Value.......... 2,879,245,000 1,923,078,614 1,460,378,781 632,747
-------------- --------------- -------------- ----------
OTHER ASSETS
Deferred charges........ 2,15 35,734,707,000 32,001,908,891 -- --
-------------- --------------- -------------- ----------
TOTAL ASSETS............ 59,800,900,168 55,252,822,256 50,683,555,586 21,959,946
============== =============== ============== ==========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Short-term loans........ 8 5,992,693,000 15,822,744,048 9,475,366,558 4,105,445
Accounts payable
Trade.................. 9 6,237,168,000 4,294,723,512 564,424,841 244,551
Affiliates............. 2 -- -- 327,000,000 141,681
Others................. 5,445,055,000 654,737,094 12,759,468,992 5,528,366
Taxes payable........... 2,10 9,751,111,000 8,326,449,431 4,920,000,182 2,131,716
Accrued expenses........ 2,11 4,507,201,000 7,560,349,400 1,366,099,168 591,897
Current maturities of
long-term debt......... 12 18,422,245,000 19,054,254,112 2,714,491,758 1,176,123
-------------- --------------- -------------- ----------
Total Current
Liabilities............ 50,355,473,000 55,713,257,597 32,126,851,499 13,919,779
-------------- --------------- -------------- ----------
LONG-TERM DEBTS--net of
current maturities..... 12 14,598,961,000 8,602,303,862 135,656,507 58,777
-------------- --------------- -------------- ----------
STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY)
Capital stock--Rp
1,000,000 par value
Authorized and issued--
1,000 shares in 1993
and 1994 and 25,000
shares in 1995........ 13 1,000,000,000 1,000,000,000 25,000,000,000 10,831,889
Deficit................ (6,153,533,832) (10,062,739,203) (6,578,952,420) (2,850,499)
-------------- --------------- -------------- ----------
Total Stockholders'
Equity (Capital
Deficiency)........... (5,153,533,832) (9,062,739,203) 18,421,047,580 7,981,390
-------------- --------------- -------------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY... 59,800,900,168 55,252,822,256 50,683,555,586 21,959,946
============== =============== ============== ==========
</TABLE>
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-36
<PAGE>
PT RAJASA HAZANAH PERKASA
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------------------
U.S. $
NOTES RP RP RP (NOTE 3)
----- -------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES................ 2,14,15 38,171,012,000 34,981,603,290 16,812,363,798 7,284,386
COST OF REVENUES........ 2,14 23,690,291,000 17,425,723,608 7,679,495,493 3,327,337
-------------- -------------- -------------- ----------
GROSS PROFIT............ 14,480,721,000 17,555,879,682 9,132,868,305 3,957,049
-------------- -------------- -------------- ----------
OPERATING EXPENSES...... 12,675,997,000 12,784,298,746 10,840,193,673 4,696,791
-------------- -------------- -------------- ----------
INCOME (LOSS) FROM
OPERATIONS............. 1,804,724,000 4,771,580,936 (1,707,325,368) (739,742)
-------------- -------------- -------------- ----------
OTHER INCOME (CHARGES)
Interest income....... 558,855,000 587,672,516 403,155,251 174,677
Gain on disposals of
property and
equipment--net....... 2 850,000 2,936,000 344,054,448 149,070
Interest expense...... (4,975,872,000) (4,923,313,013) (4,813,937,236) (2,085,761)
Miscellaneous--net.... 15 789,148,000 (3,861,829,788) 13,431,326,688 5,819,465
-------------- -------------- -------------- ----------
Other Income (Charges)--
Net.................... (3,627,019,000) (8,194,534,285) 9,364,599,151 4,057,451
-------------- -------------- -------------- ----------
CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING
PRINCIPLE.............. 2 -- 1,048,136,128 -- --
-------------- -------------- -------------- ----------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAX.................... (1,822,295,000) (2,374,817,221) 7,657,273,783 3,317,709
PROVISION FOR INCOME
TAX.................... 2,10 1,095,450,000 1,534,388,150 4,173,487,000 1,808,270
-------------- -------------- -------------- ----------
NET INCOME (LOSS)....... (2,917,745,000) (3,909,205,371) 3,483,786,783 1,509,439
-------------- -------------- -------------- ----------
</TABLE>
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-37
<PAGE>
PT RAJASA HAZANAH PERKASA
STATEMENT OF DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
<TABLE>
<CAPTION>
1993 1994 1995
------------- -------------- --------------------------
U.S. $
RP RP RP (NOTE 3)
------------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
DEFICIT AT BEGINNING OF
YEAR................... 3,235,788,832 6,153,533,832 10,062,739,203 4,359,938
NET LOSS (INCOME)....... 2,917,745,000 3,909,205,371 (3,483,786,783) (1,509,439)
------------- -------------- -------------- ----------
DEFICIT AT END OF YEAR.. 6,153,533,832 10,062,739,203 6,578,952,420 2,850,499
============= ============== ============== ==========
</TABLE>
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-38
<PAGE>
PT RAJASA HAZANAH PERKASA
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
<TABLE>
<CAPTION>
1993 1994 1995
--------------- -------------- ----------------------------
U.S. $
RP RP RP (NOTE 3)
--------------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Income (loss) before
provision for income
tax.................... (1,822,295,000) (2,374,817,221) 7,657,273,783 3,317,709
Adjustments to reconcile
income (loss) before
provision for income
tax to net cash
provided by (used in)
operating activities:
Amortization of
deferred charges..... -- 6,429,397,219 4,819,331,622 2,088,099
Depreciation.......... 12,595,321,000 1,215,863,781 749,562,756 324,767
Provisions for:
Doubtful accounts... 39,239,000 469,876,000 62,739,169 27,183
Inventory
obsolescence....... -- 891,089,416 2,967,643,196 1,285,807
Gain on disposal of
network assets....... -- -- (10,967,490,528) (4,751,945)
Gain on disposals of
property and
equipment............ (850,000) (2,936,000) (344,054,448) (149,070)
Changes in operating
assets and
liabilities:
Accounts
receivable......... (783,972,000) (1,208,001,018) 216,000,856 93,588
Inventories......... (4,569,467,000) (2,163,187,253) 348,812,887 151,132
Prepaid tax and
expenses........... 1,882,755,000 2,297,831,520 363,641,317 157,557
Accounts payable.... 4,042,779,168 (6,732,762,394) 8,701,433,227 3,770,118
Accrued expenses.... 2,123,728,000 3,053,148,400 (6,194,250,232) (2,683,817)
Taxes payable
(excluding
corporate income
tax)............... (2,116,879,000) (2,204,640,569) (4,585,265,495) (1,986,683)
Payments of corporate
income tax........... (608,930,000) (754,409,150) (2,994,670,754) (1,297,518)
--------------- -------------- --------------- -----------
Net Cash Provided by
(Used in) Operating
Activities............. 10,781,429,168 (1,083,547,269) 800,707,356 346,927
--------------- -------------- --------------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Decrease (increase) in
deferred charges....... (8,908,137,000) (2,696,599,110) 38,150,067,797 16,529,492
Proceeds from sales of
property and
equipment.............. 909,000 61,375,000 498,794,393 216,115
Increase in advance for
investment in shares of
stock.................. -- -- (29,112,810,000) (12,613,869)
Acquisitions of property
and equipment.......... (3,411,300,000) (434,255,000) (441,602,868) (191,336)
Proceeds from casualty
insurance.............. -- 33,900,000 -- --
--------------- -------------- --------------- -----------
Net Cash Provided by
(Used in) Investing
Activities............. (12,318,528,000) (3,035,579,110) 9,094,449,322 3,940,402
--------------- -------------- --------------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from capital
stock issuance......... -- -- 24,000,000,000 10,398,614
Decrease (increase) in
due from stockholders.. (1,189,479,000) (2,352,285,800) 4,041,764,800 1,751,198
Increase (decrease) in
long-term debts........ 5,643,333,000 (5,364,648,026) (24,806,409,709) (10,748,011)
Increase in due from an
affiliate.............. -- -- (8,210,270,047) (3,557,309)
Increase (decrease) in
short-term loans....... 3,930,456,000 9,830,051,048 (6,347,377,490) (2,750,164)
Decrease in payable to
former stockholders.... (4,500,000,000) -- -- --
--------------- -------------- --------------- -----------
Net Cash Provided by
(Used in) Financing
Activities............. 3,884,310,000 2,113,117,222 (11,322,292,446) (4,905,672)
--------------- -------------- --------------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ 2,347,211,168 (2,006,009,157) (1,427,135,768) (618,343)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR...... 6,629,642,000 8,976,853,168 6,970,844,011 3,020,296
--------------- -------------- --------------- -----------
CASH AND CASH
EQUIVALENTS AT END OF
YEAR................... 8,976,853,168 6,970,844,011 5,543,708,243 2,401,953
=============== ============== =============== ===========
</TABLE>
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-39
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
1. GENERAL
PT Rajasa Hazanah Perkasa (the Company) was established on December 17, 1984
based on notarial deed No. 22 of Pariwondo Soekarno SH. The deed of
establishment was approved by the Ministry of Justice (MOJ) in its decision
letter No. C2-2666-HT.01.01.TH'85 dated May 8, 1985, registered at the South
Jakarta Court of Justice under No. 503/Not/1985/PN.JKT.SEL on July 24, 1985
and was published in State Gazette No. 82, Supplement No. 1199 dated October
14, 1986. The Company's articles of association has been amended from time to
time, most recently by notarial deed No. 41 of Sinta Susikto SH dated November
9, 1995.
According to Article No. 2 of the Company's articles of association, the
Company is engaged in various business activities.
The Company changed its status to foreign capital investment based on the
approval of Investment Coordinating Board No. 22/V/PMA/11995 dated May 26,
1995 and No. 1226/A.6/1995 dated September 28, 1995.
Since 1985, the Company, in association with PT Telekomunikasi Indonesia
(Telkom), has provided cellular telephone connection services which are
integrated into the national telephone network, covering the Jakarta-Puncak-
Bandung area. Based on Letter from Ministry of Finance No. S-611/MK.016/1995
dated October 23, 1995, the Company in association with Telkom, established a
joint venture company, PT Mobile Selular Indonesia (Mobisel) which is engaged
in cellular telephone connection services covering the West Java, Lampung,
Jakarta, Central Java, Bali and Lombok areas. On November 30, 1995, the
Company transferred its cellular mobile telephone networks as advance for
investment in shares of stock of Mobisel (see Note 15).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statements
The financial statements have been prepared on the historical cost basis of
accounting, except for inventories which are valued at the lower of cost or
net realizable value (market).
Cash Equivalents
Time deposits and other short-term investments with maturities of three
months or less at the time of placement or purchase are considered as "Cash
Equivalents".
Allowance for Doubtful Accounts
The Company provides allowance for doubtful accounts based on a review of
the status of the individual receivable accounts at the end of the year.
Inventories
Inventories are stated at the lower of cost or net realizable value
(market). Cost is determined by the first-in, first-out method. The Company
provides an allowance for obsolescence on inventories based on a periodic
review of their conditions.
Transactions with Related Parties
The Company has transactions with entities which are regarded as having
special relationship as defined under Statement of Financial Accounting
Standards No. 7, "Related Party Disclosures".
F-40
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed based on the double-declining balance method at the
following rates:
<TABLE>
<CAPTION>
RATES
-----------
<S> <C>
Vehicles...................................................... 50%
Furniture and fixtures........................................ 50% and 25%
Building improvements......................................... 50%
Computer equipment............................................ 25%
Cellular mobile telephones.................................... 25%
Machinery and equipment....................................... 25%
</TABLE>
The cost of maintenance and repairs is charged to income as incurred;
significant renewals and betterments are capitalized. When assets are retired
or otherwise disposed of, their costs and the related accumulated depreciation
are removed from the accounts and any resulting gain or loss is reflected in
income for the year.
Prepaid Expenses
Prepaid expenses are amortized over the periods benefited using the
straight-line method.
Deferred Charges
Certain expenditures of which the benefits extend over one year are deferred
and amortized over their estimated useful lives using the straight-line
method.
Revenue and Expense Recognition
Revenue is recorded as earned when products are delivered to the customers
or when services are rendered. Expenses are recognized when these are
incurred.
Revenue is obtained from three primary sources:
. connection charge for each new line sold.
. pulse-sharing amounting to 56% of the charges raised for local calls on
the cellular network.
. sales, repair, maintenance and rental of outstations and accessories.
Effective January 1, 1994, the Company changed its revenue recognition
policy in connection with its pulse-sharing revenue. Previously, the Company
had recognized its pulse-sharing revenue in accordance with the billing
practices of Telkom. For purposes of monthly billing, Telkom has used a cut-
off date of the 20th of the month to determine a customer's bill. Accordingly,
all pulses incurred from the 20th to the end of the month are recognized as
part of the next month's billing. Effective January 1, 1994, the Company
changed its revenue recognition to record pulse-sharing revenue as incurred.
The Company adopted this method in 1995 as required by a recently issued
Statement of Financial Accounting Standards No 35. This change has been
recognized in the statement of income as a cumulative effect of a change in
accounting principle which amounted to Rp 1,048,136,128 in 1994.
Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded at the rates of
exchange prevailing at the time the transactions are made. At balance sheet
date, assets and liabilities denominated in foreign currency are adjusted
F-41
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
to reflect the rates of exchange prevailing at such date, and any resulting
gains or losses are credited or charged to operations of the current year.
Provision for Income Tax
Provision for income tax is determined on the basis of estimated taxable
income for the year. No deferred tax is provided for the timing differences in
the recognition of income and expenses for financial reporting and income tax
purposes.
3. TRANSLATIONS OF INDONESIAN RUPIAH AMOUNTS INTO UNITED STATES DOLLAR AMOUNTS
The financial statements are stated in Indonesian rupiah. The translations
of the Indonesian rupiah amounts into United States dollars are included
solely for the convenience of the readers, using the average buying and
selling rates published by Bank Indonesia (Central Bank) on December 31, 1995
of Rp 2,308 to U.S.$ 1. The convenience translations should not be construed
as representations that the Indonesian rupiah amounts have been, could have
been, or could in the future be, converted into United States dollars at this
or any other rate of exchange.
4. CASH AND CASH EQUIVALENTS
A portion of cash amounting to Rp 1,159,931,000, Rp 70,234,145 and Rp
50,417,840 in 1993, 1994 and 1995, respectively, and all of cash equivalents
are used as collateral for the short-term loans and long-term debts (see Notes
8 and 12). Cash equivalents represent time deposits with annual interest at
3.42%-6% in 1993 and 1994 and 4.5%-6.06% in 1995.
5. ACCOUNTS RECEIVABLE--TRADE
This account consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Pulse revenue receivables.. Rp 640,116,000 Rp 2,408,308,173 Rp 2,579,752,929
Outstation receivables..... 7,480,652,000 1,047,468,674 606,278,414
---------------- ---------------- ----------------
Total...................... 8,120,768,000 3,455,776,847 3,186,031,343
Less allowance for doubtful
accounts................... 5,908,861,000 505,744,829 568,483,998
---------------- ---------------- ----------------
Net........................ Rp 2,211,907,000 Rp 2,950,032,018 Rp 2,617,547,345
================ ================ ================
</TABLE>
Trade receivables are used as collateral for short-term loans and long-term
debts (see Notes 8 and 12).
F-42
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cellular mobile
telephones................. Rp 3,338,281,000 Rp 5,668,441,207 Rp 5,009,533,582
Optional equipment......... 742,085,000 1,828,198,651 2,286,941,570
Mobile telephones in
transit.................... 1,344,728,000 173,860,000 25,211,819
---------------- ---------------- ----------------
Total...................... 5,425,094,000 7,670,499,858 7,321,686,971
Less allowance for
obsolescence............... -- 891,089,416 3,858,732,612
---------------- ---------------- ----------------
Net........................ Rp 5,425,094,000 Rp 6,779,410,442 Rp 3,462,954,359
================ ================ ================
</TABLE>
Certain inventories are used as collateral for certain short-term loans (see
Note 8).
7. PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------
BEGINNING ENDING
BALANCE ADDITIONS DISPOSALS BALANCE
---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
COST
Vehicles................ Rp 2,452,282,407 Rp 432,687,868 Rp 710,052,795 Rp 2,174,917,480
Furniture and fixtures.. 403,108,997 -- 2,276,940 400,832,057
Building improvements... 474,708,473 -- -- 474,708,473
Computer equipment...... 513,888,700 7,880,000 41,667,500 480,101,200
Cellular mobile
telephones.............. 325,786,242 -- 146,149,131 179,637,111
Machinery and
equipment............... 203,951,126 1,035,000 -- 204,986,126
---------------- -------------- -------------- ----------------
Total................... 4,373,725,945 441,602,868 900,146,366 3,915,182,447
---------------- -------------- -------------- ----------------
ACCUMULATED DEPRECIATION
Vehicles................ 1,654,460,019 499,983,205 676,943,561 1,477,499,663
Furniture and fixtures.. 234,032,459 45,246,268 1,759,910 277,518,817
Building improvements... 261,340,006 53,342,117 -- 314,682,123
Computer equipment...... 149,419,287 96,819,502 18,620,970 227,617,819
Cellular mobile
telephones.............. 68,304,517 21,353,642 48,081,980 41,576,179
Machine and equipment... 83,091,043 32,818,022 -- 115,909,065
---------------- -------------- -------------- ----------------
Total................... 2,450,647,331 749,562,756 745,406,421 2,454,803,666
---------------- -------------- -------------- ----------------
Net Book Value.......... Rp 1,923,078,614 Rp 1,460,378,781
================ ================
</TABLE>
Depreciation charged to operations amounted to Rp 12,595,321,000, Rp
1,215,863,781 and Rp 749,562,756 in 1993, 1994 and 1995, respectively. The
Company's property and equipment are used as collateral to the short-term
loans and long-term debts (see Notes 8 and 12).
F-43
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. SHORT-TERM LOANS
This account represents loans obtained from the following:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ----------------- ----------------
<S> <C> <C> <C>
PT Bank Utama............... Rp 5,435,000,000 Rp 15,822,744,048 Rp 9,475,000,000
PT Lippobank................ -- -- 366,558
PT Bank Dagang Negara....... 557,693,000 -- --
---------------- ----------------- ----------------
Total....................... Rp 5,992,693,000 Rp 15,822,744,048 Rp 9,475,366,558
================ ================= ================
</TABLE>
The loans bear annual interest ranging from 20% to 24%. The loans are
collateralized with certain inventories, receivables, cash, property and
equipment of the Company, corporate guarantee from PT Bina Reksa Perdana, a
stockholder and certain property and equipment of affiliates.
9. ACCOUNTS PAYABLE--TRADE
This account consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- --------------
<S> <C> <C> <C>
Ericsson Radio System AB..... Rp 1,205,839,000 Rp 1,762,803,091 Rp --
Nokia Mobile Phones (H.K.)
Ltd. ........................ 3,067,412,000 1,527,438,000 --
Dancall Radio A/S............ 746,940,000 347,600,001 --
PT Erindo Utama.............. 445,557,000 239,675,567 --
Rose Andersen Pte., Ltd...... 350,260,000 -- --
Others (below Rp 150 million
each)........................ 421,160,000 417,206,853 564,424,841
---------------- ---------------- --------------
Total........................ Rp 6,237,168,000 Rp 4,294,723,512 Rp 564,424,841
================ ================ ==============
</TABLE>
10. TAXES PAYABLE
This account consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Estimated income tax payable
(less tax prepayment of Rp
97,784,316 in 1995)........ Rp 2,160,015,000 Rp 2,939,994,278 Rp 4,075,702,684
Income taxes:
Article 21................ 448,012,000 1,811,256,939 268,692,322
Article 22................ 452,471,000 -- --
Article 23................ 102,565,000 85,822,512 357,878,479
Article 25................ -- -- 43,107,840
Article 26................ 755,072,000 319,049,988 174,618,857
Value Added Tax on Import... 5,832,976,000 3,170,325,714 --
---------------- ---------------- ----------------
Total....................... Rp 9,751,111,000 Rp 8,326,449,431 Rp 4,920,000,182
================ ================ ================
</TABLE>
As of December 31, 1994, the Company had accrued taxes payable amounting to
Rp 8,326,449,431. The Company has received several tax assessments and
additional tax assessments for the Company's tax returns for 1988, 1989, 1990,
1992, 1993 and 1994. The total taxes payable including interest and penalty of
the said tax assessments amounted to RP 1,798,556,404 and has been fully paid
by the Company in 1995.
F-44
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation between income (loss) before provision for income tax, as
shown in the statement of income, and estimated taxable income for the year
ended December 31, 1995 (with comparative figures for 1993 and 1994) is as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Income (loss) before
provision for income
tax per statement of
income................. Rp (1,822,295,000) Rp (2,374,817,221) Rp 7,657,273,783
Timing differences:
Amortization of
deferred charges..... -- -- 4,819,331,622
Provision for
inventory
obsolescence......... -- 891,089,416 2,967,643,196
Difference in
beginning balance of
property and
equipment as
regulated by
Directorate General
of Taxes Circular
Letter No. 44/1995... -- -- 1,211,445,061
Depreciation.......... 5,653,227,000 1,727,531,584 473,000,943
Provision for
uncollectible trade
receivables.......... 39,239,000 469,876,000 62,739,169
Gain on disposal of
network assets....... -- -- (5,856,159,247)
Gain on disposals of
property and
equipment............ -- -- (401,162,201)
Permanent differences:
Donation............ 18,540,000 106,605,000 2,090,349,100
Employees' benefits
in kind............ 704,497,000 865,755,000 599,409,987
Entertainment....... 87,821,000 446,774,000 461,698,721
Interest expense.... -- -- 206,746,361
Tax penalty and
interest........... -- -- 17,415,989
Taxes, other than
income tax......... (2,745,464,000) 975,934,000 --
Others.............. 2,473,158,000 1,292,362,000 --
Non-taxable income
Interest already
subjected to final
income tax......... -- -- (368,942,024)
----------------- ----------------- -----------------
Estimated taxable
income............... Rp 4,408,723,000 Rp 4,401,109,779 Rp 13,940,790,460
================= ================= =================
</TABLE>
F-45
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The provision for income tax and computation of the estimated corporate
income tax payable are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- -----------------
<S> <C> <C> <C>
Estimated taxable income
(rounded-off)............ Rp 4,408,723,000 Rp 4,401,109,000 Rp 13,940,790,000
Provision for income tax
before adjustment......... 1,537,053,050 1,534,388,150 4,173,487,000
Adjustment for prior years
overaccrual............... 441,603,050 -- --
---------------- ---------------- -----------------
Provision for income tax
after adjustment......... 1,095,450,000 1,534,388,150 4,173,487,000
---------------- ---------------- -----------------
Prepayments of income tax
Article 22.............. -- -- 52,898,433
Article 23.............. -- -- 1,350,000
Article 25.............. -- -- 43,535,883
---------------- ---------------- -----------------
-- -- 97,784,316
---------------- ---------------- -----------------
Estimated corporate income tax payable for
1995.................. -- -- 4,075,702,684
1994.................. -- 1,534,388,150 --
1993 and 1992......... 2,160,015,000 1,405,606,128 --
---------------- ---------------- -----------------
Total................. Rp 2,160,015,000 Rp 2,939,994,278 Rp 4,075,702,684
================ ================ =================
</TABLE>
11. ACCRUED EXPENSES
The details of this account are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Interest..................... Rp 896,956,000 Rp 2,240,442,112 Rp 572,321,782
Consulting services.......... -- 251,528,475 404,271,431
Salaries..................... 176,420,000 208,387,989 167,328,782
Professional services........ 2,693,191,000 4,331,800,000 22,531,652
Legal fees................... 119,600,000 33,607,200 18,133,652
Training..................... 137,448,000 67,420,950 --
Others....................... 483,586,000 427,162,674 181,511,869
---------------- ---------------- ----------------
Total........................ Rp 4,507,201,000 Rp 7,560,349,400 Rp 1,366,099,168
================ ================ ================
</TABLE>
Accrued professional services in 1993 and 1994 resulted from a consulting
services agreement between the Company and Bell Atlantic International, Inc.
Under the agreement, the Company had to pay annual fee amounting to U.S.$
1,600,000 for technical services provided by Bell Atlantic International, Inc.
F-46
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
12. LONG-TERM DEBTS
The details of this account are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------------- ---------------- ----------------
<S> <C> <C> <C>
Rupiah
PT Bank Indonesia Raya... Rp 2,658,366,000 Rp 2,482,897,203 Rp 1,718,555,179
PT Bank Tamara........... 3,396,921,000 2,170,692,738 676,853,686
PT Lippobank............. 1,761,226,000 1,060,203,233 243,565,458
PT Bank Niaga............ -- -- 76,297,200
PT Astra Credit Company.. -- -- 74,429,400
PT Arthacakra Multi Fi-
nance................... -- -- 39,666,678
PT Tunas Financindo Cor-
poration................ -- -- 20,780 664
U.S. Dollar
Svenska Handelsbanken,
Singapore
(U.S.$ 5,973,984)....... 16,764,693,000 13,142,764,800 --
Bell Atlantic
International, Inc.
(U.S.$ 4,000,000)....... 8,440,000,000 8,800,000,000 --
----------------- ---------------- ----------------
33,021,206,000 27,656,557,974 2,850,148,265
Less current maturities.... 18,422,245,000 19,054,254,112 2,714,491,758
----------------- ---------------- ----------------
Long-term portion.......... Rp 14,598,961,000 Rp 8,602,303,862 Rp 135,656,507
================= ================ ================
</TABLE>
F-47
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Based on the Joint Venture Agreement No. PKS 234/HK.810/UTA-00/95 dated
November 30, 1995 between the Company, Telkom and Yayasan Dana Pensiun Pegawai
Telkom (YDPP Telkom), the Company has transferred the balance of the loan from
Svenska Handelsbanken, Singapore to Mobisel as of June 30, 1995 amounting Rp
10,752,598,140 (see Note 15).
The above loans are collateralized with 3,000 lines cellular telephone
network and certain receivables, property and equipment and cash and cash
equivalents of the Company and property and equipment of an affiliate. The
Rupiah loans bear interest at rates ranging from 15% to 23% per annum in 1993
and 1994, and 20% to 23% per annum in 1995. The loan from Svenska
Handelsbanken, Singapore bears annual interest at 0.55% above one month SIBOR
and the loan from Bell Atlantic International, Inc. bears annual interest at
12%.
13. CAPITAL STOCK
The Company's stockholders and their respective share ownerships as of
December 31, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1993 AND 1994
-------------------------------------------
NUMBER OF
SHARES ISSUED PERCENTAGE
STOCKHOLDERS AND PAID OF OWNERSHIP AMOUNT
------------ ------------- ------------ ----------------
<S> <C> <C> <C>
PT Panutan Duta.................. 500 50% Rp 500,000,000
PT Bina Reksa Perdana............ 500 50 500,000,000
----- --- ----------------
Total............................ 1,000 100% Rp 1,000,000,000
===== === ================
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------
NUMBER OF
SHARES ISSUED PERCENTAGE
STOCKHOLDERS AND PAID OF OWNERSHIP AMOUNT
------------ ------------- ------------ -----------------
<S> <C> <C> <C>
PT Bina Reksa Perdana......... 12,500 50% Rp 12,500,000,000
International Wireless
Communications, Inc.......... 6,250 25 6,250,000,000
PT Deltona Satya Dinamika..... 6,250 25 6,250,000,000
------ --- -----------------
Total......................... 25,000 100% Rp 25,000,000,000
====== === =================
</TABLE>
Based on the Extraordinary General Meeting of the Stockholders dated
November 9, 1995 which was notarized by deed No. 41 of Sinta Susikto SH, on
the same date, the stockholders approved the increase in the Company's
authorized and issued capital stock from Rp 1 billion to Rp 25 billion and the
changes in the composition of stockholders. The above changes were approved by
MOJ in its decision letter No. C2-1451.HT.01.04.TH'96 dated February 5, 1996.
14. REVENUES AND COST OF REVENUES
The details of revenues are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Pulse sharing........... Rp 14,107,885,000 Rp 11,313,620,949 Rp 12,249,170,887
Sales of outstations.... 17,966,406,000 18,434,605,503 4,113,518,256
Connecting charges...... 5,798,980 000 4,602,300,000 126,500,000
Repair, maintenance and
others................. 297,741,000 631,076,838 323,174,655
----------------- ----------------- -----------------
Total................... Rp 38,171,012,000 Rp 34,981,603,290 Rp 16,812,363,798
================= ================= =================
</TABLE>
Cost of revenues amounted to Rp 23,690,291,000, Rp 17,425,723,608 and Rp
7,679,495,493 for 1993, 1994 and 1995, respectively.
F-48
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
15. COMMITMENTS
In its operations, the Company entered into several agreements with Telkom,
whereby the Company should build cellular mobile telephone networks. The costs
financed by the Company to build the cellular mobile telephone networks was
capitalized, and was presented under the account "Deferred Charges" which was
amortized over the revenue sharing period. In accordance with the term of
cooperation agreements with Telkom, ownership of the assets will belong to
Telkom at the end of the revenue sharing period. As compensation, the Company
is entitled to receive 100% of the revenue derived from customers for selling
and installing outstation, maintenance and repair of the outstation; while
during the revenue sharing period, the pulse revenue from the outgoing local
calls and monthly customers' fixed charges is shared by both parties at a 56%
sharing in favor of the Company and 44% sharing in favor of Telkom. Telkom is
entitled to receive 100% of the revenue from international call pulses. The
outstanding agreements as of December 31, 1994 are as follows:
a. Agreement No. 22/KS.010/UTA-00/89, dated January 23, 1989, stipulates
that the Company shall build a 5,000 line cellular mobile telephone
network for the Jakarta-Bandung area (Phase II). The revenue sharing
period is six years.
b. Agreement No. 312/KS.010/UTA-00/91, dated June 13, 1991, stipulates that
the Company shall build a 15,000 line cellular mobile telephone network
for the Jakarta-Bandung area (Phase III). The revenue sharing period is
approximately eight years and ten months.
On November 30, 1995, as covered by notarial deed No. 210 dated November 30,
1995 of Sinta Susikto SH, the Company, Telkom and YDPP Telkom established a
joint venture company named PT Mobile Selular Indonesia.
In accordance with the joint venture agreement, the Company transferred
network assets to Mobisel as capital contribution. The agreed value of the
assets transferred totaling Rp 52,342,326,140 is allocated--as follows:
<TABLE>
<S> <C>
As capital contributions:
The Company......................................... Rp 29,112,810,000
Telkom.............................................. 10,397,432,000
YDPP Telkom......................................... 2,079,486,000
Assumption of the Company's loan from Svenska
Handelsbanken, Singapore............................. 10,752,598,140
-----------------
Total................................................. Rp 52,342,326,140
=================
</TABLE>
The excess of the Company's portion on capital contribution over the net
book value of the network assets transferred amounting to Rp 10,967,490,528 is
presented under "Other Income (Charges)--Miscellaneous".
Under existing regulations, Mobisel can only operate upon the approval of
its articles of associations by MOJ. As such, the following arrangements and
conditions are adopted with respect to the transfer and assumption of the
operations of, and recognition and sharing of revenues being generated from,
the above-mentioned assets transferred to Mobisel:
a. The operations of the network assets will be transferred to and assumed
by Mobisel effective on the 20th day of the month of approval of its
articles of association by MOJ, with the condition that if the approval
is made exactly on the 20th day of the said month, then the transfer
shall be effective on that date.
b. Revenues generated from the operations of the transferred assets can
only be recognized by Mobisel starting from the effectivity date of the
transfer being referred to in point (a). Prior to the said date, all
revenues generated are recognized by the Company.
c. The revenue sharing agreement between Telkom and the Company covering
the transferred assets is still valid as long as the condition in point
(a) is not yet fulfilled.
F-49
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Since Mobisel's deed of establishment was approved by MOJ in its decision
letter No. C2-1238.HT.01.01-TH'96 dated January 31, 1996, the Company recorded
the assets transferred as capital contribution to Mobisel as "Advance for
Investment in Shares of Stock". Accordingly, the Company is still entitled to
the pulse sharing revenue until February 20, 1996.
16. CONTINGENT LIABILITIES
The Company is in a dispute with PT Larikerindo relating to the settlement
of loan. On August 9, 1994, the court dismissed the claims against the
Company. However, PT Larikerindo filed an appeal concerning the court
decision. On December 29, 1995, the higher court again dismissed the claims.
17. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED
BY THE COMPANY AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The financial statements have been prepared in accordance with Indonesian
GAAP which differ in certain aspects from U.S. GAAP.
The differences are reflected in the approximations provided in Note 18 and
arise due to the items discussed in the following paragraphs:
a. Income Taxes
Under Indonesian GAAP, it is acceptable to recognize Income Tax expense
based upon the estimated current Income Tax liability on the current year's
earnings. When income and expense recognition for Income
F-50
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Tax purposes does not occur in the same year as income and expense recognition
for financial reporting purposes, the resulting temporary differences are not
considered in the computation of Income Tax expense for the year.
Under U.S. GAAP, the liability method is used to calculate the Income Tax
provision. Under the liability method, deferred tax assets or liabilities are
recognized for differences between the financial reporting and tax bases of
assets and liabilities at each reporting date.
b. Regulation
The Company provides telephone service in Indonesia and therefore is subject
to the regulatory control of the Minister of Tourism, Posts and
Telecommunications of the Republic of Indonesia. Rates for services are
tariff-regulated. Although changes in rates for services are authorized and
computed based on a decree issued by the Minister of Tourism, Posts and
Telecommunications of the Republic of Indonesia, these are not based on a
fixed rate of return and are not designed to provide for the recovery of the
Company's cost of services. Accordingly, the requirements of U.S. GAAP related
to a business whose rates are regulated on the basis of its actual costs are
not applicable to the Company's financial statements.
c. Presentation of the Statements of Stockholders' Equity
Under Indonesian GAAP, except for public companies, it is not required to
present statements of retained earnings. Under U.S. GAAP, the Company is
required to present statements of stockholders' equity.
18. RECONCILIATION BETWEEN NET INCOME AND STOCKHOLDERS' EQUITY DETERMINED
UNDER INDONESIAN AND U.S. GAAP
The following is a summary of the significant adjustments to net income for
the years ended December 31, 1993, 1994 and 1995 and to stockholders' equity
as of December 31, 1993, 1994 and 1995 which would be required if U.S. GAAP
had been applied instead of Indonesian GAAP in the financial statements:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- -------------------------------
RP RP RP U.S.$ (NOTE 3)
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Net income (loss)
according to the
financial statements
prepared under
Indonesian GAAP........ (2,917,745,000) (3,909,205,371) 3,483,786,783 1,509,439
Adjustments due to:
Income tax............ 1,992,363,100 (974,573,164) 4,147,273,998 1,796,912
Gain on disposal of
network assets....... -- -- (10,967,490,528) (4,751,946)
Expenses incurred
during preoperating
stage of Mobisel..... -- -- (762,417,085) (330,337)
-------------- -------------- --------------- ----------
Approximate net loss in
accordance with U.S.
GAAP................... (925,381,900) (4,883,778,535) (4,098,846,832) (1,775,932)
============== ============== =============== ==========
</TABLE>
F-51
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- -------------------------------
RP RP RP U.S.$ (NOTE 3)
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Stockholders' equity
according to the
financial statements
prepared under
Indonesian GAAP........ (5,153,533,832) (9,062,739,203) 18,421,047,580 7,981,390
Adjustments due to:
Income tax............ 1,856,557,219 881,984,055 5,029,258,053 2,179,055
Gain on disposal of
network assets....... -- -- (10,967,490,528) (4,751,946)
Expenses incurred
during preoperating
stage of Mobisel..... -- -- (762,417,085) (330,337)
-------------- -------------- --------------- ----------
Approximate
stockholders' equity
(capital deficiency) in
accordance with U.S.
GAAP................... (3,296,976,613) (8,180,755,148) 11,720,398,020 5,078,162
============== ============== =============== ==========
</TABLE>
With regard to the balance sheets and statements of income, the following
significant captions determined under U. S. GAAP would have been:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- ------------------------------
RP RP RP U.S.$ (NOTE 3)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance sheets
Current assets........ 21,565,570,518 17,774,961,937 13,598,669,197 5,891,971
Total assets.......... 61,657,457,387 56,134,806,311 66,542,206,450 28,831,112
Current liabilities... 50,355,473,000 55,713,257,597 40,380,349,030 17,495,818
Total liabilities..... 64,954,434,000 64,315,561,459 54,821,808,430 23,752,950
Statements of income
Operating income
(loss)............... 1,804,724,000 4,771,580,936 (2,796,492,632) (1,211,652)
</TABLE>
19. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP
The following information is presented on the basis of U.S. GAAP:
a. Income Tax
The tax effect on significant temporary differences is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------------- --------------- -----------------
<S> <C> <C> <C>
Deferred tax assets--
current
Provision for inventory
obsolescence........... Rp -- Rp (311,881,296) Rp (1,157,619,784)
Provision for
uncollectible trade
receivable............. (2,068,101,350) (177,010,690) (170,545,199)
----------------- --------------- -----------------
Total deferred tax
assets--current........ (2,068,101,350) (488,891,986) (1,328,164,983)
----------------- --------------- -----------------
Deferred tax assets--
non-current
Gain on disposal of
network assets......... -- -- (3,290,247,158)
Property and equipment.. -- (30,202,400) (410,845,912)
Network assets.......... (362,889,669) (362,889,669) --
----------------- --------------- -----------------
Total deferred tax
assets--non-current.... (362,889,669) (393,092,069) (3,701,093,070)
----------------- --------------- -----------------
Deferred tax
liabilities--non-
current
Property and equipment.. 574,433,800 -- --
----------------- --------------- -----------------
Total deferred tax--
net..................... Rp (1,856,557,219) Rp (881,984,055) Rp (5,029,258,053)
================= =============== =================
</TABLE>
F-52
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The temporary differences, on which deferred tax assets have been computed
are not deductible for income tax purposes until the provision for inventory
obsolescence and provision for uncollectible trade receivable are written-off.
The differences between the book and tax bases of gain on disposal of network
assets, property and equipment and network assets are due to the differing
recognition methods for Income Tax and financial reporting purposes.
The Income Tax provision reported under U.S. GAAP differs from the expected
provision due to certain permanent differences which are detailed below:
<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
1993 1994 1995
-------------- -------------- ------------------------------
RP RP RP U.S.$ (NOTE 3)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Approximate loss before
income tax in
accordance with U.S.
GAAP................... (1,822,295,000) (2,374,817,221) (4,072,633,830) (1,764,573)
Effect of permanent
differences:
Donation.............. 18,540,000 106,605,000 2,090,349,100 905,697
Expenses incurred
during preoperating
stage of Mobisel..... -- -- 762,417,085 330,337
Employees' benefits in
kind................. 704,497,000 865,755,000 599,499,987 259,749
Entertainment......... 87,821,000 446,774,000 461,698,721 200,043
Interest expense...... -- -- 206,746,361 89,578
Tax penalty and
interest............. -- -- 17,415,989 7,546
Interest income which
was already subjected
to final tax......... -- -- (368,942,024) (159,854)
Taxes, other than
income tax........... (2,745,464,000) 975,934,000 -- --
Others................ 2,473,158,000 1,292,362,000 -- --
-------------- -------------- -------------- ----------
538,552,000 3,687,430,000 3,769,185,219 1,633,096
-------------- -------------- -------------- ----------
Approximate income
(loss) before income
tax in accordance with
U.S. GAAP.............. (1,283,743,000) 1,312,612,779 (303,448,611) (131,477)
-------------- -------------- -------------- ----------
Provision for income tax
on taxable income in
accordance with U.S.
GAAP before
adjustment............. (455,310,050) 453,414,200 (99,784,400) (43,234)
Adjustment for changes
in tax rates............ -- -- 125,997,402 54,591
Adjustment for prior
years overaccrual....... (441,603,050) -- -- --
-------------- -------------- -------------- ----------
Provision for income tax
on taxable income in
accordance with U.S.
GAAP after adjustment.. (896,913,100) 453,414,200 26,213,002 11,357
-------------- -------------- -------------- ----------
</TABLE>
F-53
<PAGE>
PT RAJASA HAZANAH PERKASA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
b. Valuation and Qualifying Accounts
Activity in the Company's allowance for doubtful accounts for the years
ended December 31, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT COSTS
BEGINNING OF AND BALANCE AT
PERIOD EXPENSES DEDUCTIONS END OF PERIOD
------------- ----------- ------------- -------------
FOR THE YEARS ENDED RP RP RP RP
------------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
December 31, 1993........ 5,869,622,000 39,239,000 -- 5,908,861,000
December 31, 1994........ 5,908,861,000 469,876,000 5,872,992,171 505,744,829
December 31, 1995........ 505,744,829 62,739,169 -- 568,483,998
</TABLE>
Activity in the Company's allowance for inventory obsolescence for the years
ended December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO
OF COSTS AND BALANCE AT
PERIOD EXPENSES DEDUCTIONS END OF PERIOD
----------- ------------- ---------- -------------
FOR THE YEARS ENDED RP RP RP RP
------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
December 31, 1994........... -- 891,089,416 -- 891,089,416
December 31, 1995........... 891,089,416 2,967,643,196 -- 3,858,732,612
</TABLE>
20. RECLASSIFICATION OF ACCOUNTS
Certain accounts in 1993 and 1994 financial statements have been
reclassified to conform with the presentation of accounts in the 1995
financial statements.
F-54
<PAGE>
PT RAJASA HAZANAH PERKASA
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
(WITH COMPARATIVE FIGURES FOR 1993 AND 1994)
<TABLE>
<CAPTION>
CAPITAL STOCK STOCKHOLDERS' EQUITY
DESCRIPTION NOTES (ISSUED AND FULLY PAID) DEFICIT (CAPITAL DEFICIENCY)
----------- ----- ----------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Balance as of January 1,
1993................... Rp 1,000,000,000 Rp (3,235,788,832) Rp (2,235,788,832)
Net loss for 1993....... -- (2,917,745,000) (2,917,745,000)
----------------- ------------------- -----------------
Balance as of December
31, 1993............... 1,000,000,000 (6,153,533,832) (5,153,533,832)
Net loss for 1994....... -- (3,909,205,371) (3,909,205,371)
----------------- ------------------- -----------------
Balance as of December
31, 1994............... 1,000,000,000 (10,062,739,203) (9,062,739,203)
----------------- ------------------- -----------------
Approved during the
Extraordinary General
Meeting of the
Stockholders on
November 9, 1995:
Increase in the issued
and
fully paid-up capital
from
RP 1,000,000,000 to
RP 25,000,000,000.... 13 24,000,000,000 -- 24,000,000,000
Net income for 1995..... -- 3,483,786,783 3,483,786,783
----------------- ------------------- -----------------
Balance as of December
31, 1995............... Rp 25,000,000,000 Rp (6,578,952,420) Rp 18,421,047,580
================= =================== =================
</TABLE>
F-55
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-56
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
AND ITS SUBSIDIARY
(INCORPORATED IN MALAYSIA)
FINANCIAL STATEMENTS
FOR US REPORTING
THREE YEARS ENDED 31 DECEMBER 1995
F-57
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-58
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Syarikat Telefon Wireless (M) Sdn Bhd
We have audited the consolidated balance sheets of Syarikat Telefon Wireless
(M) Sdn Bhd ("STW") as at 31 December 1994 and 1995 and the related
consolidated profit and loss accounts, statements of shareholders equity and
cashflow statements for the three years ended 31 December 1995 together with
the notes, set out on pages F-64 to F-69. These Consolidated Financial
Statements are the responsibility of STW's management. Our responsibility is
to express an opinion on these Consolidated Financial Statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards in Malaysia which are essentially the same as United States
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 STW and
subsidiary as of 31 December 1994 and 1995, and of the results of their
operations and cash flows for each of the years in the three year-period ended
31 December 1995, in conformity with generally accepted accounting principles
in Malaysia.
Generally accepted accounting principles in Malaysia vary in certain
significant respects from generally accepted accounting principles in the
United States. Application of generally accepted accounting principles in the
United States would have affected stockholders' equity as of 31 December 1993,
1994 and 1995 and results of operations for each of the years in the three
year period ended 31 December 1995 to the extent summarized in Note 16 to the
Consolidated Financial Statements.
KPMG Peat Marwick
Public Accountants
Kuala Lumpur
Date: 17 July 1996
F-59
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD AND ITS SUBSIDIARY
(INCORPORATED IN MALAYSIA)
CONSOLIDATED BALANCE SHEETS
AT 31 DECEMBER 1994 AND 31 DECEMBER 1995
<TABLE>
<CAPTION>
1995 1994
----------- ----------
RM RM
ASSETS ----------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalent (Note 3)................... 3,067,969 2,819,563
Trade debtors....................................... 334,409 30,143
Other debtors (Note 4).............................. 2,673,274 586,013
Deposits & prepayments.............................. 471,918 125,246
----------- ----------
Total current assets.............................. 6,547,570 3,560,965
Fixed assets, net of accumulated depreciation of
RM5,993,049 (1995) and RM666,631 (1994) (Note 6)..... 80,383,813 29,046,193
License fee, net of accumulated amortisation of
RM30,000 (1995) and RM15,000 (1994).................. 270,000 285,000
Fixed deposit (Note 3)................................ 1,000,000 --
----------- ----------
Total assets...................................... 88,201,383 32,892,158
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... 531,499 333,977
Customers deposits.................................. 233,471 34,800
Other creditors and accruals........................ 257,381 495,417
Equipment supplier creditor......................... 3,926,233 --
Consultancy fees payable............................ 392,573 639,626
Provision for compensation to former shareholder.... 2,000,000 --
Term loan (secured) (Note 7)........................ -- 679,292
Hire purchase creditors (Note 8).................... 108,398 30,810
Taxes payable....................................... 43,550 27,000
----------- ----------
Total current liabilities......................... 7,493,105 2,240,922
Term loan (secured) (Note 7).......................... 54,639,164 5,566,206
Hire purchase creditors (Note 8)...................... 349,477 81,171
Loans from shareholders............................... -- 13,670,700
Shareholders' equity:
Common stock--RM1.00 par value, authorized
50,000,000 shares; issued and fully paid-up
46,418,000 (1995) and 16,280,000 (1994) shares
(Note 9)........................................... 46,418,000 16,280,000
Revaluation reserve (Note 10)....................... 2,971,432 --
Accumulated deficit................................. (23,669,795) (4,946,841)
----------- ----------
Total shareholders' equity........................ 25,719,637 11,333,159
----------- ----------
Total liabilities and shareholders' equity........ 88,201,383 32,892,158
=========== ==========
</TABLE>
The notes set out on pages F-64 to F-69 form an integral part of,
and should be read in conjunction with, these accounts.
F-60
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD. AND ITS SUBSIDIARY
(INCORPORATED IN MALAYSIA)
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE THREE YEARS ENDED 31 DECEMBER 1995
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ------
RM RM RM
----------- ---------- ------
<S> <C> <C> <C>
Revenue
Telecommunication revenues.................. 934,808 43,240 --
Income from property rentals................ 944,485 191,258 --
----------- ---------- ------
Total revenue............................. 1,879,293 234,498 --
Operating Expenses
Cost of telecommunication revenues.......... 1,045,086 288,959 --
Depreciation................................ 5,669,938 662,039 4,592
General and administrative expenses......... 10,235,999 3,787,420 5,334
Preliminary & preoperating expenses......... -- 406,500 --
----------- ---------- ------
Total Operating Expenses.................. 16,951,023 5,144,918 9,926
Operating loss................................ (15,071,730) (4,910,420) (9,926)
Other income/(expense)
Provision for compensation to former
shareholder................................ (2,000,000) -- --
Interest income............................. 27,466 102,923 3,452
Interest expense............................ (1,661,690) (105,117) --
----------- ---------- ------
Net loss before income taxes.................. (18,705,954) (4,912,614) (6,474)
Income taxes (Note 14)........................ (17,000) (26,753) (1,000)
----------- ---------- ------
Net loss...................................... (18,722,954) (4,939,367) (7,474)
=========== ========== ======
</TABLE>
The notes set out on pages F-64 to F-69 form an integral part of,
and should be read in conjunction with, these accounts.
F-61
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE THREE YEARS ENDED 31 DECEMBER 1995
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ---------
RM RM RM
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss............................... (18,722,954) (4,939,367) (7,474)
Adjustments to reconcile net loss to
cash used in
operating activities
Depreciation........................... 5,669,938 662,039 4,592
Loss on disposal of fixed assets....... 36,700 -- --
Provision for compensation to former
shareholder........................... 2,000,000 -- --
Amortisation of license fee............ 15,000 15,000 --
Increase in trade and other debtors.... (2,391,527) (604,399) (11,757)
Increase in deposits and prepayments... (346,672) (125,246) --
Increase in license fee................ -- (300,000) --
Increase in equipment supplier
creditor.............................. 3,926,233 -- --
(Decrease)/increase in other current
liabilities........................... (72,346) 1,454,381 76,439
Increase in fixed deposits............. (1,000,000) -- --
Decrease/(increase) in deferred
expenses.............................. -- 404,000 (404,000)
----------- ----------- ---------
Net cash used in operating activities.... (10,885,628) (3,433,592) (342,200)
----------- ----------- ---------
CASHFLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets............... (54,169,326) (29,690,572) (30,615)
Proceeds from disposal of fixed
assets................................ 96,500 8,363 --
----------- ----------- ---------
Net cash used in investing activities.. (54,072,826) (29,682,209) (30,615)
----------- ----------- ---------
CASHFLOWS FROM FINANCING ACTIVITIES
Proceeds from term loan................ 54,639,164 6,245,498 --
Repayment of term loan................. (6,245,498) -- --
Loan (to)/from shareholders............ (13,670,700) 13,670,700 --
Proceeds from issue of shares.......... 30,138,000 13,780,000 2,500,000
Increase in hire purchase.............. 345,894 111,981
----------- ----------- ---------
Net cash from financing activities..... 65,206,860 33,808,179 2,500,000
----------- ----------- ---------
Net increase in cash and cash
equivalents............................. 248,406 692,378 2,127,185
Cash and cash equivalents at beginning of
year.................................... 2,819,563 2,127,185 --
----------- ----------- ---------
Cash and cash equivalents at end of
year..................................... 3,067,969 2,819,563 2,127,185
=========== =========== =========
Supplemental information:
(i)Cash paid for:
Interest............................... 1,661,690 106,048 --
Income taxes........................... 450 753 --
=========== =========== =========
(ii)Supplemental schedules on non-cash
investing activities:
Revaluation of fixed assets............ 2,971,432 -- --
=========== =========== =========
</TABLE>
The notes set out on pages F-64 to F-69 form an integral part of,
and should be read in conjunction with, these accounts.
F-62
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED 31 DECEMBER 1995
<TABLE>
<CAPTION>
ORDINARY SHARES REVALUATION
OF RM1 EACH DEFICIT RESERVE TOTAL
RM RM RM RM
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1993
Balance at 11 February
1993 (date of
incorporation)......... 3 -- -- 3
Ordinary shares issued.. 2,499,997 -- -- 2,499,997
Net loss for the period
ended 31 December
1993................... (7,474) -- (7,474)
---------- ----------- --------- -----------
Balance at 31 December
1993................... 2,500,000 (7,474) -- 2,492,526
1994
Ordinary shares issued.. 13,780,000 -- -- 13,780,000
Net loss for the year
ended 31 December
1994................... -- (4,939,367) -- (4,939,367)
---------- ----------- --------- -----------
Balance at 31 December
1994................... 16,280,000 (4,946,841) -- 11,331,159
1995
Ordinary shares issued.. 30,138,000 -- -- 30,138,000
Revaluation reserve..... -- -- 2,971,432 2,971,432
Net loss for the year
ended 31 December
1995................... -- (18,722,954) -- (18,722,954)
---------- ----------- --------- -----------
Balance at 31 December
1995................... 46,418,000 (23,669,795) 2,971,432 25,719,637
========== =========== ========= ===========
</TABLE>
The notes set out on pages F-64 to F-69 form an integral part of,
and should be read in conjunction with, these accounts.
F-63
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
NOTES TO THE ACCOUNTS
1. PRINCIPAL ACTIVITIES
The principal activity of the Company is provision of telecommunication
services. The principal activities of the subsidiary is disclosed in Note 5.
These activities have remained unchanged during the period.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation
The accounts of the Company and its subsidiary have been prepared under the
historical cost convention modified to include the revaluation of certain
properties and in compliance with approved accounting standards.
2.2 Basis of Consolidation
The consolidated accounts incorporate the audited accounts of the Company
and its subsidiary made up to 31 December 1994 and 1995. The 1993 accounts
reflect the Company level only as the subsidiary was acquired in 1994.
Inter-company transactions are eliminated on consolidation and the
consolidated accounts reflect external transactions only.
2.3 Fixed Assets and Depreciation
Leasehold land and building will be amortised over the period of the lease.
Other fixed assets are stated at cost less accumulated depreciation.
Depreciation of fixed assets is calculated on the straight lines basis to
write off the cost of the assets over their expected useful lives.
The principal annual rates used are as follows:
<TABLE>
<CAPTION>
Leasehold land and building Over the period of the lease of 80 years
--------------------------- ----------------------------------------
<S> <C>
Furniture and fittings......... 15%
Office equipment............... 15%
Telecommunication network
equipment...................... 5%-15%
Plant and machinery............ 20%
Motor vehicles................. 20%
Renovation..................... 15%
</TABLE>
2.4 Deferred Taxation
Provision for deferred taxation is made on the liability method for all
timing differences except where no liability is expected to arise in the
foreseeable future. Deferred tax benefits are only recognised when there is a
reasonable expectation of realisation in the near future.
2.5 Foreign Currency
Assets and liabilities in foreign currencies are translated into Ringgit
Malaysia at rates of exchange ruling at the balance sheet date and items in
the profit and loss account are converted at rates ruling on the transaction
dates. Exchange differences are dealt within the profit and loss account.
There were no significant exchange differences during the three years ended 31
December 1995.
F-64
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
NOTES TO THE ACCOUNTS--(CONTINUED)
2.6 Leases
Fixed assets acquired under finance leases are capitalized in the accounts
and the corresponding obligation treated as a liability. Finance charges are
allocated to the profit and loss account over the lease periods to give a
constant periodic rate of interest on the remaining lease liabilities.
3. CASH AND CASH EQUIVALENTS AND DEPOSITS
<TABLE>
<CAPTION>
1995 1994
---------- ---------
RM RM
---------- ---------
<S> <C> <C>
Cash and bank balances.............................. 267,969 2,819,563
Deposits with licensed banks........................ 3,800,000 --
---------- ---------
4,067,969 2,819,563
Non-current deposits................................ (1,000,000) --
---------- ---------
Cash and cash equivalents........................... 3,067,969 2,819,563
========== =========
</TABLE>
Non-current deposits with licensed banks comprise RM 1,000,000 (1994--RM
Nil) pledged as security for a syndicated term loan granted to the Company.
4. OTHER DEBTORS
Included in other debtors is RM2,564,000 (1994-RM Nil) due from a director
of the Company.
5. SUBSIDIARY COMPANY
The subsidiary company, incorporated in Malaysia, is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
EQUITY HELD
----------------
NAME OF COMPANY PRINCIPAL ACTIVITIES 1995 1994 1993
--------------- -------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Segar Kasturi Sdn Bhd............ Investment in property 100% 100% --
</TABLE>
The investment in the subsidiary was acquired in 1994.
6. FIXED ASSETS
<TABLE>
<CAPTION>
DEPRECIATION
COST/ ACCUMULATED NET BOOK CHARGE FOR
VALUATION DEPRECIATION VALUE THE YEAR
1995 RM RM RM RM
---- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Freehold land--at cost........ 104,755 -- 104,755 --
Leasehold land and building--
at valuation.................. 15,070,000 -- 15,070,000 155,110
Telecommunication network
equipment..................... 67,358,973 5,273,497 62,085,476 4,882,949
Renovation.................... 1,582,727 251,379 1,331,348 237,409
Furniture and fittings........ 380,322 68,552 311,770 57,049
Office equipment.............. 771,929 146,605 625,324 115,790
Plant and machinery........... 302,270 60,454 241,816 60,454
Motor vehicles................ 805,886 192,562 613,324 161,177
---------- --------- ---------- ---------
86,376,862 5,993,049 80,383,813 5,669,938
========== ========= ========== =========
</TABLE>
F-65
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
NOTES TO THE ACCOUNTS--(CONTINUED)
<TABLE>
<CAPTION>
DEPRECIATION
COST/ ACCUMULATED NET BOOK CHARGE FOR
VALUATION DEPRECIATION VALUE THE YEAR
1994 RM RM RM RM
---- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Freehold land--at cost........ 104,755 -- 104,755 --
Leasehold land and building--
at cost....................... 12,408,788 155,110 12,253,678 155,110
Telecommunication network
equipment..................... 16,522,855 390,548 16,132,307 390,548
Renovation.................... 86,705 13,970 72,735 13,006
Furniture and fittings........ 70,851 11,503 59,348 10,388
Office equipment.............. 195,444 30,815 164,629 28,302
Motor vehicles................ 323,426 64,685 258,741 64,685
---------- ------- ---------- -------
29,712,824 666,631 29,046,193 662,039
========== ======= ========== =======
</TABLE>
During the year ended 31 December 1995, the leasehold land and building of a
subsidiary company was revalued by a firm of professional valuers on a fair
market value basis (refer note 10).
The leasehold land and building are charged to a financial institution as
security for a syndicated term loan granted to the Company (refer note 7).
Included under fixed assets are motor vehicles amounting to RM667,977
(1994--RM156,926) at cost which are acquired under hire purchase agreements.
7. TERM LOAN (SECURED)
<TABLE>
<CAPTION>
1995 1994
---------- ---------
RM RM
---------- ---------
<S> <C> <C>
Amount outstanding................................ 54,639,164 6,245,498
Less: Amount due and repayable and due within
twelve months.................................... -- (679,292)
---------- ---------
54,639,164 5,566,206
========== =========
</TABLE>
The term loan is secured by way of fixed and floating amounts of certain
assets of the Group including leasehold land and building and fixed deposits
with licensed bank and are jointly and severally guaranteed by certain
directors of the Company and a corporate guarantee from the holding company.
The loans are subject to interest at 2.5% above the base lending rates of the
participating financial institutions. The loans are repayable in eleven
installments, the first installment of which is due on 8 October 1997 and
subsequent installments due on six monthly intervals thereafter.
8. HIRE PURCHASE CREDITORS
<TABLE>
<CAPTION>
1995 1994
------- -------
RM RM
------- -------
<S> <C> <C>
Amount outstanding........................................ 603,361 147,450
Less: Unearned interest................................... 145,486 35,469
------- -------
457,875 111,981
======= =======
Amount due within twelve months........................... 108,398 30,810
Amount due after twelve months............................ 349,477 81,171
------- -------
457,875 111,981
======= =======
</TABLE>
F-66
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
NOTES TO THE ACCOUNTS--(CONTINUED)
9. SHARE CAPITAL
<TABLE>
<CAPTION>
1995 1994
---------- ----------
RM RM
---------- ----------
<S> <C> <C>
Authorized--Ordinary shares of RM1 each
At 1 January..................................... 50,000,000 5,000,000
Increase during the year......................... -- 45,000,000
---------- ----------
At 31 December................................... 50,000,000 50,000,000
========== ==========
Issued and fully paid--Ordinary shares of RM1 each
At 1 January..................................... 16,280,000 2,500,000
Add: Issue of ordinary shares at par............. 30,138,000 13,780,000
---------- ----------
At 31 December................................... 46,418,000 16,280,000
========== ==========
</TABLE>
10. REVALUATION RESERVE
In 1995, leasehold land and building were re-appraised to give a valuation
of RM15,070,000 based on open market value by an independent firm of
professional valuers. This revaluation was incorporated in the accounts at 31
December 1995.
11. LOANS FROM SHAREHOLDERS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
RM RM
---------- ----------
<S> <C> <C>
Loan from holding company........................... -- 1,900,000
Loan from other shareholders........................ -- 11,770,000
---------- ----------
-- 13,670,000
========== ==========
</TABLE>
The loans from shareholders are unsecured, interest free with no fixed term
for repayment.
12. HOLDING COMPANY
The holding company is Shubila Holdings Sdn. Bhd., a company incorporated in
Malaysia.
13. TURNOVER
Turnover comprises gross billings in the provision of telecommunication
services and rental of office block.
14. TAXATION
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -----
RM RM RM
------ ------ -----
<S> <C> <C> <C>
Current income tax provision........................ 17,000 27,000 1,000
Overprovision of income taxes in the prior years.... -- (247) --
------ ------ -----
17,000 26,753 1,000
====== ====== =====
</TABLE>
The income taxes of the Group mainly relates to rental income of the
subsidiary.
F-67
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
NOTES TO THE ACCOUNTS--(CONTINUED)
15. DEFERRED TAXATION
Subject to agreement by the Inland Revenue Department, the Group has
potential deferred tax benefit at 30% amounting to RM6,089,000,000 (1994--
RM1,250,000) not taken up in the accounts as calculated under the liability
method in respect of the following items:--
<TABLE>
<CAPTION>
1995 1994
----------- ----------
RM RM
----------- ----------
<S> <C> <C>
Unabsorbed capital allowances.................. 22,524,000 5,128,000
Excess of net book value on book basis over tax
basis of fixed assets......................... (16,834,000) (4,652,000)
----------- ----------
5,690,000 476,000
Unabsorbed tax losses.......................... 14,606,000 3,691,000
----------- ----------
20,296,000 4,167,000
=========== ==========
</TABLE>
16. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)
The accompanying financial statements are prepared in accordance with GAAP
in Malaysia, which differ in certain significant respects to the GAAP in the
United States (US). The significant differences are described below. Other
differences do not have a significant effect on the consolidated net loss
after tax or shareholders' equity.
The estimated effects of the significant adjustments to the consolidated net
loss after tax and shareholders' equity which would be required if US GAAP
were applied instead of Malaysian GAAP are summarized as follows:--
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- --------
NOTE RM RM RM
---- ----------- ---------- --------
<S> <C> <C> <C> <C>
Net loss after tax--Malaysian
GAAP............................. (18,722,954) (4,939,367) (7,474)
Adjustments:
Preliminary expenditure......... (i) -- 6,591 (6,591)
Pre-operating expenditure....... (i) -- 397,409 (397,409)
Consultants fees................ 2,124,087 1,110,705 --
Amortisation of consultants fees (iii) (106,205) (55,535) --
Debt issuance costs............. 2,413,712 -- --
Amortisation of debt issuance
costs.......................... (iv) (344,816) -- --
Depreciation of leasehold land &
building....................... (v) (155,110) (155,110) --
----------- ---------- --------
Net loss after tax--US GAAP..... (14,791,286) (3,635,307) (411,474)
=========== ========== ========
</TABLE>
F-68
<PAGE>
SYARIKAT TELEFON WIRELESS (M) SDN. BHD.
(INCORPORATED IN MALAYSIA)
NOTES TO THE ACCOUNTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
NOTE RM RM RM
---- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Total shareholders equity--Malaysian
GAAP.................................. 25,719,637 11,333,159 2,492,526
Adjustments:
Preliminary expenditure............. (i) -- 6,591 (6,591)
Pre-operating expenditure........... (i) -- 397,409 (397,409)
Revaluation reserve................. (ii) (2,971,432) -- --
Consultants fees--(cumulative)...... (iii) 3,234,792 1,110,705 --
Amortization of consultants fees--
(cumulative) (iii) (161,740) (55,535) --
Debt issuance costs................. (iv) 2,413,712 -- --
Amortisation of debt issuance
costs.............................. (iv) (344,816) -- --
Depreciation of leasehold land &
building--(cumulative)............. (v) (310,220) (155,110) --
---------- ---------- ---------
Total shareholders equity--US GAAP.... 27,579,933 12,637,219 2,088,526
========== ========== =========
</TABLE>
- --------
(i) Preliminary and pre-operating expenditure
Preliminary and pre-operating expenditure are deferred for Malaysian GAAP
and written off in the year the company commences operations. However,
these costs are normally expensed as incurred under US GAAP.
(ii) Revaluation reserve
Revaluation performed by professional valuers of fixed assets are taken up
in the accounts for Malaysian GAAP. However, this is not incorporated in
the accounts under US GAAP.
(iii) Consultants fees
Consultants fees in relation to the installation of telecommunication has
been written-off as incurred as allowed under Malaysia GAAP. However, these
costs are normally capitalised and amortised under US GAAP.
The amortisation rate used is 20 years consistent with the life of
telecommunication equipment.
(iv) Debt issuance costs
Debt issuance costs in relation to the term loan has been written-off as
incurred as allowed under Malaysian GAAP. However, these amounts are
normally capitalised and amortised under US GAAP.
The amortisation rate used in 7 years, consistent with the tenure of the
loan.
(v) Depreciation of leasehold land and buildings
Leasehold land and building have been depreciated over the lease period of
80 years as allowed under Malaysian GAAP. However, under US GAAP, assets
may be depreciated up to 40 years only.
F-69
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CON-
TAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE
TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITA-
TION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAW-
FUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPEC-
TUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IM-
PLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 3
Prospectus Summary....................................................... 5
Risk Factors............................................................. 22
Use of Proceeds.......................................................... 36
The Exchange Offer....................................................... 37
Capitalization........................................................... 45
Unaudited Pro Forma Consolidated Condensed Financial Statements.......... 46
Consolidated Selected Financial Data..................................... 53
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 54
Business................................................................. 58
Management............................................................... 85
Certain Transactions..................................................... 95
Principal Stockholders................................................... 102
Description of Exchange Notes............................................ 105
Description of Capital Stock............................................. 129
Certain Income Tax Considerations........................................ 134
Old Notes Registration Rights............................................ 138
Old Notes Transfer Restrictions.......................................... 140
Plan of Distribution..................................................... 142
Book-Entry; Delivery and Form............................................ 143
Experts.................................................................. 145
Legal Matters............................................................ 145
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------------------
PROSPECTUS
----------------------------
LOGO
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
OFFER TO EXCHANGE $1,000
PRINCIPAL AMOUNT OF ITS
14% SENIOR SECURED
DISCOUNT NOTES DUE 2001
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT
FOR EACH $1,000 PRINCIPAL
AMOUNT OF ITS OUTSTANDING 14% SENIOR SECURED DISCOUNT NOTES DUE 2001
The Exchange Agent for the Exchange Offer is:
BANKERS TRUST COMPANY
By Facsimile: (615) 835-3572
Confirmation by Telephone: (615) 835-3701
By Hand Delivery:
Bankers Trust Company
Receipt & Delivery Window
123 Washington St., 1st Floor
New York, New York 10006
Attn: Corporate Trust and Agency Group
By Mail:
BT Services Tennessee, Inc.
P.O. Box 292737
Nashville, TN 37229-2737
Attn: Reorganization Unit
By Overnight Delivery:
BT Services Tennessee, Inc.
648 Grassmere Park Road
Nashville, TN 37211
Attn: Reorganization Unit
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by the
Registrant in connection with the issuance and distribution of the securities
being registered hereby. All of such expenses, except the SEC filing fee, are
estimated.
<TABLE>
<S> <C>
SEC filing fee.................................................. $ 22,612
Legal fees and expenses......................................... 75,000
Accounting fees and expenses.................................... 75,000
Printing and engraving.......................................... 45,000
Trustee and exchange agent fees and expenses.................... 7,000
Blue Sky fees and expenses...................................... 5,000
Miscellaneous................................................... 5,388
--------
Total......................................................... $235,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), each director and officer of the Registrant may
be indemnified by the respective Registrant against expenses (including
attorney's fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed legal proceedings in which he is involved by
reason of the fact that he is or was a director or officer of that Registrant
if he acted in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of that Registrant, and, with respect to
any criminal action or proceeding, if he had no reasonable cause to believe
that his conduct was unlawful. If the legal proceeding, however, is by or in
the right of the respective Registrant, the director or officer may not be
indemnified in respect to any claim, issue or matters as to which he shall
have been adjudged to be liable for negligence or misconduct in the
performance of his duty to that Registrant unless a court determines
otherwise.
Article IX of the Certificate of Incorporation of the Company, a copy of
which is filed as Exhibit 3.1 to this Registration Statement, provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director to the fullest extent permitted by Delaware Law. In addition, Article
VII of the By-Laws of the Company, a copy of which is filed as Exhibit 3.2
hereto, provides for the indemnification of the Registrant's officers and
directors.
In addition, the Registrant has entered into an Indemnification Agreement
with each of its directors and officers which provides for indemnification to
the fullest extent available under Delaware Corporation Law.
Section 7 of the Purchase Agreement, a copy of which is filed as Exhibit 1.1
hereto, provides for indemnification by the Initial Purchasers of directors
and officers of the Company against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"), under
certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On August 15, 1996, the Company sold 196,720 Units (the "Units"), each
consisting of a $1,000 principal amount 14% Senior Secured Discount Note due
2001 (collectively, the "Old Notes") and one Warrant (collectively, the
Warrants) to purchase 11.638 shares of Common Stock to BT Securities
Corporation, Toronto Dominion Securities (USA) Inc. and Salomon Brothers Inc
(the "Initial Purchasers") at 35.43% of the principal amount thereof. Each
Warrant provides that if the Company does not complete a Threshold Initial
Public Offering (as defined) or a Qualified Reorganization (as defined) on or
prior to May 15, 1997, each unexercised Warrant will entitle the holder
thereof to purchase an additional 2.645 shares of Common Stock. Such
transaction
II-1
<PAGE>
was exempt from the registration requirements of the Securities Act in
reliance on Section 4(2) of the Securities Act and Rule 144A promulgated under
the Securities Act on the basis that such transaction did not involve a public
offering. In accordance with the agreement pursuant to which the Initial
Purchasers purchased the Units, the Initial Purchasers agreed to offer and
sell the Units only to "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act) or a limited number of institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) or outside the United States in
compliance with Regulation S under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
1.1 Purchase Agreement dated August 9, 1996, among Registrant, BT
Securities Corporation, Toronto Dominion Securities (USA) Inc. and
Salomon Brothers Inc
2.1 Agreement and Plan of Merger dated as of August 8, 1996 by and among
Registrant, International Wireless Communications Acquisition
Corporation and International Wireless Communications, Inc.
3.1 Amended and Restated Certificate of Incorporation of Registrant, as
currently in effect
3.2 Bylaws of Registrant
4.1 Indenture dated as of August 15, 1996 between Registrant, as issuer,
and Marine Midland Bank, as Trustee
4.2 Pledge Agreement dated as of August 15, 1996 by Registrant and
International Wireless Communications, Inc. in favor of Bankers Trust
Company, as Collateral Agent
4.3 Unit Agreement dated as of August 15, 1996 among Registrant and
Bankers Trust Company, as Unit Agent and Warrant Agent and Marine
Midland Bank, as Trustee
4.4 Registration Rights Agreement dated as of August 15, 1996 among
Registrant, BT Securities Corporation, Toronto Dominion Securities
(USA) Inc. and Salomon Brothers Inc
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP
10.1 Warrant Agreement dated August 15, 1996 between Registrant and Bankers
Trust Company, as Warrant Agent
10.2 Securities Purchase Agreement dated as of December 6, 1995 among
Registrant and the Investors named therein
10.3 Fifth Amended and Restated Investor Rights Agreement dated as of
December 18, 1995 among Registrant and the Investors named therein
10.4 Registration Rights Agreement dated as of December 18, 1995 among
Registrant and the Investors named therein
10.5 Stock Purchase Agreement dated as of December 18, 1995 among
Registrant, John D. Lockton and Hugh B.L. McClung
10.6 Assignment and Assumption Agreement dated as of August 7, 1996 between
Registrant and International Wireless Communications, Inc.
10.7 Consent, Waiver, Amendment, Assignment and Assumption Agreement
effective as of August 7, 1996 among Registrant and the other parties
named therein
10.8 Consent, Waiver, Amendment, Assignment and Assumption Agreement
effective as of August 7, 1996 among International Wireless
Communications, Inc. and the parties named therein
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.9 1996 Stock Option/Stock Issuance Plan
10.10 Form of Indemnification Agreement
10.11* Real Property Lease between Registrant and PM Realty Group, dated
June 20, 1994.
10.12A** Shareholders Agreement by and among Shubila Holding Sdn Bhd, the
Registrant and Laranda Sdn Bhd, dated March 26, 1996.
10.12B* License granted to Syarikat Telefon Wireless (Malaysia) Sdn Bhd
("STW"), dated November 16, 1994.
10.12C* Access and Interconnect Agreement between Telekom Malaysia Berhad and
STW, dated August 16, 1994.
10.12D* Loan Agreement among STW, Permata Merchant Bank Berhad and certain
financial institutions, dated August 18, 1995.
10.13A* Business Agreement among PT Rajasa Hazanah Perkasa ("RHP"), PT Bina
Reksa Perdana ("BRP"), the Registrant and Bell Atlantic Indonesia,
Inc. ("BA"), dated February 1995; Amendment to the Business Agreement
among RHP, BRP, the Registrant, BA and PT Deltona Satya Dinamika
("DSD"), dated February 23, 1995.
10.13B* Sale and Termination Agreement among RHP, DSD, BRP, the Registrant
and BA, dated October 11, 1995; Promissory Note executed by RHP, DSD,
BRP and the Registrant in favor of BA, dated October 11, 1995.
10.13C* Shareholders' Agreement among BRP, the Registrant, DSD and RHP, dated
November 9, 1995.
10.13D* Cooperative Agreement among PT Telekomunikasi Indonesia, Yayasan Dana
Pensiun Pegawai PT Telkom and RHP, dated November 30, 1995.
10.13E* License granted to RHP, dated April 28, 1995.
10.13F* Facility Agreement between PT Mobile Selular Indonesia ("Mobisel")
and Nissho Iwai International (Singapore) Pte., Ltd. ("Nissho Iwai"),
dated March 12, 1996; Share Pledge Agreement between RHP and Nissho
Iwai, dated March 12, 1996.
10.14* Stockholder Agreement between Teleparbs Participacoes Ltda. (RBS) and
the Registrant, dated August 31, 1995.
10.15 Shareholders' Agreement among Mainstream Limited, the Registrant and
Star Telecom Holding Limited, dated August 30, 1996.
23.1* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in Exhibit 5.1)
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick
23.5 Consent of Prasetio Utomo & Co.
24.1 Power of Attorney (page II-5)
25.1 Form T-1 for Marine Midland Bank, as Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letters to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on
Form W-9
</TABLE>
* To be filed by Amendment.
** Confidential treatment to be requested.
(b) Financial Statement Schedule
[Included in accompanying Financial Statements]
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
2. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN MATEO, STATE OF
CALIFORNIA, ON SEPTEMBER 13, 1996.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
/s/ John D. Lockton
By: _________________________________
JOHN D. LOCKTON PRESIDENT, CHIEF
EXECUTIVE OFFICER AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John D. Lockton and Douglas S. Sinclair, and
each of them, as his true and lawful attorneys in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-1, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
/s/ John D. Lockton President, Chief September 13,
- ------------------------------------- Executive Officer 1996
JOHN D. LOCKTON and Director
/s/ Douglas S. Sinclair Chief Financial September 13,
- ------------------------------------- Officer (Principal 1996
DOUGLAS S. SINCLAIR Financial Officer)
/s/ Keith D. Taylor Controller September 13,
- ------------------------------------- (Principal 1996
KEITH D. TAYLOR Accounting Officer)
/s/ Haynes G. Griffin Chairman of the September 13,
- ------------------------------------- Board 1996
HAYNES G. GRIFFIN
/s/ Stephen R. Leeolou Director September 13,
- ------------------------------------- 1996
STEPHEN R. LEEOLOU
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Piers Playfair Director September 13,
- ------------------------------------- 1996
PIERS PLAYFAIR
/s/ John S. McCarthy Director September 13,
- ------------------------------------- 1996
JOHN S. MCCARTHY
/s/ Carl C. Cordova Director September 13,
- ------------------------------------- 1996
CARL C. CORDOVA
/s/ Brian Rich Director September 13,
- ------------------------------------- 1996
BRIAN RICH
/s/ Van Snowdon Director September 13,
- ------------------------------------- 1996
VAN SNOWDON
/s/ Carl F. Pascarella Director September 13,
- ------------------------------------- 1996
CARL F. PASCARELLA
/s/ Stanley Wen Director September 13,
- ------------------------------------- 1996
STANLEY WEN
/s/ Hugh B. L. McClung Director September 13,
- ------------------------------------- 1996
HUGH B. L. MCCLUNG
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
1.1 Purchase Agreement dated August 9, 1996, among Registrant, BT
Securities Corporation, Toronto Dominion Securities (USA) Inc. and
Salomon Brothers Inc
2.1 Agreement and Plan of Merger dated as of August 8, 1996 by and among
Registrant, International Wireless Communications Acquisition
Corporation and International Wireless Communications, Inc.
3.1 Amended and Restated Certificate of Incorporation of Registrant, as
currently in effect
3.2 Bylaws of Registrant
4.1 Indenture dated as of August 15, 1996 between Registrant, as issuer,
and Marine Midland Bank, as Trustee
4.2 Pledge Agreement dated as of August 15, 1996 by Registrant and
International Wireless Communications, Inc. in favor of Bankers Trust
Company, as Collateral Agent
4.3 Unit Agreement dated as of August 15, 1996 among Registrant and
Bankers Trust Company, as Unit Agent and Warrant Agent and Marine
Midland Bank, as Trustee
4.4 Registration Rights Agreement dated as of August 15, 1996 among
Registrant, BT Securities Corporation, Toronto Dominion Securities
(USA) Inc. and Salomon Brothers Inc
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP
10.1 Warrant Agreement dated August 15, 1996 between Registrant and
Bankers Trust Company, as Warrant Agent
10.2 Securities Purchase Agreement dated as of December 6, 1995 among
Registrant and the Investors named therein
10.3 Fifth Amended and Restated Investor Rights Agreement dated as of
December 18, 1995 among Registrant and the Investors named therein
10.4 Registration Rights Agreement dated as of December 18, 1995 among
Registrant and the Investors named therein
10.5 Stock Purchase Agreement dated as of December 18, 1995 among
Registrant, John D. Lockton and Hugh B.L. McClung
10.6 Assignment and Assumption Agreement dated as of August 7, 1996
between Registrant and International Wireless Communications, Inc.
10.7 Consent, Waiver, Amendment, Assignment and Assumption Agreement
effective as of August 7, 1996 among Registrant and the other parties
named therein
10.8 Consent, Waiver, Amendment, Assignment and Assumption Agreement
effective as of August 7, 1996 among International Wireless
Communications, Inc. and the parties named therein
10.9 1996 Stock Option/Stock Issuance Plan
10.10 Form of Indemnification Agreement
10.11* Real Property Lease between Registrant and PM Realty Group, dated
June 20, 1994.
10.12A** Shareholders Agreement by and among Shubila Holding Sdn Bhd, the
Registrant and Laranda Sdn Bhd, dated March 26, 1996.
10.12B* License granted to Syarikat Telefon Wireless (Malaysia) Sdn Bhd
("STW"), dated November 16, 1994.
10.12C* Access and Interconnect Agreement between Telekom Malaysia Berhad and
STW, dated August 16, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.12D* Loan Agreement among STW, Permata Merchant Bank Berhad and certain
financial institutions, dated August 18, 1995.
10.13A* Business Agreement among PT Rajasa Hazanah Perkasa ("RHP"), PT Bina
Reksa Perdana ("BRP"), the Registrant and Bell Atlantic Indonesia,
Inc. ("BA"), dated February 1995; Amendment to the Business Agreement
among RHP, BRP, the Registrant, BA and PT Deltona Satya Dinamika
("DSD"), dated February 23, 1995.
10.13B* Sale and Termination Agreement among RHP, DSD, BRP, the Registrant and
BA, dated October 11, 1995; Promissory Note executed by RHP, DSD, BRP
and the Registrant in favor of BA, dated October 11, 1995.
10.13C* Shareholders' Agreement among BRP, the Registrant, DSD and RHP, dated
November 9, 1995.
10.13D* Cooperative Agreement among PT Telekomunikasi Indonesia, Yayasan Dana
Pensiun Pegawai PT Telkom and RHP, dated November 30, 1995.
10.13E* License granted to RHP, dated April 28, 1995.
10.13F* Facility Agreement between PT Mobile Selular Indonesia ("Mobisel") and
Nissho Iwai International (Singapore) Pte., Ltd. ("Nissho Iwai"),
dated March 12, 1996; Share Pledge Agreement between RHP and Nissho
Iwai, dated March 12, 1996.
10.14* Stockholder Agreement between Teleparbs Participacoes Ltda. (RBS) and
the Registrant, dated August 31, 1995.
10.15 Shareholders' Agreement among Mainstream Limited, the Registrant and
Star Telecom Holding Limited, dated August 30, 1996.
23.1* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in Exhibit 5.1)
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick
23.5 Consent of Prasetio Utomo & Co.
24.1 Power of Attorney (page II-5)
25.1 Form T-1 for Marine Midland Bank, as Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letters to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on Form
W-9
</TABLE>
* To be filed by Amendment.
** Confidential treatment to be requested.
<PAGE>
EXHIBIT 1.1
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
196,720 UNITS CONSISTING OF
$196,720,000 14% SENIOR SECURED DISCOUNT NOTES DUE 2001
AND WARRANTS TO PURCHASE SHARES
OF COMMON STOCK
PURCHASE AGREEMENT
------------------
August 9, 1996
BT SECURITIES CORPORATION
TORONTO DOMINION SECURITIES (USA) INC.
SALOMON BROTHERS INC
c/o BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
International Wireless Communications Holdings, Inc., a Delaware
corporation (the "Company"), and International Wireless Communications, Inc., a
-------
Delaware corporation and a wholly-owned subsidiary of the Company ("IWC"), each
---
hereby confirms its agreement with each of you (collectively, the Initial
-------
Purchasers"), as set forth below.
- ----------
1. The Units. Subject to the terms and conditions herein contained,
---------
the Company propose to issue and sell to the Initial Purchasers 196,720 Units
(the "Units") consisting of an aggregate of $196,720,000 principal amount of 14%
-----
Senior Secured Discount Notes due 2001 (the "Notes") and Common Stock Purchase
-----
Warrants (the "Warrants") initially entitling the holders thereof to purchase
--------
2,289,428 shares of the Company's Common Stock, $0.01 par value per share (the
"Common Stock". The Units are to be issued under a Unit Agreement (the "Unit
------------
Agreement") to be dated as of August 15, 1996 between the Company and Bankers
Trust Company, as Unit Agent.
The Notes are to be issued under an Indenture (the "Indenture") to be
---------
dated as of August 15, 1996 by and between the Company and Marine Midland Bank,
as trustee (the "Trustee").
The Company's obligations under the Indenture will be secured by a
first priority pledge of the capital stock of all of IWC and all Intercompany
Noted (as defined in the Indenture of IWC pursuant to a pledge agreement (the
"Pledge Agreement") to be dated as of August 15, 1996 by the Company and IWC in
----------------
favor of Bankers Trust Company, as Collateral Agent (the "Collateral Agent").
----------------
The Warrants are to be governed by a Warrant Agreement (the Warrant
-------
Agreement") to be dated as of August 15, 1996 among
- ---------
<PAGE>
the Company, Vanguard Cellular Operating Corp., and Bankers Trust Company, as
Warrant Agent (the "Warrant Agent"). Shares of Common Stock issuable upon
-------------
exercise of the Warrants are collectively referred to herein as the "Warrant
-------
Shares." The units, the Notes, the Warrants and the Warrant Shares are sometimes
- ------
collectively referred to herein as the "Securities."
----------
The Units will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
----------
Act"), in reliance on exemptions therefrom.
- ---
In connection with the sale of the Units, the Company has prepared a
preliminary offering memorandum dated July 22, 1996 (the "Preliminary
-----------
Memorandum"), and the Company will prepare a final offering memorandum dated
- ----------
August 9, 1996 (the "Final Memorandum"; the Preliminary Memorandum and the Final
----------------
Memorandum each herein being referred to as a "Memorandum") setting forth or
----------
including a description of the terms of the Units, the terms of the offering of
the Units, a description of the Company and any material developments relating
to the Company occurring after the date of the most recent historical financial
statements included therein.
The Initial Purchasers and their direct and indirect transferees of
the Units and the Notes will be entitled to the benefits of the Registration
Rights Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company has agreed,
-----------------------------
among other things, to file a registration statement (the "Registration
------------
Statement") with the Securities and Exchange Commission (the "Commission") in
- --------- ----------
order to register the Notes, the Exchange Notes as defined in the Registration
Rights Agreement) and the Private Exchange Notes (as defined in the Registration
Rights Agreement) under the Securities Act.
Holders of the Warrants will have the registration rights set forth in
the Warrant Agreement. The Warrants issued to the Initial Purchasers as part of
the Units will, when executed and exercised in accordance with the terms
thereof, initially entitle the holders thereof to purchase approximately 10% of
the Company's outstanding Common Stock on a fully-diluted basis as of the
Closing Date (as hereafter defined in Section 3 hereof).
Each of the Company and IWC shall have joint and several liability in
respect of all obligations hereunder. Each of the Company and IWC hereby
acknowledges that this Agreement is the independent and several obligation of
each of the Company and IWC and may be enforced against any of the Company and
IWC separately, whether or not enforcement of any right or remedy hereunder has
been sought against either the Company or IWC. Each of the Company and IWC
hereby expressly waives, with respect to any of the amounts owing hereunder by
IWC or the Company in respect of the obligations
-2-
<PAGE>
(collectively, the "Other Party Obligations"), diligence, presentment, demand
-----------------------
of payment, protest and all notices whatsoever, and any requirement that the
Initial Purchasers exhaust any right, power or remedy or proceed against such
other party under this Agreement, or any other agreement or instrument referred
to herein or therein, or against any other person under any other guarantee of,
or security for, any of such Other Party Obligations.
2. Representations and Warranties. The Company and IWC, jointly and
------------------------------
severally, represent and warrant to and agree with each of the Initial
Purchasers that:
(a) Neither the Final Memorandum nor any amendment or supplement
thereto as of the date thereof and at all times subsequent thereto up to the
Closing Date contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 2(a) do not apply to statements or omissions made in reliance upon and
in conformity with information relating to any of the Initial Purchasers
furnished to the Company in writing by such Initial Purchaser expressly for use
in the Final Memorandum or any amendment or supplement thereto.
(b) None of the Company, nor any of its subsidiaries or affiliated
companies in which the Company, directly or indirectly, has an Equity Interest
(as defined below) listed on Exhibit B hereto (each a "Material Subsidiary" has
-------------------
sustained since the date of the latest audited financial statements included in
the Final Memorandum any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree that,
individually or in the aggregate, has had or has a Material Adverse Effect (as
defined below), otherwise than as set forth in the Final Memorandum (exclusive
of and, since the respective dates as of which information is given in the Final
Memorandum, there has not been any material change in the capital stock or
long-term debt of the Company or any of its Material Subsidiaries or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole;
(c) Other than as set forth in the Final Memorandum, the Company does
not at present own or control, directly or indirectly, any interest in any
corporation, association, or other business entity except for ownership
interests that are not material to the condition (financial or otherwise),
business, properties, results
-3-
<PAGE>
of operations, or projects of the Company and its subsidiaries, taken as a
whole;
(d) The Company has an authorized capitalization as set forth in the
Final Memorandum; all of the outstanding shares of capital stock of the Company
are, and as of the Closing Date, will be duly authorized and validly issued,
fully paid and non-assessable and were not issued in violation of any
pre-emptive of similar rights; except as set forth in the Final Memorandum,
there are no (i) options, warrants or other rights to purchase from the Company,
(ii) agreements or other obligations of any of the Company to issue or (iii)
other rights to convert any obligation into, or exchange any securities for,
Equity Interests in the Company. As used herein "Equity Interest" of any person
---------------
means any and all shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
corporate stock or other equity participations, including partnership interests,
whether general or limited, of such person.
(e) The Company owns and, at the Closing Date, will own 100% of the
outstanding shares of capital stock of IWC free and clear of any security
interest, claim, lien, encumbrance, equities and claims or restrictions on
transferability or voting, other than as contemplated by the Pledge Agreement,
and all of such shares have been duly authorized and validly issued, are fully
paid and non-assessable and were not issued in violation of any pre-emptive or
similar rights. The Company does not directly own any Equity Interests or any
other equity or long-term debt securities of any entity other than IWC. There
are no (i) options, warrants or other rights to purchase from IWC, (ii)
agreements or other obligations of IWC to issue or (iii) other rights to convert
any obligation into, or exchange any securities for, Equity Interests in IWC.
(f) All of the issued shares of capital stock or other Equity
Interests owned, directly or indirectly, by the Company in each Material
Subsidiary have been duly and validly authorized and issued and are fully paid
and non-assessable, represent the ownership percentage in such Material
Subsidiary set forth in the Final Memorandum and, except as described in the
Final Memorandum, are free and clear of any security interest, claim, lien,
encumbrance, equities and claims or restrictions on transferability or voting.
Except as set forth in the Final Memorandum and except as may be referred to in
the opinions of counsel set forth in subsection 7(c) hereof, there are no (i)
options, warrants or other rights to purchase from any Material Subsidiary, (ii)
agreements or other obligations of any Material Subsidiary to issue or (iii)
other rights to convert any obligation into, or exchange any securities for,
Equity Interests in any Material Subsidiary.
(g) Each of the Company and the Material Subsidiaries has been duly
organized, is validly existing and is in good
-4-
<PAGE>
standing under the laws of the jurisdiction of its organization, with all
requisite power and authority to own its properties and conduct its business as
now conducted, and as described in the Final Memorandum; each of the Company and
the Material Subsidiaries is duly qualified to do business and, to the extent
applicable, is in good standing in all other jurisdictions where the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified, individually or in
the aggregate, would not (i) have a material adverse effect on the general
affairs, management, business, condition (financial or otherwise), prospects or
results of operations of the Company and its subsidiaries, taken as a whole,
(ii) materially impair either the Company's or IWC's ability to perform the
obligations contemplated by the Transaction Documents (as defined below) to
which it is a party and the transactions contemplated to be performed by it
described in the Final Memorandum, or (iii) materially affect the consummation
of the transactions contemplated by the Transaction Documents and the Final
Memorandum (any such event, a "Material Adverse Effect"). This Agreement, the
-----------------------
Unit Agreement, the Indenture, the Notes, the Exchange Notes (as defined in the
Registration Rights Agreement), the Private Exchange Notes (as defined in the
Registration Rights Agreement), the Pledge Agreement, the Warrant Agreement and
the Warrants are referred to herein as the "Transaction Documents."
---------------------
(h) Each of the Company and IWC has all requisite power and authority
to execute, deliver and perform each of its obligations under the Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby, including, with respect to the Company, the corporate power
and authority to issue, sell and deliver the Securities as provided herein and
therein.
(i) This Agreement has been duly and validly authorized, executed and
delivered by each of the Company and IWC and is the valid and legally binding
obligation of each of the Company and IWC, enforceable against each of them in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, (ii) general
principles of equity, and the discretion of the court before which any
proceeding with respect thereto may be brought, and (iii) state or federal
securities laws or policies relating to the non-enforceability of the
indemnification provisions contained in this Agreement.
(j) The Notes, the Exchange Notes and the Private Exchange Notes have
been duly and validly authorized by the Company and, when executed by the
Company and authenticated by the Trustee in accordance with the provisions of
the Indenture and, in the case of the Notes, when delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement,
-5-
<PAGE>
will have been duly executed, issued and delivered and will constitute the valid
and legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
respective terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
with respect thereto may be brought.
(k) The Indenture meets the requirements for qualification under the
Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly
---
and validly authorized by the Company and, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the Trustee),
will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding with respect thereto
may be brought. The Indenture, when executed and delivered, will conform in all
material respects to the description thereof in the Final Memorandum.
(l) The Pledge Agreement has been duly and validly authorized by each
of the Company and IWC and, when duly executed and delivered by each of the
Company and IWC (assuming the due authorization, execution and delivery by the
Collateral Agent), will be the valid and legally binding obligation of the
Company and IWC, enforceable against the Company and IWC in accordance with its
terms, except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding with respect
thereto may be brought. The Pledge Agreement, when executed and delivered, will
conform in all material respects to the description thereof in the Final
Memorandum.
(m) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Initial
Purchasers), will be the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which
-6-
<PAGE>
any proceeding with respect thereto may be brought and (iii) state or federal
securities laws or policies relating to the non-enforceability of the
indemnification provisions contained in such agreement. The Registration Rights
Agreement, when executed and delivered, will conform in all material respects
to the description thereof in the Final Memorandum.
(n) The Warrant Agreement has been duly and validly authorized by the
Company (assuming the due authorization, execution and delivery by the Company
(assuming the due authorization, execution and delivery thereof by the Warrant
Agent), will be the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (ii) general principles of equity and
the discretion of the court before which any proceeding with respect thereto may
be brought and (iii) state or federal securities laws or policies relating to
the non-enforceability of the indemnification provisions contained in such
agreement. The Warrant Agreement, when executed and delivered, will conform in
all material respects to the description thereof in the Final Memorandum.
(o) The Warrants have been duly and validly authorized for issuance
and sale pursuant to this Agreement and the issuance of such Warrants will not
trigger and pre-emptive, anti-dilution or similar rights which have not been
waived in full. The Warrants are exercisable into Warrant Shares in accordance
with the terms of the Warrant Agreement. The Warrants Shares have been duly and
validly authorized by the Company and reserved for issuance upon exercise of the
Warrants and, when issued upon exercise of the Warrants in accordance with the
terms thereof, will be validly issued, fully paid and non-assessable. The
issuance of the Warrant Shares will not trigger any anti-dilution, pre-emptive
or similar rights which have not been waived in full. The Warrants, and the
Warrant Shares when issued and delivered, will conform in all material respects
to the description thereof in the Final Memorandum.
(p) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the performance by
the Company or IWC of their respective obligations under the Transaction
Documents or the consummation by the Company or IWC of the transactions
contemplated thereby or hereby, except (i) such as have been obtained, (ii) such
as may be required in connection with the registration of the Notes, the
Exchange Notes, the Private Exchange Notes or the Warrant Shares under the
Securities Act in accordance with the Registration Rights Agreement or the
Warrant Agreement, as the case may be, and (iii) such as may be required under
state securities or "Blue Sky" laws in connection with the purchase and resale
of the Units by the
-7-
<PAGE>
Initial Purchasers and the issuance of the Exchange Notes, the Private Exchange
Notes and the Warrant Shares. None of the Company or the Material Subsidiaries
is (i) in violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute, judgment,
decree, order, rule or regulation applicable to any of them or any of their
respective properties or assets, except for any such breach or violation which,
individually or in the aggregate, would not have a Material Adverse Effect, or
(iii) in breach of or default under (nor has any event occurred which, with
notice or passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any partnership agreement,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (collectively, "contracts"), except
---------
for any such breach, default, violation or event which, individually or in the
aggregate, would not have a Material Adverse Effect.
(q) The issuance, sale and delivery of the Units and the execution,
delivery and performance by the Company and IWC of each of the Transaction
Documents to which it is a party, and the consummation by the Company and IWC of
the transactions contemplated thereby and hereby, and the fulfillment of the
terms thereof or hereof, will not conflict with or constitute or result in a
breach of or a default under or an event which with notice or passage of time or
both would constitute a default under or violation of (i) any of the terms or
provisions of any Contract, except for any such conflict, breach, violation,
default or event which, individually or in the aggregate, would not have a
Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or
similar organizational document) of the Company or any Material Subsidiary, or
(iii) (assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof) any statute, judgement, decree, order,
rule or regulation applicable to the Company or any Material Subsidiary or any
of their respective properties or assets, except for any such conflict, breach
or violation which, individually or in the aggregate, would not have a Material
Adverse Effect.
(r) The pledge of the Collateral pursuant to the terms of the Pledge
Agreement on the Closing Date will create valid security interests in the
Collateral (as defined in the Pledge Agreement) securing payment of the Secured
Debt (as defined in the Pledge Agreement). On the Closing Date (i) such security
interests will constitute first and, subject to the rights of any lender under
a permitted Bank Facility (as defined in the Final Memorandum), prior and
exclusive liens with respect to the Collateral, and (ii) no filings,
registrations, recordings,
-8-
<PAGE>
deliveries or other actions will be required in order to perfect the security
interests granted in the Pledge Agreement.
(s) The consolidated condensed financial statements of the Company
included in the Final Memorandum present fairly in all material respects the
financial position, results of operations and cash flows of the Company, at
the dates and for the periods to which they relate, and have been prepared in
accordance with generally accepted accounting principles ("GAAP") of the United
States applied on a consistent basis. The summary and selected financial and
statistical data in the Final Memorandum present fairly in all material respects
the information shown therein and have been prepared and complied on a basis
consistent with the financial statements included therein, except as otherwise
stated therein, and are a fair presentation of the data purported to be shown.
The financial statements of Syarikat Telefon Wireless (M) SDN BHD ("STW")
---
included in the Final Memorandum present fairly in all material respects the
financial position, results of operations and capital gross at STW, at the dates
and for the periods to which they relate, have been prepared in accordance with
GAAP of Malaysia, and, except as stated therein, net loss forthe periods to
which such financial statements relate has been calculated in accordance with
GAAP of the United States applied on a consistent basis. KPMG Peat Marwick LLP
("KPMG") is an independent public accounting firm with respect to each of the
----
Company, IWC, and STW within the meaning of the Securities Act and the rules and
regulations promulgated thereunder. The financial statementsof PT Rajasa
Hazannah Perkasa ("RHP") included in the Final Memorandum present fairly in all
---
material respects the financial position and results of operations of RHP, at
the dates and for the periods to which they relate, have been prepared in
accordance with GAAP of Indonesia and, except as stated therin, net income for
the periods to which such financial statements relate has been calculated in
accordance with GAAP of the United States applied on a consistent basis.
Prasetio, Utomo & Co. is an independent public accounting firm with respect to
RHP within the meaning of the Securities Act and the rules and regulations
promulgated thereunder.
(t) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final Memorandum
(i) comply as to form in all material respects with the applicable requirements
of Regulation S-X promulgated under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (ii) have been prepared
------------
in accordance with the Commission's rules and guidelines with respect to pro
forma financial statements; (iii) have been properly computed on the bases
described therein and the assumptions used in the preparation of the pro forma
financial data and other pro forma financial information included in the Final
Memorandum are reasonable, and the adjustments used therein are appropriate to
give effect to the transactions or circumstances
-9-
<PAGE>
referred to therein; and (iv) present fairly the information shown
therein.
(u) Except as described in the final Memorandum, there is not pending
or, to the knowledge of the company, threatened any action, suit or proceeding
to which the properties or assets of any Material Subsidiary is a party, or to
which the properties or assets of any of the company or any of its Material
Subsidiaries are subject, before or brought by any court, arbitrator or
governmental agency or body which, if determined adversely to Company or any
Material Subsidiary, individually or in the aggregate, would have a Material
Adverse Effect or which seeks to restrain, enjoin, prevent the consummation of
or otherwise challenge the issuance or sale of the Units to be sold hereunder or
the consummation of the other transactions contemplated by the Transaction
Documents or otherwise described in the Final Memorandum. Except as described in
the Final Memorandum, neither the Company nor any of its subsidiaries or
affiliated companies in which it, directly or indirectly, owns an Equity
Interest has received any notice or claim of any default (or event, condition or
omission which with notice or lapse of time or both would result in a default)
under any of their respective Contracts, including those referred to in the
Final Memorandum, or any other Transaction Document to which any of them is a
party or has knowledge of any breach of any of such Contracts by the other party
or parties thereto, except such defaults or breaches as could not reasonably be
expected to result in a Material Adverse Effect.
(v) The company and each of the Materials Subsidiaries owns or
possesses adequate licenses or other rights to use all patents, patent rights,
inventions, trademarks, service marks, trade names, copyrights and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, "Intellectual
------------
Property") presently employed by it in connection with, or necessary for the
- --------
conduct of, the businesses now or proposed to be operated by it as described in
the Final Memorandum, except where the failure to own or possess such
Intellectual Property would not have a Material Adverse Effect; and none of the
company or any of its Material Subsidiaries has received any notice of
infringement of or conflict with (or knows of any such infringement of or
conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, individually or in the
aggregate, would have a Material Adverse Effect. To the knowledge of the
Company, the use of such Intellectual Property in connection with the business
and operations of the Company and the Material Subsidiaries does not infringe on
the rights of any other person.
(w) Except as described in the Final Memorandum, the Company and each
of the Material Subsidiaries possess all franchises, licenses, permits,
certificates, consents, orders,
-10-
<PAGE>
approvals and other authorizations from, and has made all declarations and
filings with, all federal, state, local, foreign and other governmental
agencies, bodies and other authorities, all self-regulatory organizations and
all courts and other tribunals, foreign or domestic (collectively, the
"Governmental Authorities"), presently required or necessary to own or lease, as
------------------------
the case may be, and to own and operate in the manner and to the full extent now
operated as described in the Final Memorandum ("Permits"), except where the
-------
failure to possess any such Permit would not, individually or in the aggregate,
have a Material Adverse Effect. Except as generally described in the Final
Memorandum, such Permits contain no materially burdensome restrictions not
customarily imposed by the issuing Government Authority on wireless
communications systems of the same class and type as those owned by the Company
and the Material Subsidiaries; the execution and delivery by the Company and IWC
of this Agreement, the performance by each of such persons of the Transaction
Documents to which each is a party, and the consummation of the transactions
contemplated hereby and thereby, did not and will not result in a violation of
the Permits. Except as generally described in the Final Memorandum, no event has
occurred which permits, or with notice or lapse of time or both would permit,
the revocation or non-renewal of any Permits assuming the filing in the future
of timely renewal applications and the timely payment in the future of all
applicable filing and regulatory fees to the applicable Governmental Authority,
or which might result in any other material impairment of the rights of the
Company or the Material Subsidiary in the Permits; and other than matters
described in the Final Memorandum, there are no proceedings pending or, to the
Company's knowledge, threatened or contemplated before any other Governmental
Authority against or involving the properties, businesses or Permits of any of
the Company or Material Subsidiaries that is reasonably likely to have a
Material Adverse Effect.
(x) Each of the Company and its Material Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to do so, individually or in the aggregate, would not have a
Material Adverse Effect, and has paid all taxes shown as due thereon; and other
than tax deficiencies which the Company or any Material Subsidiary is contesting
in good faith and for which the Company or such Material Subsidiary has provided
adequate reserves, there is no tax deficiency that has been asserted against the
Company or any of the Material Subsidiaries that, individually or in the
aggregate, would have a Material Adverse Effect.
(y) The statements set forth under the heading "Description of
Capital Stock", insofar as such statements purport to summarize certain
provisions of the Certificate (as described in the Final Memorandum) provide a
fair summary in all material respects of such provisions and information with
respect thereto.
-11-
<PAGE>
(z) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes to be
reliable and accurate in all material respects.
(aa) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Units) will violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System, in each case as in effect, or as the same may hereafter
be in effect, on the Closing Date.
(bb) Each of the Company and the Material Subsidiaries has good and
marketable title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good and marketable
title to a leasehold estate in the real and personal property described in the
Final Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions, individually or in the aggregate, would
not have a Material Adverse Effect. All leases, contracts and agreements to
which any of the Company or the Material Subsidiaries is a party or by which any
of then is bound are valid and enforceable against such Company or Material
Subsidiary and, to the Company's knowledge, are valid and enforceable against
the other party or parties thereto and are in full force and effect with only
such exceptions as, individually or in the aggregate, would not have a Material
Adverse Effect.
(cc) None of the Company or any Material Subsidiary is in violation of
any federal, state, local or foreign statutes, laws, ordinances, governmental
rules or regulations or any judgment, order or decree (including Environmental
Laws) to which any of them is subject or has failed to obtain any licenses,
permits, franchises or other governmental authorizations necessary to the
ownership or operation of their respective properties or the conduct of their
respective businesses, except as described in the Final Memorandum and except
for such violations and failures that would not have, either individually or in
the aggregate, a Material Adverse Effect. For purposes of this Agreement,
"Environmental Laws" mean the common law and all applicable federal, state,
------------------
local and foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued , promulgated, approved or entered thereunder, relating to
pollution or protection of public or employee health and safety or the
environment, including, without limitation, laws relating to (i) emissions,
discharges, releases or threatened releases of hazardous materials, into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of hazardous materials, and (iii) underground
-12-
<PAGE>
and above ground storage tanks, and related piping, and emissions, discharges,
releases or threatened releases therefrom. Neither the Company nor any of its
subsidiaries or affiliated companies has, directly or indirectly, at any time
during the past five years (i) made any unlawful contribution to any candidate
for public office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any United States or foreign, federal, state or
local governmental agency, office or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the applicable jurisdiction.
(dd) There is no strike, labor dispute, slowdown or work stoppage
involving the employees of the Company or any of the Material Subsidiaries which
is pending or, to the knowledge of the Company, threatened and which could,
individually or in the aggregate, have a Material Adverse Effect.
(ee) The Company and each of the Material Subsidiaries are insured by
insurers of recognized financial responsibility against such risks and in such
amounts as are prudent and customary for the interest of their respective
businesses and the value of their respective properties.
(ff) Neither of the Company nor any of the Material Subsidiaries has
any liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee retirement Income
Security Act of 1974, as amended ("ERISA"), to which any of the Company or the
-----
Material Subsidiaries makes or ever has made a contribution and in which any
employee of the Company or of any Material Subsidiary is or has ever been a
participant. With respect to such plans, the Company and each Material
Subsidiary is in compliance in all material respects with all applicable
provisions of ERISA.
(gg) Each of the Company and the Material Subsidiaries (i) makes and
keeps accurate books and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the reported accountability
for its assets is compared with existing assets at reasonable intervals and
appropriate action has been taken with respect to any differences.
(hh) The Company is not, and after giving effect to the offer and sale
of the Units, will not be an "investment company" or "promoter" or "principal
underwriter" for an "investment company," as such terms are defined in the
Investment Company Act of 1940, as
-13-
<PAGE>
amended, and the rules and regulations thereunder (collectively, the "ICA").
---
(ii) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes 1985, as amended, and all
regulations promulgated thereunder.
(jj) No condition, omission, event or act has occurred which, had the
Indenture already been executed and delivered, would constitute a Default (as
defined in the Indenture).
(kk) Other than holders of the Notes or Private Exchange Notes
pursuant to the Registration Rights Agreement and holders of Warrants pursuant
to the Warrant Agreement, no holder of securities of the Company will be
entitled to have such securities registered under the registration statements
required to be filed by the Company pursuant to the Registration Rights
Agreement or the Warrant Agreement.
(ll) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable value
of the assets of the Company will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company is not, and the Company will not
be, after giving effect to the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby
including, without limitation, the issuance and sale of the Units, (a) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted, (b) unable to pay its debts (contingent or otherwise) as they
mature or (c) otherwise insolvent.
(mm) Neither the Company nor any of its Affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act) has directly, or through
any agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Securities Act)
which is or could be integrated with the sale of the Units in a manner that
would require the registration under the Securities Act of the Units or (ii)
engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) in connection with the
offering of the Units or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(nn) Assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof, it is not necessary in connection
with the offer, sale and delivery of the Units to the Initial Purchasers in the
manner contemplated by this
-14-
<PAGE>
Agreement to register any of the Units, Notes or Warrants under the Securities
Act or to qualify the Indenture under the TIA.
(oo) No securities of the Company are of the same class (within the
meaning of rule 144A under the Securities Act) as the Units, the Notes, the
Warrants or the Warrant Shares and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a United States
automated inter-dealer quotation system.
(pp) The Company has not taken, nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Units.
(qq) The Company and the Constituent Corporations (as defined below)
had all corporate power and authority to carry out the merger pursuant to which
IWC became a wholly-owned subsidiary of the Company (the "Merger"), and the
------
Company, the Constituent Corporations and the stockholders of each of the
Company and the Constituent Corporations have taken all action required by law,
the certificates of incorporation and by-laws of the Company and the Constituent
Corporations or otherwise to approve the Merger. The Merger has been effected in
accordance with the General Corporation Law of the State of Delaware and no
stockholder of either of the Constituent Corporations has asserted or perfected
appraisal rights in connection with such transaction. The consummation of the
Merger did not contravene any provision of applicable law or any provision of
any contract or any order, writ, injunction or decree of any jurisdiction, court
or Governmental Authority and no consent, approval, authorization or order of
any court or Governmental Authority was required for the consummation of the
Merger, except such as were timely obtained. For purposes of this provision,
"Constituent Corporations" means IWC and International Wireless Communications
------------------------
Acquisition Corporation, the Delaware corporation that merged with and into IWC
pursuant to the Merger.
Any certificate signed by any officer of the Company or IWC and
delivered to any Initial Purchaser or to counsel for the Initial Purchasers
shall be deemed a joint and several representation and warranty by each of the
Company and IWC to each Initial Purchaser as to the matters covered thereby.
3. Purchase, sale and Delivery of the Units. On the basis of the
----------------------------------------
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and each of the Initial Purchasers,
acting severally and not jointly, agrees to purchase from the Company in the
respective amounts of Units set forth opposite its name on Annex I hereto at a
-------
purchase price of $490.56 per Unit, plus accretion of original issue discount,
if any, on the Notes underlying such Unit
-15-
<PAGE>
from August 15, 1996, (the "Unit Purchase Price"), or an aggregate purchase
-------------------
price of $96,502,963, plus accretion of original issue discount, if any, on the
Notes from August 15, 1996, (the "Purchase Price"). The Company and the Initial
--------------
Purchasers agree that, for federal income tax purposes, (i) the Notes and the
Warrants constitute an investment unit and (ii) the aggregate issuance price of
the Units is $100,002,612, plus accretion of original issue discount. If any, on
the Notes from August 15, 1996, with the aggregate issue price of the Notes
being $69,710,831, plus accretion of original issue discount, if any, on the
Notes from August 15, 1996, and the aggregate issue price of the Warrants being
$30,300,781. Neither the Company nor the Initial Purchasers shall voluntarily
take any action inconsistent with the agreement set forth in the immediately
preceding sentence, except that, with respect to clause (ii) thereof, any such
party may, after notice to each other such party, compromise or settles any
audit or review of such treatment initiated by the Internal Revenue Service.
One or more certificates in definitive form for the Units that the
Initial Purchasers have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchasers
request upon notice to the Company at least 36 hours prior to the Closing Date,
shall be delivered by or on behalf of the Company to the Initial Purchasers,
against payment by or on behalf of the Initial Purchasers of the Purchase Price
by certified or official bank check drawn in New York Clearinghouse funds or
similar next day funds. Such delivery of and payment for the Units shall be made
at the offices of Winston & Strawn, 200 Park Avenue, New York, New York at 10:00
A.M., New York time, on August 15, 1996, or at such other place, time or date as
the Initial purchasers, on the one hand, and the Company, on the other hand, may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date." The Company will make such certificate or certificates
------------
for the Units available for checking and packaging by the Initial Purchasers at
the offices of BT Securities Corporation in New York, New York, or at such other
place as BT Securities Corporation may designate, at least 24 hours prior to the
Closing date. The Company and IWC hereby acknowledge that they have advised the
Initial Purchasers that it would not be feasible for the Closing to occur
earlier than August 15, 1996.
It is understood that each certificate evidencing the units, the Notes
and the Warrants shall bear a legend to the effect set forth in the Final
Memorandum under the caption "Transfer Restrictions", unless the Company, the
Trustee and/or the Warrant Agent determine otherwise consistent with applicable
law.
The Company hereby agrees to pay any transfer taxes payable in
connection with the initial delivery to the Initial Purchaser of the Units.
-16-
<PAGE>
4. Offering by the Initial Purchasers. The Initial Purchasers
----------------------------------
propose to make an offering of the Units at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Company and IWC. Each of the Company and IWC
--------------------------------
jointly and severally, covenants and agrees with each of the Initial Purchasers
that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall not have given their consent. The Company will promptly, upon
the reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in connection with the
resale of the Securities by the Initial Purchasers.
(b) The Company will cooperate with the reasonable requests of the
Initial Purchasers in arranging for the qualification of the Securities for
offering and sale under the securities or "Blue Sky" laws of such jurisdictions
as the Initial Purchasers may designate and will continue such qualifications in
effect for as long as may be reasonably necessary to complete the resale of the
Securities; provided, however, that in connection therewith, the Company shall
-------- -------
not be required to qualify as a foreign entity or to execute a general consent
to service of process in any jurisdiction or subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction where it is not then
so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Units or the Private Exchange Notes, any event
occurs or information becomes known as a result of which the Final Memorandum as
then amended or supplemented would include any untrue statement of a material
fact, or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if for any other reason it is necessary at any time to amend or supplement the
Final Memorandum to comply with applicable law, the Company will promptly notify
the Initial Purchasers thereof and will prepare, at the expense of the Company,
an amendment or supplement to the Final Memorandum that corrects such statement
or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum
-17-
<PAGE>
or any amendment or supplement thereto as the Initial Purchasers may reasonably
request.
(e) For and during the period commencing on the date hereof and
ending on the date that no Units, Notes or Warrants are outstanding, the Company
will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee,
the Warrant Agent or the holders of the Units, Notes, Exchange Notes or Warrants
and, as soon as available, copies of any reports or financial statements
furnished to or filed by the Company with the Commission or any national
securities exchange or governing body of any automated quotation system on
which any class of securities of the Company may be listed.
(f) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they are available to the Company, a copy of any
unaudited interim financial statements of the Company, IWC, STW or RHP, for any
period subsequent to the period covered by the most recent financial statements
appearing in the Final Memorandum.
(g) Neither the Company nor any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Securities Act) which could be integrated with the
sale of the Units in a manner which would require the registration under the
Securities Act of the Securities.
(h) The Company shall not, for a period of 180 days following the
date hereof, without the prior written consent of the Initial Purchasers, offer,
sell, contract to sell or otherwise dispose of, directly or indirectly, any debt
securities of the Company, other than the Exchange Notes.
(i) Neither the Company nor any of its Affiliates will engage in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) in connection with the offering of the
Units or in any manner involving a public offering within the meaning of Section
4(2) of the Securities Act.
(j) For so long as any of the Units, Notes or Warrants remain
outstanding, the Company will make available, upon request, to any seller of
such securities the information specified in Rule 144A(d)(4) under the Act,
unless the Company is then subject to Section 13 or 15(d) of the Exchange Act.
(k) The Company will use its best efforts to (i) permit the Units,
Notes and Warrants to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities Dealers
(the "NASD") relating to trading
----
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<PAGE>
in the Private Offerings, Resales and Trading through Automated Linkages Market
(the "Portal Market") and (ii) permit such securities to be eligible for
-------------
clearance and settlement through The Depository Trust Company and its
participants.
(l) The Company will reserve, and continue to reserve, so long as any
Warrants are outstanding, a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants.
(m) The Company and IWC will use the proceeds from the sale of the
Units as described in the Final Memorandum under the caption "Use of Proceeds."
6. Expenses. The Company and IWC agree, jointly and severally, to
--------
pay all costs and expenses incident to the performance of their obligations
under this Agreement, whether or not the transactions contemplated herein are
consummated or this agreement is terminated pursuant to Section ll hereof,
including all costs and expenses incident to (i) the printing, word processing
or other production of documents with respect to the transactions contemplated
hereby, including any costs of printing the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, and any "Blue Sky"
memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation (including printing), issuance and
delivery to the Initial Purchasers of the Units, (v) the qualification of the
Securities under state securities and "Blue Sky" laws, including filing fees and
reasonable fees and expenses of counsel for the Initial Purchasers relating
thereto, (vi) expenses in connection with any meetings with prospective
investors in the Units, (vii) fees and expenses of the Trustee and the Warrant
Agent including reasonable fees and expenses of counsel thereto, (viii) all
expenses and listing fees incurred in connection with the application for
quotation of the Units, Notes and Warrants on the PORTAL Market, (ix) any fees
charged by investment rating agencies for the rating of the Notes or Exchange
Notes and (x) all amounts required by that certain engagement letter between the
Company and BT Securities Corporation dated May 8, 1996 (the "Engagement
----------
Letter"). If the sale of the Units provided for herein is not consummated
- ------
because any condition to the obligations of the Initial Purchasers set forth in
Section 7 hereof is not satisfied, because this Agreement is terminated or
because of any failure, refusal or inability on the part of either the Company
and IWC to perform all obligations and satisfy all conditions on their part to
be performed or satisfied hereunder (other than solely by reason of a default by
the Initial Purchasers of their obligations hereunder after all conditions
hereunder have been satisfied in accordance herewith), the Company and IWC
jointly and severally agree to promptly reimburse the Initial Purchasers upon
demand for all out-of-pocket expenses (including any amounts
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then due under the Engagement Letter) that shall have been incurred by the
Initial Purchasers in connection with the proposed purchase and sale of the
Units.
7. Conditions of the Initial Purchasers' Obligations. The
-------------------------------------------------
obligation of the Initial Purchasers to purchase and pay for the Units shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the closing Date:
(a) On the closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP,
counsel for the Company and IWC, in form and substance satisfactory to counsel
for the Initial Purchasers, to the effect that:
(i) Each of the Company and IWC is duly organized validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Final
Memorandum. Each of the Company and IWC is duly qualified as a foreign
corporation and in good standing in each jurisdiction where the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified, individually or
in the aggregate, would not have a Material Adverse Effect.
(ii) The authorized capital stock of the company consists of
26,000,000 shares of Common Stock, par value $0.01 per share ("Common
------
Stock"), 328,000 of which are issued and outstanding, and 23,080,00 shares
-----
of Preferred Stock, par value $0.01 per share ("Preferred Stock"),
---------------
17,173,200 of which are issued and outstanding. The Preferred Stock is
divided into seven series of shares of the same class, as follows:
1,200,000 shares are designated Series A Preferred Stock, all of which are
issued and outstanding; 1,229,240 shares are designated Series B Preferred
Stock, all of which are issued and outstanding; 2,460,000 shares are
designated Series C Preferred Stock, 1,762,280 of which are issued and
outstanding; 5,800,000 shares are designated Series D Preferred Stock,
3,652,960 of which are issued and outstanding; 3,972,240 shares are
designated Series E Preferred Stock, all of which are issued and
outstanding; 7,000,000 shares are designated Series F-1 Preferred Stock,
4,508,480 of which are issued and outstanding; and 1,080,000 shares are
designated Series F-2 Preferred Stock, 848,000 of which are issued and
outstanding. The outstanding shares of Common Stock and Preferred Stock
have been duly authorized and validly issued are fully paid and non-
assessable and, except as set forth in the Final Memorandum, are not
subject to pre-
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emptive or similar rights under any agreement or instrument known to such
counsel. The authorized capital stock of the Company conforms, in all
material respects, to the description thereof under the caption
"Description of Capital Stock" contained in the Final Memorandum.
(iii) Except as set forth in the Final Memorandum, to the knowledge
of such counsel (A) no options, warrants or other rights to purchase Equity
Interests in the Company are outstanding, (B) no agreements or other
obligations of any of the Company to issue, or other rights to cause any of
the Company to convert, any obligation into, or exchange any securities
for, Equity Interests in the Company are outstanding and (C) other than
holders of Notes and Private Exchange Notes pursuant to the Registration
Rights Agreement and holders of Warrants pursuant to the Warrant Agreement,
no holder of securities of any of the Company is entitled to have such
securities registered under a registration statement filed by the Company
pursuant to the Registration Rights Agreement or the Warrant Agreement.
(iv) Except as set forth in the Final Memorandum, to the knowledge
of such counsel (A) no options, warrants or other rights to purchase Equity
Interests in IWC are outstanding and (B) no agreements or other obligations
of any of IWC to issue, or other rights to cause any of IWC to convert, any
obligation into, or exchange any securities for, Equity Interests in IWC
are outstanding.
(v) The authorized capital stock of IWC consists of 1,000 shares
of Common Stock, $0.01 par value per share ("the "IWC Common Stock"), all
-----------------------
of which are issued outstanding and held of record by the Company and, to
the knowledge of such counsel and except as contemplated by the Pledge
Agreement, are free and clear of any security interest, claim, lien,
encumbrance, equities and claims or restrictions on transferability or
voting. All of the outstanding shares of IWC Common Stock have been duly
authorized and validly issued are are fully paid and non-assessable and are
not subject to any pre-emptive or similar rights under any agreement or
instrument known to such counsel.
(vi) Each of the Company and IWC has all requisite corporate power
and authority to execute, deliver and perform its respective obligations
under each of the Transaction Documents to which it is a party, and to
consummate the transactions contemplated hereby and thereby, including,
with respect to the Company, the outstanding issuance and sale of the
Units.
(viii) Each of the Transaction Documents has been duly and validly
authorized by each of the Company and, to the
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extent it is a party thereto, IWC. Each of the Transaction Documents other
that the Exchange Notes and the Private Exchange Notes has been duly
executed and delivered by the Company and, to the extent it is a party
thereto, IWC.
(viii) The Warrants have been duly and validly authorized, issued
and delivered by the Company and issuance of the Warrants is not subject to
any pre-emptive, anti-dilution or similar rights which have not been waived
in full. The Warrants are exercisable into Warrant Shares in accordance
with the terms of the Warrant Agreement. The Warrant Shares to be issued
upon exercise of the Warrants have been duly and validly authorized by the
Company and reserved for issuance upon exercise of the Warrants and, when
issued and delivered against payment therefor as provided in the Warrant
Agreement, will have been validly issued, fully paid and non-assessable,
and the issuance of such Warrant Shares is not subject to any pre-emptive
or similar rights which have not been waived in full.
(ix) The statements set forth under the heading "Description of
Warrants" in the Final Memorandum, insofar as such statements purport to
summarize certain provisions of the Warrants and the Warrant Agreement
provide a fair summary of such provisions and information with respect
thereto.
(x) To such counsel's knowledge, there is (A) no action, suit,
investigation or other proceeding before or by any court, or threatened or
governmental agency body or official, now pending, or threatened or contemplated
to which the Company or IWC is, or has been threatened to be made, a party or to
which the business property of the Company or IWC is, or has been threatened to
be made, subject, (B) no statute, rule, regulation or order that has been
enacted, adopted or issued by any Governmental Authority, or (C) no injunction,
restraining order or order of any nature by a federal, state or other court or
tribunal of competent jurisdiction to which the Company or any Material
Subsidiary is, or has been threatened to be made, subject has been issued that,
in the case of clauses (A), (B), and (C) above, is required to be disclosed in
the Final Memorandum and that was not so disclosed in the Final Memorandum and
that was not so disclosed or that (1) would have, either individually or in the
aggregate, a Material Adverse Effect, (2) would interfere with or adversely
affect the issuance of the Units, the Notes, the Warrants or the Warrants or the
Warrant Shares (when issued upon exercise of the Warrants) in any material
respect or materially and adversely affect the consummation of the transactions
contemplated by the Transactions Document or (3) that questions in any manner
the validity of the Transaction Documents, the Units, the Notes, the Warrants or
the Warrant Shares (when issued upon exercise of the Warrant).
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<PAGE>
(xi) Neither the Company nor IWC are (i) in violation of their
respective certificates of incorporation or bylaws (provided that the
opinion of such counsel with respect to subsections v.B.7(c) and (d) of
such certificate of incorporation and Section 11 of Article III of such
bylaws is limited to the knowledge of such counsel), (ii) to the knowledge
of such counsel, in breach or violation of any statute, judgment, decree,
order, rule or regulation applicable to any of them or any of their
respective properties or assets located in the United States, except for
any such breach or violation which, individually or in the aggregate, would
not have a Material Adverse Effect, or (iii) to the knowledge of such
counsel, in breach or default under (nor has any event occurred which, with
notice or passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any Contract listed on an
exhibit to such opinion that is in form and substance satisfactory to
counsel to the Initial Purchasers (a "Listed Contract"), except for any
such breach, default, violation or event which, individually or in the
aggregate, would not have a Material Adverse Effect.
(xii) The issuance, sale and delivery of the Units, the execution
and delivery of the Transaction Documents, and the consummation of the
transactions contemplated thereby and by the Final Memorandum will not
conflict with or constitute or result in a breach or a default under (or an
event which with notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or provisions of any
Listed Contract, except for any such conflict, breach, violation, default
or event which, individually or in the aggregate, would not have a Material
Adverse Effect, (ii) the certificate of incorporation or bylaws of the
Company or IWC, (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchasers in Section 8
hereof) any statute, judgment, decree, order, rule or regulation known to
such counsel to be applicable to the Company or IWC or any of their
respective properties or assets, except for any such conflict, breach or
violation which, individually or in the aggregate, would not have a
Material Adverse Effect; and any real property and buildings located in the
United States held under lease by the Company or IWC which are material
(individually or in the aggregate) to the Company are held by such person
under valid, subsisting and enforceable leases with such exceptions that,
individually or in the aggregate, would not have or result in a Material
Adverse Effect.
(xiii) To the knowledge of such counsel, no consent, approval,
authorization or order of any Governmental Authority, or third party is
required for the performance by
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the Company and IWC of their respective obligations under the Transaction
Documents or the consummation by the Company and IWC of the transactions
contemplated thereby, except such as have been obtained, such as may be
required in connection with the registration of the Notes or the Exchange
Notes under the Securities Act in accordance with the Registration Rights
Agreement and such as may be required in connection with the registration
of the Warrant Shares under the Securities Act in accordance with the
Warrant Agreement, and such as may be required under state securities or
"Blue Sky" laws in connection with the purchase and resale of the Units by
the Initial Purchasers, as to which matters such counsel need express no
opinion.
(xiv) The Merger was effected in accordance with the General
Corporation Law of the State of Delaware and that certain Agreement and
Plan of Merger by and among the Company, IWC and International Wireless
Communications Acquisition Corporation. To the knowledge of such counsel,
no consent, approval, authorization or order of any court or governmental
agency or body, or third party was required for the consummation of the
Merger, except such as were timely obtained.
In rendering opinions set forth in clauses (i)-(xiv) above, counsel
may (A) limit such opinions to the laws of the State of California, the
corporation laws of the State of Delaware, and the federal laws of the United
States of America, (B) rely as to all matters of fact relevant to such opinion
on certificates and written statements of officers and employees of the Company;
provided, however, that all such certificates and statements shall be
satisfactory to the Initial Purchasers in all material respects and attached to
such counsel's opinion and (C) expressly state that such counsel is not
expressing any opinion with respect to the ICA, the Investment Advisors Act of
1940, as amended, the TIA, the Securities Act or any applicable antitrust
statutes, rules or regulations. The opinion of such counsel for the Company may
acknowledge that the Initial Purchasers are obtaining from other counsel not
covered by the opinion of such counsel, including the opinions referred to in
subsection 7 (b), (c) and (e) hereof.
At the time the foregoing opinion is delivered, Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP shall additionally state that it has
participated in conferences with officers and other representatives of the
Company and the Material Subsidiaries, representatives of the independent public
accountants for the Company and certain of its subsidiaries, representatives of
the Initial Purchasers and counsel for the Initial Purchasers, at which
conferences the contents of the Final Memorandum and related matters were
discussed, and, although it has not independently verified and is not passing
upon and assumes no responsibility for the accuracy, completeness or fairness of
the statements contained
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in the Final Memorandum (except to the extent specified in subsection 7(a) (ii)
and (ix)), no facts have come to its attention which lead it to believe that the
Final Memorandum, on the date thereof or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such firm need express no opinion with respect to the financial statements
and related notes thereto and the other financial data derived from accounting
records included in the Final Memorandum). The opinion of Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP described in this Section shall be
rendered to the Initial Purchasers at the request of the Company and IWC and
shall so state therein.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
(b) On the Closing date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Giancarlo & Gnazzo, a Professional Corporation, counsel for the
Company and IWC, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect that:
(i) The Indenture constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which
any proceeding with respect thereto (whether considered in equity or at
law) may be brought.
(ii) The Notes are in the form contemplated by the Indenture. When
paid for by the Initial Purchasers in accordance with the terms of this
Agreement (assuming the due authentication and delivery of the Notes by the
Trustees in accordance with the Indenture), the Notes will constitute the
legal, valid and binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding with
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respect thereto (whether considered in equity or at law) may be brought.
(iii) When the Exchange Notes and the Private Exchange Notes have been
duly issued, executed and delivered by the Company in accordance with the terms
of the Registration Rights Agreement and the Indenture (assuming the due
authentication and delivery of the Exchange Notes and the Private Exchange Notes
by the Trustee in accordance with the Indenture and that there has not been a
change in any applicable law of the State of New York or the United States of
America from the date hereof to the time when the Private Exchange Notes and the
Exchange Notes are issued), will constitute the legal, valid and binding
obligations of the Company, entitled to the benefits of the Indenture, and
enforceable against the Company in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding with respect thereto
(whether considered in equity or at law) may be brought.
(iv) The Pledge Agreement constitutes the legal, valid and binding
obligation of the Company and IWC, enforceable against such persons in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
with respect thereto (whether considered in equity or at law) may be brought.
(v) The Registration Rights Agreement constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
with respect thereto (whether considered in equity or at law) may be brought.
(vi) The Warrant Agreement constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights
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<PAGE>
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding with respect thereto (whether considered
in equity or at law) may be brought.
(vii) The Pledge Agreement is effective to create, in favor of the
Collateral Agent for the benefit of the holders of the Secured Debt (as
defined in the Pledge Agreement), a valid security interest under the
Uniform Commercial Code as in effect in the State of New York (the "UCC")
---
in all of the right, title and interest of the Company and IWC in, to and
under the Collateral (as defined in the Pledge Agreement), as collateral
security for the payment when due of the Secured Debt. Assuming that (A)
financing statements in the form attached to the opinion, are properly
filed and no other financing statements with respect to the Collateral are
on financing statements with respect to the Collateral are on file, and (B)
the Collateral Agent (or any custodian acting on its behalf) obtains
possession by delivery in the State of New York of the instruments,
negotiable instruments and certificated securities (including the pledged
stock certificates and the Intercompany Notes) pledged under the Pledge
Agreement, the Collateral Agent will have a perfected security interest in
the Collateral consisting of (x) general intangibles, (y) instruments,
negotiable instruments and certificated securities (including the pledged
stock certificates and the Intercompany Notes), and (z) the proceeds
thereof, and in the case of instruments, negotiable instruments and
certificated securities, assuming that the Collateral Agent obtains
possession thereof in good faith and without notice of any adverse claim
(as defined in the UCC) and indorsed to the Collateral Agent or in blank,
and thereafter retains possession thereof in New York, such perfected
security interest therein will have priority over all other security
interests theretofore or thereafter created; and no other filing, recording
or notice is required to make such security interest effective.
(viii) The statements set forth under the heading "Description of
Senior Notes" in the Final Memorandum, insofar as such statements purport
to summarize certain provisions of the Notes and the Indenture, provide a
fair summary of such provisions and information with respect thereto.
(ix) Assuming (a) the accuracy of representations and warranties
of the Initial Purchasers in Section 8 of this Agreement; (b) the accuracy
of the representations and warranties of the Company in Section 2(mm) and
2(00) of this Agreement; (c) the accuracy of the representations and
warranties deemed to be made by a purchaser of the Securities as set forth
under the heading "Transfer Restrictions" in the Final Memorandum or made
by a purchaser of the Securities in a letter in substantially the form of
Appendix A to the Final
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Memorandum, (d) the due performance of the Initial Purchasers of the
agreements contained in Section 8 of this Agreement and (e) the due
performance of the Company of the agreements contained in Sections 5(g),
5(i) and 5(j) of this Agreement, (i) no registration of the Securities
under the Securities Act is required for the sale of the Securities to the
Initial Purchasers and the initial resale of the Securities by the Initial
Purchasers in the manner contemplated by this Agreement and the Final
Memorandum, and (ii) prior to the commencement of the Exchange Offer (as
defined in the Registration Rights Agreement) or the effectiveness of the
Shelf Registration Statement (as defined in the Registration Rights
Agreement), the Indenture is not required to be qualified under the Trust
Indenture Act of 1933, as amended.
(x) The Statements made in the Final Memorandum under the caption
"Certain Income Tax Considerations" to the extent that they relate to U.S.
federal income tax matters currently applicable to the United States
holders described therein, accurately reflect the material tax consequences
of owning the Units.
The opinion of Giancarlo & Gnazzo, P.C. described in this subsection
shall be rendered to the Initial Purchasers at the request of the Company and
IWC and shall so state therein. References to the Final Memorandum in this
subsection (b) shall include any amendment or supplement thereto prepared in
accordance with the provisions of this Agreement at the Closing Date.
In rendering such opinion, counsel may (A) rely as to matters
involving the application of laws of any jurisdiction other than the laws of the
State of California, New York, the corporation laws of the State of Delaware, or
the laws of the United States of America, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for the
Initial Purchasers, (B) rely as to all matters of fact relevant to such opinion
on certificates and written statements of officers and employees of the Company;
provided, however, that all such certificates and statements shall be
satisfactory to the Initial Purchasers in all material respects and attached to
such counsel's opinion, and (C) assume that each of the Indenture, the Notes,
the Registration Rights Agreement, the Pledge Agreement, the Warrants, and the
Warrant Agreement have been duly authorized, executed and delivered by each of
the parties thereto and, except with respect to IWC and the Company, constitute
the legal, valid and binding obligation of such parties. The opinion of such
Counsel for the Company shall state the opinion of any other counsel is in form
and substance satisfactory to such counsel and, in their opinion, you and they
are justified in relying thereon.
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<PAGE>
(c) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, from the local counsel listed on Exhibit C hereto for each of the
Material Subsidiaries, which opinion shall be in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
(d) On the closing Date, the Initial Purchasers shall have received
the opinion, in form and substance satisfactory to the Initial Purchasers, dated
as of the Closing Date and addressed to the Initial Purchasers, of Winston &
Strawn, counsel for the Initial Purchasers, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchasers may reasonably require. In rendering such opinion, Winston & Strawn
shall have received and may rely upon such certificates and other documents and
information as it may reasonably request to pass upon such matters.
(e) On the Closing Date, the Initial Purchasers shall have received
the opinion, in form and substance satisfactory to the Initial Purchasers, dated
as of the Closing Date and addressed to the Initial Purchasers, of Willkie Farr
& Gallagher, counsel for the Initial Purchasers and the Company, with respect to
certain legal matters, including the ICA, relating to this Agreement and such
other related matters as the Initial Purchasers may reasonably require. In
rendering such opinion, Wilkie Farr & Gallagher shall have received and may rely
upon such certificates and other documents and information as it may reasonably
to pass upon such matters.
(f) On the date of the Final Memorandum prior to the execution of
this Agreement and also at the Closing Date, the Initial Purchasers shall have
received from KPMG, with respect to the information contained in the Final
Memorandum relating to the Company, IWC, STW, and Prasetio, Utomo & Co., with
respect to the information contained in the Final Memorandum relating to RHP,
comfort letters dated the date hereof and the Closing Date, respectively, in
form and substance reasonably satisfactory to counsel for the Initial
Purchasers.
(g) The representations and warranties of the Company and IWC
contained in this Agreement shall be true and correct on and as of the date
hereof and on as of the Closing Date as if made on and as of the Closing Date;
the statements of the Company's officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be true and correct as
of the date made and on as of the Closing Date; the Company and IWC shall have
performed all covenants and agreements and satisfied all conditions on their
part to be performed or satisfied hereunder at or prior the Closing Date; and,
except as described in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), subsequent to the date of the most
recent
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financial statements contained in such Final Memorandum, there shall have been
no event or development that, individually or in the aggregate, has or could be
reasonably likely to have a Material Adverse Effect.
(h) The sale of the Units hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(i) Subsequent to the date of the most recent financial statements
in the Final Memorandum (exclusive of any amendment or supplement thereto after
the date hereof), the conduct of the business and operations of the Company or
any of the Material Subsidiaries shall not have been interfered with by strike,
fire, flood, hurricane, accident or other calamity (whether or not insured) or
by any court or governmental action, order or decree, and, except as otherwise
stated therein, the properties of the Company or any of its subsidiaries or
affiliated companies in which it, directly or indirectly, has an Equity Interest
shall not have sustained any loss or damage (whether or not insured) as a result
of any such occurrence, which, individually or in the aggregate, could have a
Material Adverse Effect, other than as set forth in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date hereof).
(j) The Initial Purchasers shall have received certificates of each
of the Company and IWC, dated the Closing Date, signed by their respective
Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, to the effect that:
(i) The representations and warranties of the Company and IWC
contained in this Agreement are true and correct as of the date hereof and
as of the Closing Date, and the Company the date hereof and as of the
Closing Date, and the Company and IWC have performed all covenants and
agreements and satisfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof and since the date
of the most recent financial statements in the Final Memorandum (exclusive
of any amendment or supplement thereto after the date hereof), no event or
events have occurred, no information has become known nor does any
condition exist that, individually or in the aggregate, could have a
Material Adverse Effect, other than as set forth in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date hereof);
and
(iii) The sale of the Units hereunder has not been enjoined
(temporarily or permanently).
(k) On the Closing Date, the Initial Purchasers shall have
received copies of the Pledge Agreement executed by the
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Company, IWC and the Collateral Agent, the Registration Rights Agreement
executed by the Company and the Initial Purchasers and the Warrant Agreement
executed by the Company [, Vanguard Cellular Operating Corp.] and the Warrant
Agent and such agreements shall be in full force and effect at all times from
and after the Closing Date.
(l) On or prior to the Closing Date, the Initial Purchasers shall
have received from the Company a duly executed Consent Agreements in form and
substance reasonably satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers relating to, among other things, the waiver of certain
registration and anti-dilution rights arising under the Series F Purchase
Agreement, the IRA and the Registration Rights Agreement (as such terms are
defined in the Final Memorandum).
(m) On or prior to the Closing Date, the Initial Purchasers shall
have received evidence, in form and substance satisfactory to the Initial
Purchasers and counsel for the Initial Purchasers, of the satisfaction and
release of all claims and security interests arising under the 1996 TD Loan
Agreement (as defined in the Final Memorandum).
On or before the Closing Date, the Initial Purchasers and counsel for
the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Material
Subsidiaries as they shall have reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company and IWC
shall furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. Offering of Securities; Restrictions on Transfer. Each of the
------------------------------------------------
Initial Purchasers represents and warrants to and agrees with the Company that
(i) it has not and will not solicit offers for, or offer or sell, the Units by
any form of general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act; (ii) it is an
Accredited Investor (as such term is defined in Regulation D under the
Securities Act); (iii) it has all requisite corporate power and authority to
enter into, deliver and perform its several obligations under this Agreement and
the Registration Rights Agreement and each of this Agreement and the
Registration Rights Agreement have been duly authorized by it; and
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<PAGE>
(iv) it has and will solicit offers for the Unit only from, and will offer or
sell the Units only to (A) persons whom the Initial Purchasers reasonably
believe to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchasers that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A (B) a limited number of other institutional investors reasonably
believed by the Initial Purchasers to be Accredited Investors that, prior to
their purchase of the Units, deliver to the Initial Purchasers a letter
containing the representations and agreements set forth in Annex A to the Final
Memorandum and (C) in the case of offers outside the United States, to persons
other than U.S. persons (as such term is defined in Regulation S under the
Securities Act) ("foreign purchasers," which term shall include dealers or other
------------------
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust) in the case of
clauses (B) and (C) and (D), to persons who will be deemed to have represented
and agreed as provided under the caption "Transfer Restrictions" contained in
the Final Memorandum.
9. Indemnification and Contribution. (a) The Company and IWC,
--------------------------------
jointly and severally, agree to indemnify and hold harmless the Initial
Purchasers, and each person, if any, who controls any Initial Purchaser within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, against any losses, claims, damages or liabilities to which any Initial
Purchaser or such controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto or any application or other document, or any amendment or
supplement thereto, executed by the Company or IWC or based upon written
information furnished by or on behalf of the Company or IWC filed in any
jurisdiction in order to qualify the Securities under the securities or
"Blue Sky" laws thereof or filed with any securities association or
securities exchange (each an "Application"); or
-----------
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses incurred by the Initial
Purchasers or such controlling person in connection
-32-
<PAGE>
with investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
--------
however, the Company and IWC will not be liable in any such case to the extent
- -------
that any such loss, claim, damage, or liability arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in any Memorandum or any amendment or supplement thereto or any Application
in reliance upon and in conformity with written information concerning the
Initial Purchasers furnished to the Company by the Initial Purchasers
specifically for use therein. This indemnity agreement will be in addition to
any liability that the Company and IWC may otherwise have to the indemnified
parties.
(b) Each of the Initial Purchasers severally agrees to indemnify and
hold harmless the Company and IWC, and each of their respective directors,
officers and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damage or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Memorandum or any amendment or supplement thereto or any Application, or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in any Memorandum or any amendment or supplement thereto
or any Application, or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning such Initial
Purchaser furnished to the Company by the Initial Purchasers specifically for
use therein; and subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchasers may otherwise have to the indemnified parties.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph
-33-
<PAGE>
(a) or (b) above unless and to the extent such failure results in the forfeiture
or compromise by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation provided in
paragraphs (a) and (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if (i) the use of counsel chosen
-------- -------
by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchasers
in the case of paragraph (a) of this Section 9 or the Company in the case of
paragraph (b) of this Section 9 or the Company in the case of paragraph (b) of
this Section 9, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions) or
(ii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any
-34-
<PAGE>
settlement of such action effected by such indemnified party without the prior
written consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in writing its
rights under this Section 9, in which case the indemnified party may effect such
a settlement without consent. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise of
any pending or threatened proceeding in respect of which any indemnified party
is or likely would have been a party, and for which indemnity of such
indemnified party would have been required hereunder, unless such settlement (A)
includes an unconditional written release of such indemnified party, in form and
substance reasonably satisfactory to such indemnified party, from all liability
on claims that are the subject matter of such settlement, and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any indemnified party.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Units, Notes or Warrants or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Company and IWC on the one hand
and any Initial Purchaser on the other shall be deemed to be in the same
proportion as the total proceeds from the Offering (before deducting expenses)
received by the Company bear to the total discounts and commissions received by
such Initial Purchaser. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or IWC on the one hand, or such
Initial Purchaser on the other, the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission
or alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company, IWC and the Initial Purchasers
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per
-35-
<PAGE>
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Nothwithstanding any other provision of this paragraph (d), no
Initial Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls an Initial Purchaser within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act shall have the same rights
to contribution as the Initial Purchasers, and each director of the Company,
each officer of the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company. The
Initial Purchaser's obligations in this subsection (d) to contribute are several
in proportion to their respective underwriting obligations and not joint.
10. Survival Clause. The respective representations, warranties,
---------------
agreements, covenants, indemnities and other statements of the Company and IWC,
their respective officers and the Initial Purchasers set forth in this Agreement
or made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the company and IWC, any of their respective officers or directors, the Initial
Purchasers or any controlling person referred to in Section 9 hereof and (ii)
delivery of and payment for the Units. The respective agreements, covenants,
indemnities and other statements set forth in Sections 6, 9 and 15 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
-----------
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that any of the Company or IWC shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
their respective part to be performed or satisfied hereunder at or prior thereto
or, if at or prior to the Closing Date:
(i) the Company or any of its subsidiaries of affiliated companies in
which it, directly or indirectly , has an Equity Interest shall have
sustained any loss or interference with respect to its business or
properties from fire, flood, hurricane, accident or other calamity, whether
or not covered
-36-
<PAGE>
by insurance, or from any strike, labor dispute, slowdown or work stoppage
or any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of any of the
Company) except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date hereof);
(ii) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market System shall have
been suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchasers, makes it impracticable or inadvisable
to proceed with the offering or the delivery of the Units as contemplated
by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The statements
----------------------------------------------
set forth in the last paragraph on the front cover page and in the second and
third sentences of the third paragraph under the heading "Private Placement" in
the Final Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to the Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Initial Purchasers, shall be mailed or
-37-
<PAGE>
delivered to BT Securities Corporation, 130 Liberty Street, New York, New York
10006, Attention: Corporate Finance Department; with a copy to Winston & Strawn,
200 Park Avenue, New York, New York 10166, Attention: Robert W. Ericson; if sent
to the Company or IWC, shall be mailed or delivered to the Company at 400 South
El Camino Real, Suite 1275, San Mateo, California 94402, Attention: Chief
Financial Officer; with a copy to Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian LLP, 600 Hansen Way, Second Floor, Palo Alto, California 94304,
Attention: Brooks Stough.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; and one business day
after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the Initial Purchasers, the Company and IWC and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company and IWC contained in Section 9 of this Agreement
shall also be for the benefit of any person or persons who control the Initial
Purchasers within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained
in Section 9 of this Agreement shall also be for the benefit of the directors of
the Company and IWC and their respective officers and any person or persons who
control the Company or IWC within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act. No purchaser of Units from the Initial
Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
--------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. 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 instrument.
[SIGNATURE PAGE TO FOLLOW]
-38-
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
IWC and the Initial Purchasers.
Very truly yours,
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC.
By: /s/ John D. Lockton
--------------------------------
Its: President
------------------------------
INTERNATIONAL WIRELESS COMMUNICATIONS,
INC.
By: /s/ John D. Lockton
--------------------------------
Its: President
-------------------------------
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BT SECURITIES CORPORATION
By:____________________________
TORONTO DOMINION SECURITIES (USA) INC.
By: ___________________________
SALOMON BROTHERS INC
By: ___________________________
-39-
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
IWC and the Initial Purchasers.
Very truly yours,
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC.
By:_______________________________
Its:______________________________
INTERNATIONAL WIRELESS COMMUNICATIONS,
INC.
By:_______________________________
Its:______________________________
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BT SECURITIES CORPORATION
By: /s/ D.F. Hadley
----------------------------
TORONTO DOMINION SECURITIES (USA) INC.
By:
____________________________
SALOMON BROTHERS INC
By:
____________________________
-39-
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
IWC and the Initial Purchasers.
Very truly yours,
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC.
By:_______________________________
Its:______________________________
INTERNATIONAL WIRELESS COMMUNICATIONS,
INC.
By:_______________________________
Its:______________________________
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BT SECURITIES CORPORATION
By: __________________________
TORONTO DOMINION SECURITIES (USA) INC.
By: /s/ Rod Ashtaryeh
--------------------------
SALOMON BROTHERS INC
By: __________________________
-39-
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
IWC and the Initial Purchasers.
Very truly yours,
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC.
By:_______________________________
Its:______________________________
INTERNATIONAL WIRELESS COMMUNICATIONS,
INC.
By:_______________________________
Its:______________________________
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BT SECURITIES CORPORATION
By: ___________________________
TORONTO DOMINION SECURITIES (USA) INC.
By: ___________________________
SALOMON BROTHERS INC
By: /s/ Peter Westley
---------------------------
-39-
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
Initial Purchasers Number of Units
- ------------------ ---------------
<S> <C>
BT Securities Corporation.............................. 108,196
Toronto Dominion Securities (USA) Inc.................. 49,180
Salomon Brothers Inc................................... 39,344
Total............................................... 196,720
=======================
</TABLE>
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
-----------------------------
<PAGE>
________________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of August 15, 1996
Among
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
and
BT SECURITIES CORPORATION
TORONTO DOMINION SECURITIES (USA) INC.
and
SALOMON BROTHERS INC
as Initial Purchasers
________________________________________________________________________________
$196,720,000
14% SENIOR SECURED DISCOUNT NOTES DUE 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions........................................................... 1
2. Exchange Offer........................................................ 4
3. Shelf Registration Statement.......................................... 8
4. Additional Interest................................................... 9
5. Registration Procedures............................................... 11
6. Registration Expenses................................................. 19
7. Indemnification....................................................... 21
8. Rule 144 and 144A..................................................... 24
9. Underwritten Registrations............................................ 25
10. Miscellaneous......................................................... 25
(a) No Inconsistent Agreements....................................... 25
(b) Adjustments Affecting Registrable Notes.......................... 25
(c) Amendments and Waivers........................................... 25
(d) Notices.......................................................... 26
(e) Successors and Assigns........................................... 28
(f) Counterparts..................................................... 28
(g) Headings......................................................... 28
(h) GOVERNING LAW.................................................... 28
(i) Severability..................................................... 28
(j) Senior Notes Held by the Company or its Affiliates............... 28
(k) Third Party Beneficiaries........................................ 29
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
---------
August 15, 1996, by and among International Wireless Communications Holdings,
Inc., a Delaware corporation (the "Company"), and BT Securities Corporation,
-------
Toronto Dominion Securities (USA) Inc. and Salomon Brothers Inc (the "Initial
-------
Purchasers").
- ----------
This Agreement is entered into in connection with the Purchase
Agreement, dated August 9, 1996, among the Company, International Wireless
Communications, Inc. and the Initial Purchasers (the "Purchase Agreement"),
------------------
which provides for the sale to the Initial Purchasers of Units (the "Units")
-----
consisting of an aggregate of $196,720,000 principal amount of 14% Senior
Secured Discount Notes due 2001 of the Company (the "Senior Notes") and
------ -----
Contingent Warrants (the "Warrants") to purchase shares of the Company's Common
--------
Stock, $0.01 par value per share. The Senior Notes and the Warrants will be
separately transferable upon the earlier of (i) November 15, 1996, (ii) the
occurrence of an Exercise Event (as defined in the Warrants), (iii) the date a
registration statement with respect to a registered exchange offer for the
Senior Notes or a shelf registration for the Senior Notes is declared effective
under the Securities Act of 1933, as amended, and (iv) such earlier date as the
Initial Purchasers, in their discretion, deem appropriate. In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the obligation of
the Initial Purchasers to purchase the Units under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the first introductory paragraph hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
Closing Date: The Closing Date as defined in the Purchase Agreement.
------------
-1-
<PAGE>
Company: See the first introductory paragraph hereto.
-------
Effectiveness Date: The 90th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Registration Statement: See Section 2(a) hereof.
-------------------------------
Filing Date: The 45th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of August 15, 1996 among the
---------
Company and Marine Midland Bank, as trustee, pursuant to which the Senior Notes
are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchasers: See the first introductory paragraph hereto.
------------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: The date on which the original Senior Notes were sold to
----------
the Initial Purchasers pursuant to the Purchase Agreement.
NASD: See Section 5(s) hereof.
----
Participant: See Section 7(a) hereof.
-----------
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, limited
------
liability company, limited liability limited partnership, joint stock company,
trust, unincorporated
-2-
<PAGE>
association, union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph hereto.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Senior Note upon original issuance of the
-----------------
Senior Notes and at all times subsequent thereto, each Exchange Note as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Senior Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) a Registration Statement (other than, with respect to any Exchange
Note as to which Section 2(c)(v) hereof is applicable, the Exchange Registration
Statement) covering such Senior Note, Exchange Note or Private Exchange Note, as
the case may be, has been declared effective by the SEC and such Senior Note
(unless such Senior Note was not tendered for exchange by the Holder thereof),
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Senior Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, or (iii) such Senior Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Registration Statement, that covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and
-3-
<PAGE>
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the Company of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Senior Notes: See the second introductory paragraph hereto.
------------
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration Statement: See Section 3(a) hereof.
----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private
Exchange Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Company agrees to file with the SEC no later than the Filing
Date an offer to exchange (the "Exchange Offer") any and all of the Registrable
--------------
Notes (other than the Private Exchange Notes, if any) for a like aggregate
principal amount of debt securities of the Company, which are identical in all
material respects to the Senior Notes (the "Exchange Notes") (and which are
--------------
entitled to the benefits of the Indenture or a trust indenture
-4-
<PAGE>
which is identical in all material respects to the Indenture (other than such
changes to the Indenture or any such identical trust indenture as are necessary
to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA), except that the Exchange Notes (other than Private
Exchange Notes, if any) shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Offer shall be registered under the Securities Act
on the appropriate form (the "Exchange Registration Statement") and shall comply
-------------------------------
with all applicable tender offer rules and regulations under the Exchange Act.
The Company agrees to use its best efforts to (x) cause the Exchange
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20
business days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 135th day following the Issue Date. If after
such Exchange Registration Statement is declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to represent
that any Exchange Notes received by it will be acquired in the ordinary course
of its business, that at the time of the consummation of the Exchange Offer such
Holder will have no arrangement or understanding with any Person to participate
in the distribution of the Exchange Notes in violation of the provisions of the
Securities Act, and that such Holder is not an affiliate of the Company within
the meaning of the Securities Act. Upon consummation of the Exchange Offer in
accordance with this Section 2, the Company shall have no further obligation to
register Registrable Notes (other than Private Exchange Notes and other than in
respect of any Exchange Notes as to which clause 2(c)(v) hereof applies)
pursuant to Section 3 hereof. No securities other than the Exchange Notes shall
be included in the Exchange Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
-------------
Broker-Dealer"), whether such positions or policies have been publicly
- -------------
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the
-5-
<PAGE>
Initial Purchasers, represent the prevailing views of the staff of the SEC. Such
"Plan of Distribution" section shall also expressly permit the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 180 days after the
- -------- -------
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5 hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Senior Notes acquired by them and having the status of an
unsold allotment in the initial distribution, the Company shall, upon the
request of any of the Initial Purchasers, simultaneously with the delivery of
the Exchange Notes in the Exchange Offer issue and deliver to the Initial
Purchasers in exchange (the "Private Exchange") for such Senior Notes held by
----------------
the Initial Purchasers a like principal amount of debt securities of the Company
that are identical in all material respects to the Exchange Notes (the "Private
-------
Exchange Notes") (and which are issued pursuant to the same indenture as the
- --------------
Exchange Notes) except for the placement of a restrictive legend on such Private
Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Senior Notes surrendered in exchange therefor or, if no interest has been paid
on the Senior Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
-6-
<PAGE>
(3) permit Holders to withdraw tendered Senior Notes at any time
prior to the close of business, New York time, on the last business day on
which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Senior Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Senior Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Senior Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Senior Notes of such Holder
so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that (1) the Exchange Notes shall
not be subject to the transfer restrictions set forth in the Indenture and (2)
the Private Exchange Notes shall be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Senior Notes shall vote and
consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Senior Notes will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 135 days of
the Issue Date, (iii) any holder of Private Exchange Notes so requests at any
time within one year after the consummation of the Private Exchange, (iv) the
Holders of not less than a majority in aggregate principal amount of the
Registrable Notes reasonably determine that the interests of the Holders would
be materially adversely affected by consummation of the Exchange Offer or (v) in
the case of any Holder that participates in the Exchange Offer, such Holder does
not receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Company
-7-
<PAGE>
within the meaning of the Securities Act), then the Company shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
-----
Notice") to the Trustee and in the case of clauses (i), (ii) and (iv), all
- ------
Holders, in the case of clause (iii), the Holders of the Private Exchange Notes
and in the case of clause (v), the affected Holder, and shall file a Shelf
Registration Statement pursuant to Section 3 hereof.
3. Shelf Registration Statement
----------------------------
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration Statement. The Company shall as promptly as
----------------------------
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Shelf Registration Statement"). If the Company
----------------------------
shall not have yet filed an Exchange Registration Statement, the Company shall
use its best efforts to file with the SEC the Shelf Registration Statement on or
prior to the Filing Date. Otherwise, the Company shall use its best efforts to
file with the SEC the Shelf Registration Statement on or prior to the 30th day
after the delivery of the Shelf Notice. The Shelf Registration Statement shall
be on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Company shall not permit any securities other than the Registrable Notes to be
included in the Shelf Registration Statement. The Company will, in the event of
the filing of a Shelf Registration Statement, notify each Holder when such Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Senior Notes.
The Company shall use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the filing of the Shelf Registration Statement and to keep the
Shelf Registration Statement continuously effective under the Securities Act
until the date which is three years from the Issue Date, subject to extension
pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"),
--------------------
or such shorter period ending when all Registrable Notes covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement.
(b) Withdrawal of Stop Orders. If the Shelf Registration Statement
-------------------------
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company
-8-
<PAGE>
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend the Shelf Registration Statement if required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. Additional Interest
-------------------
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay, as liquidated damages, additional interest on the
Senior Notes ("Additional Interest") under the circumstances and to the extent
-------------------
set forth below (each of which shall be given independent effect and shall not
be duplicative):
(i) if neither the Exchange Registration Statement nor the Shelf
Registration Statement has been filed on or prior to the Filing Date, then,
commencing on the 46th day after the Issue Date, Additional Interest shall
accrue on the Senior Notes over and above the stated interest at a rate of
0.50% per annum for the first 90 days immediately following the Filing
Date, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor the Shelf
Registration Statement is declared effective by the SEC on or prior to the
Effectiveness Date, then, commencing on the 91st day after the Issue Date,
Additional Interest shall accrue on the Senior Notes included or which
should have been included in such Registration Statement over and above the
stated interest at a rate of 0.50% per annum for the first 90 days
immediately following the Effectiveness Date, such Additional Interest rate
increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; and
(iii) if (A) the Company has not exchanged Exchange Notes for
all Senior Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 135th day after the Issue Date or (B) the
Exchange Registration Statement ceases to be effective at any time prior to
the time that the Exchange Offer is consummated or (C) if applicable,
-9-
<PAGE>
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue over and above
the stated interest at a rate of 0.50% per annum for the first 90 days
commencing on (x) the 136th day after the Issue Date with respect to the
Senior Notes validly tendered and not exchanged by the Company, in the case
of (A) above, or (y) the day the Exchange Registration Statement ceases to
be effective in the case of (B) above, or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest rate increasing by an additional 0.50% per annum
at the beginning of each such subsequent 90-day period (it being understood
and agreed that, notwithstanding any provision to the contrary, so long as
any Senior Notes which is the subject of a Shelf Notice is then covered by
an effective Shelf Registration Statement, no Additional Interest shall
accrue on such Senior Notes);
provided, however, that the Additional Interest rate on any affected Senior
- -------- -------
Notes may not exceed at any one time in the aggregate 2.0% per annum; and
provided, further, that (1) upon the filing of the Exchange Registration
- -------- -------
Statement or a Shelf Registration Statement (in the case of clause (i) of this
Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement
or the Shelf Registration Statement (in the case of clause (ii) of this Section
4(a)), or (3) upon the exchange of Exchange Notes for all Senior Notes tendered
(in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness
of the Exchange Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the case
of (iii)(C) of this Section 4(a)), Additional Interest on the affected Senior
Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture within one business day after each and every date on which an
event occurs in respect of which Additional Interest is required to be paid (an
"Event Date"). Any amounts of Additional Interest due pursuant to clauses
----------
(a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable to the Holders of
affected Senior Notes in cash semi-annually on each February 15 and August 15
(to the holders of record on the February 1 and August 1 immediately preceding
such dates), commencing with the first such date occurring after any Event Date.
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the affected
Registrable Notes of such Holders, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of
-10-
<PAGE>
a 360-day year comprised of twelve 30-day months and, in the case of a partial
month, the actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registration(s) to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:
(a) Prepare and file with the SEC prior to the Filing Date a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided, however,
-------- -------
that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
hereof is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each case
at least five business days prior to such filing). The Company shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period or until consummation of the Exchange Offer, as the case may be; cause
the related Prospectus to be supplemented by any Prospectus supplement required
by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities Act; and
comply with the
-11-
<PAGE>
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; the Company shall be deemed not to
have used its best efforts to keep a Registration Statement effective during the
Applicable Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless such action
is required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of paragraph 5(k) hereof
and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, the Company shall notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, their counsel and the managing underwriters, if any, promptly (but in any
event within two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement), contemplated by Section 5(n) hereof
cease to be true and correct, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or
sale in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any condition
or any information becoming known that makes any statement made in
-12-
<PAGE>
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in or amendments or supplements to
such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the determination by the Company that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes for sale in any jurisdiction, and, if any such order is issued,
to use its best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any), or the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering, (i) promptly incorporate
in a prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters (if any), such Holders, or counsel for any
of them reasonably request to be included therein and (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment.
(f) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and to counsel and each managing underwriter, if any, at the sole expense of the
Company, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
-13-
<PAGE>
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Company, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify such
Registrable Notes (and to cooperate with selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes) for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request in writing; provided, however, that where
--------- --------
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Company agrees to cause
its counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that the Company shall not be required to (A)
--------- --------
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself
-14-
<PAGE>
to taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the Holders thereof or the underwriter or underwriters, if any, to dispose of
such Registrable Notes, except as may be required solely as a consequence of the
nature of a selling Holder's business, in which case each of the Company will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals.
(k) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating Broker-
Dealer, any such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) [Intentionally Omitted]
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes or Exchange Notes, as the case may be, in a form eligible
for deposit
-15-
<PAGE>
with The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes or Exchange Notes, as the case may be.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings of debt securities similar to the
Senior Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to facilitate the registration or
the disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Company and its respective subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, as are customarily made
by issuers to underwriters in underwritten offerings of debt securities similar
to the Senior Notes, and confirm the same in writing if and when requested; (ii)
obtain the written opinion of counsel to the Company and written updates thereof
in form, scope and substance reasonably satisfactory to the managing underwriter
or underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt similar to the
Senior Notes and such other matters as may be reasonably requested by the
managing underwriter or underwriters; (iii) obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings of debt similar to
the Senior Notes and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any
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<PAGE>
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer, as the
case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the case
may be, or underwriter (collectively, the "Inspectors"), at the offices where
----------
normally kept, during reasonable business hours and upon reasonable advance
notice to the Company, all financial and other records, pertinent corporate
documents and instruments of the Company and its respective subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them to
-------
exercise any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Company and its respective subsidiaries to supply
all information reasonably requested by any such Inspector in connection with
such Registration Statement. Records which the Company determines, in good
faith, to be confidential and any Records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a material misstatement or
material omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is, in the opinion
of counsel for any Inspector, necessary or advisable in connection with any
action, claim, suit or proceeding, directly or indirectly, involving or
reasonably likely to involve such Inspector and arising out of, based upon,
relating to, or involving this Agreement, or any transactions contemplated
hereby or arising hereunder, or (iv) the information in such Records has been
made generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such information
is generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to further
agree that it will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give prompt notice to the Company and allow the
Company to undertake appropriate action to prevent disclosure of the Records
deemed confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such
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<PAGE>
indenture and the Holders of the Registrable Notes, to effect such changes to
such indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and in the event that such qualification
would require the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
the Indenture; and execute, and use its best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
----
(t) Use its best efforts to take all other reasonable steps necessary
or advisable to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any Registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time,
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<PAGE>
reasonably request. The Company may exclude from such registration the
Registrable Notes of any seller who unreasonably fails to furnish such
information within a reasonable time after receiving such request. Each seller
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such seller not
materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
------
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event the Company shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a
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<PAGE>
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
or by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or sold by any Participating
Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, if any, and any fees associated with
making the Registrable Notes or Exchange Notes eligible for trading through The
Depository Trust Company, (vii) Securities Act liability insurance, if the
Company desires such insurance, (viii) fees and expenses of all other Persons
retained by the Company, (ix) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (x) the expense of any annual
audit, (xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange, if applicable, and (xii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) The Company shall (i)reimburse the Holders of the Registrable
Notes being registered in a Shelf Registration Statement for the reasonable fees
and disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Notes to be included in such Registration Statement and (ii)
reimburse reasonable out-of-pocket expenses (other than legal expenses) of
Holders of Registrable Notes incurred in connection with the registration and
sale of the Registrable Notes pursuant to a Shelf Registration Statement or in
connection with the exchange of Registrable Notes pursuant to the Exchange
Offer. In addition, the Company shall reimburse the Initial Purchasers for the
reasonable fees and expenses of one counsel in connection with the Exchange
Offer which shall be Winston & Strawn, and shall not be required to pay any
other legal expenses in connection therewith.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes offered pursuant to a Shelf Registration Statement and each
Participating Broker-Dealer selling
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<PAGE>
Exchange Notes during the Applicable Period, the officers and directors of each
such Person, and each Person, if any, who controls any such Person within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all losses, claims,
-----------
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which the offering of such Registrable Notes
or Exchange Notes, as the case may be, is registered (or any amendment thereto)
or related Prospectus (or any amendments or supplements thereto) or any related
preliminary prospectus, or caused by, arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
-------- -------
that the Company will not be required to indemnify a Participant if (i) such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by or on behalf of such Participant expressly for use therein or (ii)
if such Participant sold to the person asserting the claim the Registrable Notes
or Exchange Notes which are the subject of such claim and such untrue statement
or omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and it is established by
the Company in the related proceeding that such Participant failed to deliver or
provide a copy of the Prospectus (as amended or supplemented) to such Person
with or prior to the confirmation of the sale of such Registrable Notes or
Exchange Notes sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) or as a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its respective directors and officers and each
Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only (i) with
reference to information relating to such Participant furnished to the Company
in writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus or
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<PAGE>
(ii) with respect to any untrue statement or representation made by such
Participant in writing to the Company. The liability of any Participant under
this paragraph shall in no event exceed the proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes giving rise to
such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Person against whom such indemnity may be sought (the "Indemnifying
------------
Person" in writing, and the Indemnifying Person, upon request of the Indemnified
- ------
Person, shall retain counsel reasonably satisfactory to the Indemnified Person
to represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred by such counsel related to such proceeding; provided,
--------
however, that the failure to so notify the Indemnifying Person shall not relieve
- -------
it of any obligation or liability which it may have hereunder or otherwise
(unless and only to the extent that such failure directly results in the loss or
compromise of any material rights or defenses by the Indemnifying Person and the
Indemnifying Person was not otherwise aware of such action or claim). In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that, unless there
exists a conflict among Indemnified Persons, the Indemnifying Person shall not,
in connection with any one such proceeding or separate but substantially similar
related proceedings in the same jurisdiction arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed promptly as they are incurred. Any
such separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold by all such Participants and any
such separate firm for the Company, their directors, their officers and such
control Persons of the Company shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent (which consent shall not
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<PAGE>
be unreasonably withheld), but if settled with such consent or if there be a
final non-appealable judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
Person agrees to indemnify and hold harmless each Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses actually incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; provided,
--------
however, that the Indemnifying Person shall not be liable for any settlement
- -------
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (A) includes an unconditional written release of
such Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such settlement and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Senior Notes or (ii) if the allocation provided by the foregoing clause (i)
is not permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such
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<PAGE>
losses, claims, damages or liabilities (or actions in respect thereof). The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Participant on the other, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and 144A
-----------------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available annual reports and such
information, documents and other reports of the type specified in Sections 13
and 15(d) of the Exchange Act. The Company further covenants for so long as any
Registrable Notes remain outstanding, to make available to any Holder or
beneficial
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<PAGE>
owner of Registrable Notes in connection with any sale thereof and any
prospective purchaser of such Registrable Notes from such Holder or beneficial
owner the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered
into any agreement with respect to any of its securities which grants to any
Person piggy-back registration rights with respect to a Registration Statement
which have not been waived in full. The Company will not enter into any
agreement which will grant any such rights.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Registrable Notes. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with
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<PAGE>
respect to a matter that relates exclusively to the rights of holders of
Registrable Notes whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount of the Registrable
Notes being sold by such Holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be amended,
- -------- -------
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: High Yield
Administration
Toronto Dominion Securities
(USA) Inc.
31 W. 52nd Street, 21st Floor
New York, New York 10019
Facsimile No: (212)397-4733
Attention: Gordon Paris
Salomon Brothers Inc
555 California Street
Suite 3900
San Francisco, California
Facsimile No: (415) 951-1777
Attention: M. Ian G. Gilchrist
with a copy to:
Winston & Strawn
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<PAGE>
200 Park Avenue
New York, New York 10166-4193
Facsimile No: (212) 294-4700
Attention: Robert W. Ericson
2. if to the Initial Purchasers, at the addresses specified in
Section 10(d)(1);
3. if to the Company, as follows:
International Wireless Communications
Holdings, Inc.
400 South El Camino Real
Suite 1275
San Mateo, California 94402
Facsimile No: (415) 548-1842
Attention: Douglas S. Sinclair
Chief Financial Officer
with copies to:
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, California 94304
Facsimile No.: (415) 843-0314
Attention: Brooks Stough
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that this Agreement shall not inure to the benefit of
-------- -------
or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate
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<PAGE>
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Senior Notes Held by the Company or its Affiliates. Whenever the
--------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
[Signature pages follow]
-28-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC., a
Delaware corporation
By: ______________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By:___________________________
Name:
Title:
TORONTO DOMINION SECURITIES (USA) INC.
By:___________________________
Name:
Title:
SALOMON BROTHERS INC
By:___________________________
Name:
Title:
-29-
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of this 8/th/ day of
August, 1996, (the "Agreement") is by and among International Wireless
Communications, Inc., a Delaware corporation ("IWC"), International Wireless
Communications Holdings, Inc., a Delaware corporation ("IWC Holdings"), and
International Wireless Communications Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of IWC Holdings ("IWC Acquisition").
IWC and IWC Acquisition are sometimes referred to herein as the "Constituent
Corporations."
RECITALS
--------
A. IWC Holdings is a corporation duly organized and existing
under the laws of the State of Delaware and has an authorized capital stock of
Forty-Nine Million Eighty Thousand (49,080,000) shares ("IWCH Capital Stock"),
Twenty-Six Million (26,000,000) of which are designated Common Stock, par value
$0.01 per share ("IWCH Common"), Twenty-Three Million Eighty Thousand
(23,080,000) of which are designated Preferred Stock, par value $0.01 per share
("IWCH Preferred"). Of the authorized shares of IWCH Preferred Stock, One
Million Two Hundred Thousand (1,200,000) shares are designated Series A
Preferred Stock ("IWCH Series A"), One Million Two Hundred Twenty-Nine Thousand
Two Hundred Forty (1,229,240) shares are designated Series B Preferred Stock
("IWCH Series B"), Two Million Four Hundred Sixty Thousand (2,460,000) shares
are designated Series C Preferred Stock ("IWCH Series C"), Five Million Eight
Hundred Thousand (5,800,000) shares are designated Series D Preferred Stock
("IWCH Series D"), Three Million Nine Hundred Seventy-Two Thousand Two Hundred
Forty (3,972,240) shares are designated Series E Preferred Stock ("IWCH Series
E"), Seven Million (7,000,000) shares are designated Series F-1 Preferred Stock
("IWCH Series F-1") and One Million Eighty Thousand (1,080,000) shares are
designated Series F-2 Preferred Stock ("IWCH Series F-2"). As of the date
hereof, 1,000 shares of IWCH Common are issued and outstanding, all of which
were held by Douglas S. Sinclair, as trustee for the benefit of IWC, and no
shares of IWCH Preferred are outstanding.
B. IWC is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital stock of One
Million Two Hundred Twenty-Seven Thousand (1,227,000) shares ("IWC Capital
Stock), Six Hundred Fifty Thousand (650,000) of which are designated Common
Stock, par value $0.01 per share ("IWC Common"), and Five Hundred Seventy-Seven
Thousand (577,000) of which are designated Preferred Stock, par value $0.01 per
share ("IWC Preferred"). Of the authorized shares of IWC Preferred, Thirty
Thousand (30,000) shares are designated Series A Preferred Stock ("IWC Series
A"), Thirty Thousand Seven Hundred Thirty-One (30,731) shares are designated
Series B Preferred Stock ("IWC Series B"), Sixty-One Thousand Five Hundred
(61,500) shares are designated Series C Preferred Stock ("IWC Series C") , One
Hundred Forty-Five Thousand (145,000) shares are designated Series D Preferred
Stock ("IWC Series D"), Ninety-Nine Thousand Three Hundred Six (99,306) shares
are designated Series E Preferred Stock ("IWC Series E"), One Hundred Seventy-
Five Thousand (175,000) shares are designated Series F-1 Preferred Stock ("IWC
Series F-1") and
<PAGE>
Twenty-Seven Thousand (27,000) shares are designated Series F-2 Preferred Stock
("IWC Series F-2"). As of the date hereof, 14,870 shares of IWC Common are
issued and outstanding, 23,330 shares of IWC Series A are issued and
outstanding, 30,731 shares of IWC Series B were issued and outstanding, 44,057
shares of IWC Series C are issued and outstanding, 91,324 shares of IWC Series D
are issued and outstanding, 99,306 shares of IWC Series E are issued and
outstanding, 112,712 shares of IWC Series F-1 are issued and outstanding and
21,200 shares of IWC Series F-2 are issued and outstanding. The remaining 8,463
shares of Preferred Stock may be designated by the Board of Directors of IWC
from time to time in accordance with Delaware law.
C. IWC Acquisition is a corporation duly organized and existing
under the laws of the State of Delaware and has an authorized capital stock
consisting of One Thousand (1,000) shares designated Common Stock, par value
$0.01 per share ("IWCA Common"). As of the date hereof, 1,000 shares of IWCA
Common are issued and outstanding, all of which are held by IWC Holdings.
D. The respective Boards of Directors of IWC Holdings, IWC
Acquisition and IWC have determined that it is advisable and in the best
interests of their respective stockholders that IWC Acquisition merge with and
into IWC upon the terms and conditions herein provided.
E. The respective stockholders of IWC Holdings, IWC Acquisition and
IWC have adopted and approved this Agreement and the Merger in accordance with
their respective Certificates of Incorporation, as currently in effect, and the
General Corporation Law of the State of Delaware (the "Delaware Law").
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, IWC Holdings, IWC Acquisition and IWC hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
1. MERGER
1.1 Merger. In accordance with the provisions of this Agreement and
------
Delaware Law, IWC Acquisition shall be merged with and into IWC (the "Merger"),
the separate existence of IWC Acquisition shall cease and IWC shall be, and is
herein sometimes referred to as, the "Surviving Corporation," and the name of
the Surviving Corporation shall be International Wireless Communications, Inc.
2
<PAGE>
1.2 Filing and Effectiveness. The Merger shall become effective
------------------------
when the following actions shall have been completed:
(a) All of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied or duly waived by
the party entitled to satisfaction thereof; and
(b) An executed Certificate of Merger or an executed counterpart
of this Agreement meeting the requirements of the Delaware Law shall have been
filed with the Secretary of State of the State of Delaware.
The time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Time."
1.3 Effect of the Merger. At the Effective Time, the separate
--------------------
existence of IWC Acquisition shall cease and IWC, as the Surviving Corporation,
(i) shall continue to possess all of its assets, rights, powers and property as
constituted immediately prior to the Effective Time, (ii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of IWC
Acquisition in the manner more fully set forth in Section 259 of Delaware Law,
(iii) shall continue to be subject to all of the debts, liabilities and
obligations of IWC as constituted immediately prior to the Effective Time, and
(iv) shall succeed, without other transfer, to all of the debts, liabilities and
obligations of IWC Acquisition in the same manner as if IWC had itself incurred
them, all as more fully provided under the applicable provisions of the Delaware
Law.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Amended and Restated
----------------------------
Certificate of Incorporation of IWC, in substantially the form attached hereto
as Exhibit A, shall at the Effective Time become the Certificate of
---------
Incorporation of the Surviving Corporation until duly altered, amended or
repealed.
2.2 Bylaws. The Bylaws of IWC Acquisition as in effect immediately
------
prior to the Effective Time shall at the Effective Time become the Bylaws of the
Surviving Corporation until duly altered, amended or repealed.
2.3 Directors and Officers. The directors and officers of IWC
----------------------
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected
and qualified or until as otherwise provided by law, the Certificate of
Incorporation of the Surviving Corporation or the Bylaws of the Surviving
Corporation.
3. MANNER OF CONVERSION OF STOCK
3.1 IWC Capital Stock. Subject to Section 3.5 hereof, each share
-----------------
of IWC Common, issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any further action, be converted into
forty (40) fully paid and nonassessable
3
<PAGE>
shares of IWCH Common. Subject to Section 3.5 hereof, each share of IWC Series
A, IWC Series B, IWC Series C, IWC Series D, IWC Series E, IWC Series F-1 and
IWC Series F-2 issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any further action, be converted into
forty (40) fully paid and nonassessable shares of IWCH Series A, IWCH Series B,
IWCH Series C, IWCH Series D, IWCH Series E, IWCH Series F-1 and IWCH Series F-
2, respectively, having such rights, preferences and privileges as set forth in
the Amended and Restated Certificate of Incorporation of IWC Holdings in effect
at the Effective Time (the "IWCH Certificate").
3.2 IWC Acquisition Common Stock. Each share of IWCA Common issued
----------------------------
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any further action, be converted into one (1) fully paid and
nonassessable share of IWC Common.
3.3 IWC Holdings Common Stock. Each share of IWCH Common issued and
-------------------------
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any further action, be converted into the right to receive
One Dollar ($1.00) in cash.
3.4 Exchange of Certificates. After the Effective Time, each
------------------------
holder of an outstanding certificate representing shares of IWC Common or IWC
Preferred immediately prior to the Merger may surrender the same for
cancellation to an exchange agent, whose name will be delivered to such holders
prior to any requested exchange (the "Exchange Agent"), and each such holder
shall be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of IWCH Common or IWCH Preferred, as the case
may be, into which the surrendered certificates were converted as herein
provided. Until so surrendered, each such certificate shall be deemed for all
purposes to represent the number of shares of IWCH Common or IWCH Preferred, as
the case may be, into which such shares of IWC Common or IWC Preferred, as the
case may be, were converted in the Merger.
The registered owner on the books and records of IWC Holdings or the
Exchange Agent of any such certificate shall, until such certificate shall have
been surrendered for transfer or conversion or otherwise accounted for to IWC
Holdings or the Exchange Agent, have and be entitled to exercise any voting and
other rights with respect to and to receive dividends and other distributions
upon the shares of IWCH Common or IWCH Preferred represented by such certificate
as provided above.
Each certificate representing IWCH Common or IWCH Preferred so issued
in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of IWC Common or IWC
Preferred, as the case may be, so converted and given in exchange therefore,
unless otherwise determined by the Board of Directors of IWC Holdings in
compliance with applicable laws, or other such additional legends as agreed upon
by the holder and IWC Holdings.
If any certificate for shares of IWCH Common or IWCH Preferred is to
be issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it
4
<PAGE>
shall be a condition of issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer, that such
transfer otherwise be proper and comply with applicable securities laws and that
the person requesting such transfer pay to the Exchange Agent any transfer or
other taxes payable by reason of issuance of such new certificate in a name
other than that of the registered holder of the certificate surrendered or
establish to the satisfaction of IWC Holdings that such tax has been paid or is
not payable.
3.5 Dissenting Shares. Notwithstanding Section 3.1 hereof, each
-----------------
holder of shares of IWC Capital Stock who has become entitled to payment of the
fair market value of such shares pursuant to the provisions of Section 262 of
Delaware Law as a result of the Merger ("Dissenting Shares") shall not be
converted into IWCH Capital Stock as provided in Section 3.1 hereof unless the
status of such shares as Dissenting Shares shall terminate pursuant to Delaware
Law. If the status of such shares as Dissenting Shares shall so terminate, then,
as of the Effective Time, or the occurrence of the event which causes such
termination, whichever last occurs, such shares shall be converted into IWCH
Capital Stock as provided in Section 3.1 hereof.
4. GENERAL
4.1 Covenants. IWC Holdings and IWC each covenants and agrees as
---------
follows:
(a) On or prior to Effective Time, IWC Holdings shall establish
the 1996 Stock Option/Stock Issuance Plan (the "IWCH 1996 Plan") to serve as the
successor to the IWC 1994 Stock Option/Stock Issuance Plan (the "IWC 1994
Plan"). Prior to the Effective Time, IWC Holdings shall reserve for issuance
under the IWCH 1996 Plan that number of shares of IWCH Common equal to (1) the
total number of shares of IWC Common available for issuance under the IWC 1994
Plan, including shares subject to outstanding options under the IWC 1994 Plan,
multiplied by (ii) forty (40).
(b) At the Effective Time, IWC Holdings shall assume all
unexpired and unexercised options to purchase IWC Common under the IWC 1994 Plan
that are outstanding immediately prior thereto ("IWC Option"). Each IWC Option
so assumed by IWC Holdings will continue to have, and be subject to,
substantially the same terms and conditions set forth in the documents governing
such IWC Option immediately prior to the Effective Time, except that (i) such
IWC Option will be exercisable for that number of whole shares of IWCH Common
equal to the product of the number of shares of IWC Common that were purchasable
under such IWC Option immediately prior to the Effective Time multiplied by
forty (40), (ii) the per share exercise price for the shares of IWCH Common
issuable upon exercise of such IWC Option will be equal to the quotient obtained
by dividing the exercise price per share of IWC Common at which such IWC Option
was exercisable immediately prior to the Effective Time by forty (40), rounded
up to the nearest whole cent, and (iii) such IWC Options shall be standing
under, and otherwise governed by, the terms of the IWCH 1996 Plan. As soon as
practicable after the Effective Time, IWC Holdings shall deliver to each holder
of an IWC Option appropriate documents evidencing the assumption of such
holder's IWC Option by IWC Holdings pursuant to this Section 4.1(b). The parties
intend that the assumption of the IWC
5
<PAGE>
Options hereunder will meet the requirements of Section 424(a) of the Internal
Revenue Code, and this Section 4.1(b) shall be interpreted consistent with such
intention. Consistent with the terms of the IWC Options and the documents
governing such IWC Options, the Merger will not terminate or accelerate any
assumed IWC Option or any right of exercise, vesting or repurchase relating
thereto with respect to shares of IWCH Common acquired upon exercise of such
assumed IWC Option.
(c) On or prior to the Effective Time, IWC Holdings shall assume
all unexpired and unexercised warrants to purchase IWC Preferred that are
outstanding immediately prior thereto ("IWC Warrant"). Each IWC Warrant so
assumed by IWC Holdings will continue to have, and be subject to, substantially
the same terms and conditions set forth in the documents governing the IWC
Warrant immediately prior to the Effective Time, except that (i) such IWC
Warrant will be exercisable for a number of whole shares of the corresponding
series of IWCH Preferred as the series of IWC Preferred for which such IWC
Warrant is exercisable immediately prior to the Effective Time equal to the
product of the number of shares of IWC Preferred that were purchasable under
such IWC Warrant immediately prior to the Effective Time multiplied by forty
(40), (ii) the per share exercise price for shares of IWCH Preferred issuable
upon exercise of such IWC Warrant will be equal to the quotient obtained by
dividing the exercise price per share of IWC Preferred for which such IWC
Warrant was exercisable immediately prior to the Effective Time by forty (40),
rounded out to the nearest whole cent, and (iii) such number of shares and
exercise price shall not be subject to adjustment based solely on the issuance
or exercise of the Unit Warrants (as defined below). As soon as practicable
after the Effective Time, IWC Holdings shall deliver to each holder of an IWC
Warrant appropriate documents evidencing the warrant assumption by IWC Holdings
pursuant to this Section 4.1(c).
(d) On or prior to the Effective Time, IWC Holdings and IWC
shall have entered into an Assignment and Assumption Agreement to allow IWC
Holdings to succeed to all of the right, title and interest in and to assume all
of the obligations of IWC under, each of the agreements set forth on Exhibit B
---------
attached hereto, subject to any amendments and modifications of such agreements
as shall be mutually agreed upon by IWC Holdings, and the other parties thereto.
(e) IWC Holdings shall have filed the IWCH Certificate with the
Delaware Secretary of State in accordance with Delaware Law.
(f) IWC Holdings and IWC shall take such other actions as may be
required by Delaware Law.
6
<PAGE>
4.2 Conditions. Obligations of IWC Holdings, IWC and IWC Acquisition
----------
shall be subject to satisfaction or waiver by each such party of the following
conditions:
(i) IWC Holdings shall have entered into a purchase agreement
with respect to the proposed offer and sale of units, each consisting of a
senior secured discount note due 2001 and a contingent warrant to purchase IWCH
Common, with the initial purchasers of such units;
(ii) Any shares of IWC Capital Stock that constitute Dissenting
Shares shall represent less than two percent (2%) of the IWC Capital Stock
(calculated on an as-converted basis) outstanding immediately prior to the
Effective Time;
(iii) IWC Holdings, IWC and IWC Acquisition shall have obtained
all consents, approvals, waivers and permits and have made all filings or other
submissions required to be obtained or made on or before the Effective Time in
order to consummate the Merger, except for the filing of this Agreement purchase
to Delaware law.
4.3 Abandonment. At any time before the Effective Time, this
-----------
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of any of IWC, IWC Holdings or of IWC
Acquisition, or of any combination thereof, notwithstanding the approval of this
Agreement by the stockholders of IWC or the stockholder of IWC Holdings or IWC
Acquisition.
4.4 Amendment. The Boards of Directors of the Constituent
---------
Corporations may amend this Agreement at any time prior to the filing of this
Agreement (or certificate in lieu thereof) with the Secretary of State of the
State of Delaware, provided that an amendment made subsequent to the adoption of
this Agreement by the stockholders of either Constituent Corporation shall not:
(1) alter or change the amount or kind of shares, securities, cash, property
and/or rights to be received in exchange for or on conversion of all or any of
the shares of any class or series thereof of such Constituent Corporation, (2)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of any
Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving
-----------------
Corporation in the State of Delaware is 15 E. North Street, Dover, Kent County,
Delaware. Incorporating Services, Ltd. is the registered agent of the Surviving
Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file
---------
at the principal place of business of the Surviving Corporation at 400 South El
Camino Real, Suite 1275, San Mateo, California, 94402 and copies thereof will be
furnished to any stockholder of either Constituent Corporation, upon request and
without cost.
7
<PAGE>
4.7 Governing Law. This Agreement shall in all respects be
-------------
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware.
4.8 Counterparts. In order to facilitate the filing and recording
------------
of this Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement, having first been approved by the
resolutions of the respective Boards of Directors and stockholders of IWC, IWC
Holdings and IWC Acquisition, is hereby executed on behalf of each such
corporation and attested by their respective officers thereunto duly authorized.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.,
a Delaware corporation
By:___________________________________________
John D. Lockton, Jr.,
President
ATTEST:
_______________________________
Douglas S. Sinclair,
Secretary
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.,
a Delaware corporation
By:___________________________________________
John D. Lockton, Jr.,
President
ATTEST:
_______________________________
Aarti C. Gurnani,
Secretary
9
<PAGE>
INTERNATIONAL WIRELESS
COMMUNICATIONS ACQUISITION
CORPORATION,
a Delaware corporation
By:___________________________________________
Douglas S. Sinclair,
President
ATTEST:
_______________________________
Aarti C. Gurnani,
Secretary
10
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
a Delaware Corporation
International Wireless Communications Holdings, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "General Corporation
Law"), does hereby certify that:
FIRST: The name of the Corporation is International Wireless
Communications Holdings, Inc. and the Corporation was originally incorporated on
July 8, 1996.
SECOND: The following resolutions amending and restating the
Corporation's Certificate of Incorporation were duly approved by unanimous
written consent of the Board of Directors of the Corporation dated August 7,
1996 and were duly adopted by the stockholders of the Corporation in accordance
with the provisions of Section 242 of the General Corporation Law by written
consent of the stockholders given in accordance with Section 228 of the General
Corporation Law:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation
of the Corporation be, and it hereby is, amended and restated in its
entirety as follows:
ARTICLE I
The name of this corporation is International Wireless Communications
Holdings, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 15 E. North Street, Dover, Kent County, Delaware. The name of its
registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law.
ARTICLE IV
The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be as specified in the by-laws of the
Corporation.
<PAGE>
ARTICLE V
A. Classes of Stock. The Corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is Forty-Nine Million Eighty Thousand (49,080,000). Twenty-Six Million
(26,000,000) shares shall be Common Stock, with a par value of $0.01 per share,
and Twenty-Three Million Eighty Thousand (23,080,000) shares shall be Preferred
Stock, with a par value of $0.01 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by this Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. There is
hereby designated a Series A Preferred Stock (the "Series A Preferred Stock"), a
Series B Preferred Stock (the "Series B Preferred Stock"), a Series C Preferred
Stock (the "Series C Preferred Stock"), a Series D Preferred Stock (the "Series
D Preferred Stock), a Series E Preferred Stock (the "Series E Preferred Stock"),
a Series F-1 Preferred Stock (the "Series F-1 Preferred Stock") and a Series F-2
Preferred Stock (the "Series F-2 Preferred Stock" and the Series F-1 Preferred
Stock are collectively referred to as the "Series F Preferred Stock") (the
Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock
are collectively referred to as the "Existing Preferred Stock"). The rights,
preferences, privileges, and restrictions granted to and imposed on the Series A
Preferred Stock, which series shall consist of One Million Two Hundred Thousand
(1,200,000) shares, the Series B Preferred Stock, which series shall consist of
One Million Two Hundred Twenty-Nine Thousand Two Hundred Forty (1,229,240)
shares, the Series C Preferred Stock, which series shall consist of Two Million
Four Hundred Sixty (2,460,000) shares, the Series D Preferred Stock, which
series shall consist of Five Million Eight Hundred Thousand (5,800,000) shares,
the Series E Preferred Stock, which series shall consist of Three Million Nine
Hundred Seventy-Two Thousand Two Hundred Forty (3,972,240) shares, the Series F-
1 Preferred Stock, which series shall consist of Seven Million (7,000,000)
shares, and the Series F-2 Preferred Stock, which series shall consist of One
Million Eighty Thousand (1,080,000) shares, are as set forth below in this
Article V(B); provided, that anything contained herein to the contrary
notwithstanding, the economic rights, preferences and privileges of the Series
F-1 and Series F-2 Preferred Stock shall be identical. The Board of Directors
is hereby authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon additional series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or of any of them. Subject to compliance with applicable protective
voting rights which have been or may be granted to the Preferred Stock or series
thereof in Certificates of Designation or the Corporation's Amended and Restated
Certificate of Incorporation ("Protective Provisions"), but notwithstanding any
other rights of the Preferred Stock or any series thereof, the rights,
privileges, preferences and restrictions of any such additional series may be
subordinated to, pari passu with (including, without limitation, with respect to
---- -----
liquidation and acquisition preferences, redemption and/or approval of matters
by vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized to
increase or decrease the number of shares of any series of Preferred Stock
(other than the Existing Preferred Stock), prior or subsequent to the issue of
that series, but not below the number of shares of such series
2
<PAGE>
then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
1. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
Series B, Series C, Series D, Series E and Series F Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any assets
of the Corporation to the holders of the Series A Preferred Stock and Common
Stock by reason of their ownership thereof, the following amounts (with respect
to each such series of Preferred Stock, the "Preferred Preferential Amount") in
the following order of priority:
(i) First, the holders of Series F Preferred
Stock shall be entitled to receive an amount per share equal to the sum of (i)
the product of (A) .50 multiplied by (B) $9.375, as appropriately adjusted for
any stock dividends, combinations, splits or the like with respect to such
shares (the "Original Series F Issue Price"), and (ii) an amount equal to
declared but unpaid dividends on such share, subject to reduction in accordance
with subsection V.B.1(a) (iv) and s ection V.B.2 below;
(ii) Thereafter, the holders of Series B, Series
C, Series D and Series E Preferred Stock (the "Junior Preferred Stock") shall be
entitled to receive an amount per share calculated as follows:
(A) the holders of Series B Preferred Stock
shall be entitled to receive an amount per share equal to the sum of (i) the
product of (A) .55 multiplied by (B) $0.9193, as appropriately adjusted for any
stock dividends, combinations, splits or the like with respect to such shares
(the "Original Series B Issue Price"), and (ii) an amount equal to declared but
unpaid dividends on such share, subject to reduction in accordance with
subsection V.B.1(a) (iv) and section V.B.2 below;
(B) the holders of Series C Preferred Stock
shall be entitled to receive an amount per share equal to the sum of (i) the
product of (A) .55 multiplied by (B) $2.223, as appropriately adjusted for any
stock dividends, combinations, splits, or the like with respect to such shares
(the "Original Series C Issue Price"), and (ii) an amount equal to declared but
unpaid dividends on such share, subject to reduction in accordance with
subsection V.B.1(a) (iv) and section V.B.2. below;
(C) the holders of Series D Preferred Stock
shall be entitled to receive an amount per share equal to the sum of (i) the
product of (A) .55 multiplied by (B) $6.55, as appropriately adjusted for any
stock dividends, combinations, splits or the like with respect to such shares
(the "Original Series D Issue Price"), and (ii) an amount equal to declared but
unpaid dividends on such share, subject to reduction in accordance with
subsection V.B.1(a) (iv) and section V.B.2 below; and
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(D) the holders of Series E Preferred Stock
shall be entitled to receive an amount per share equal to the sum of (i) the
product of (A) .55 multiplied by (B) $6.2938, as appropriately adjusted for any
stock dividends, combinations, splits or the like with respect to such shares
(the "Original Series E Issue Price"), and (ii) an amount equal to declared but
unpaid dividends on such share, subject to reduction in accordance with
subsection V.B.1(a) (iv) and section V.B.2 below;
(iii) Thereafter, the holders of the Junior
Preferred Stock and the Series F Preferred Stock shall be entitled to receive an
amount per share calculated as follows:
(A) the holders of Series B Preferred Stock
shall be entitled to receive an amount per share equal to the product of (1) .50
multiplied by (2) the Original Series B Issue Price, subject to reduction in
accordance with subsection V.B.1(a) (iv) and section V.B.2 below;
(B) the holders of Series C Preferred Stock
shall be entitled to receive an amount per share equal to the product of (1) .50
multiplied by (2) the Original Series C Issue Price, subject to reduction in
accordance with subsection V.B.1(a) (iv) and section V.B.2 below;
(C) the holders of Series D Preferred Stock
shall be entitled to receive an amount per share equal to the product of (1) .50
multiplied by (2) the Original Series E Issue Price, subject to reduction in
accordance with subsection V.B.1(a) (iv) and section V.B.2 below;
(D) the holders of Series E Preferred Stock
shall be entitled to receive an amount per share equal to the product of (1) .50
multiplied by (2) the Original Series E Issue Price, subject to reduction in
accordance with subsection V.B.1(a) (iv) and section V.B.2 below; and
(E) the holders of Series F Preferred Stock
shall be entitled to receive an amount per share equal to the product of (1) .50
multiplied by (2) the Original Series F Issue Price, subject to reduction in
accordance with subsection V.B.1(a) (iv) and section V.B.2 below.
(iv) Notwithstanding the foregoing,
(A) if the assets and funds of the
Corporation are insufficient to permit the payment in full to the holders of
Series F Preferred Stock in accordance with clause (i) above, then, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the shares of Series F Preferred Stock
in proportion to the number of shares of Series F Preferred Stock then
outstanding;
(B) if the assets and funds of the
Corporation are insufficient to permit the payment in full to the holders of the
Junior Preferred Stock in
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accordance with clause (ii) above, then, the entire assets and funds of the
Corporation legally available for distribution, after completion of the
distribution required by clause (i) above, shall be distributed ratably among
the holders of each series of Junior Preferred Stock in proportion to the total
amounts to be paid to the holders of such series of Preferred Stock, and ratably
among the holders of shares of each such series in proportion to the number of
shares of such series of Preferred Stock then outstanding; and
(C) if the assets and funds of the
Corporation are insufficient to permit the payment in full to the holders of the
Junior Preferred Stock and the Series F Preferred Stock in accordance with
clause (iii) above, then, the entire assets and funds of the Corporation legally
available for distribution, after completion of the distribution required by
clauses (i) and (ii) above, shall be distributed ratably among the holders of
each such series of Preferred Stock in proportion to the total amounts to be
paid to the holders of such series of Preferred Stock, and ratably among the
holders of shares of each such series in proportion to the number of shares of
such series of Preferred Stock then outstanding.
(b) Upon the completion of the distribution required by
subsection (a) above, if assets remain in the Corporation, the holders of the
Series A Preferred Stock of the Corporation shall be entitled to receive, prior
and in preference to any distribution of any of the assets of the Corporation to
the holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (i) $0.85, as appropriately adjusted for any stock
dividends, combinations, splits or the like with respect to such shares (the
"Original Series A Issue Price") and (ii) an amount equal to declared but unpaid
dividends on such shares (together, the "Series A Preferential Amount"), subject
to reduction in accordance with the next sentence and section V.B.2. If upon the
occurrence of such event, the assets and funds to be distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full Series A Preferential Amount, then, the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of Series A Preferred Stock in
proportion to the number of shares of such series owned by each such holder.
(c) Upon the completion of the distribution required by
subsections (a) and (b) above and any other distribution that may be required
with respect to series of Preferred Stock that may from time to time come into
existence, if assets remain in the Corporation, the holders of the Common Stock
of the Corporation shall be entitled to receive an amount per share equal to the
sum of (i) $0.50 per share of Common Stock, as appropriately adjusted for any
stock dividends, combinations, splits or the like with respect to such shares
(the "Original Common Issue Price"), and (ii) all declared and unpaid dividends
on such shares (the "Common Preferential Amount"), subject to reduction in
accordance with the next sentence and section V.B.2. If upon the occurrence of
such event, the assets and funds to be distributed among the holders of the
Common Stock shall be insufficient to permit the payment to such holders of the
full Common Preferential Amount, then, subject to the rights of series of
Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of Common Stock in proportion to the
number of shares of Common Stock owned by each such holder.
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(d) After the distributions described in subsections (a),
(b) and (c) above have been paid, the remaining assets of the Corporation
available for distribution to stockholders shall be distributed among the
holders of Existing Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each, such that each holder of shares
of Existing Preferred Stock shall be entitled to the same amount of
distributions as would have been paid thereon had such shares been converted
into Common Stock as of the record date fixed for determining the holders of
Common Stock entitled to receive such distribution.
Notwithstanding the foregoing, upon the consummation of a
Corporate Transaction (as defined below) in which the consideration thereunder,
net of all direct expenses of the Corporate Transaction, equals or exceeds
$18.75 per share (as adjusted appropriately for stock dividends, combinations,
splits or the like with respect to such shares) on a fully diluted basis, then
in lieu of the distributions set forth in subsections (a) through (d) above, all
proceeds of such Corporate Transaction shall be distributed to the stockholders
of the Corporation pro rata based upon the number of shares of Common Stock
owned by each stockholder (assuming the conversion into Common Stock of all
securities convertible into Common Stock).
(e) (i) For purposes of this Section 1, a
liquidation, dissolution or winding up of the Corporation shall be deemed to be
occasioned by, and to include, (A) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation but, excluding
any merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale of all or substantially all of the assets of the
Corporation; unless the Corporation's stockholders of record as constituted
------
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Corporation's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity. Any such transaction contemplated by
this subsection (e)(i) shall be hereinafter referred to as a "Corporate
Transaction."
(ii) In any of such events, if the consideration
received by the Corporation is other than cash, and for purposes of determining
the value of any asset of the Corporation which are to be distributed to the
stockholders of the Corporation in any liquidation, winding up or dissolution,
its value will be deemed its fair market value, as determined below:
(A) Securities not subject to investment
letter or other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange
or through the Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange or market over
the thirty (30)-day period ending three (3) days prior to the closing;
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(2) If actively traded over-the-counter
other than the Nasdaq National Market, the value shall be deemed to be the
average of the closing bid or sale prices (whichever is applicable) over the
thirty (30)-day period ending three (3) days prior to the closing; and
(3) If there is no active public
market, the value shall be the fair market value thereof, as mutually determined
by the Corporation and the holders of a majority of the voting power of all then
outstanding shares of Preferred Stock, with holders of a majority of the shares
of Series F Preferred Stock voting in favor thereof.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in subsection (A) (1), (2) or (3) to reflect
the approximate fair market value thereof, as mutually determined by the
Corporation and the holders of a majority of the voting power of all then
outstanding shares of such Preferred Stock, with holders of a majority of the
shares of Series F Preferred Stock voting in favor thereof.
(C) The value of assets other than
securities will be their fair market value as mutually determined by the
Corporation and the holders of a majority of the voting power of all then
outstanding shares of Preferred Stock, with holders of a majority of the shares
of Series F Preferred Stock voting in favor thereof.
(D) If the Corporation and holders of
Preferred Stock are unable to mutually determine the value of any securities or
other assets as provided above, then the fair market value of such securities or
other assets shall be determined as follows:
(1) The Corporation and a
representative (the "Representative") of the holders of a majority of the voting
power of all then outstanding shares of Preferred Stock shall negotiate in good
faith to determine the fair market value of such securities or assets. Such
Representative shall be selected by holders of a majority of the voting power of
all then outstanding shares of Preferred Stock (other than the Series F
Preferred Stock) and the holders of a majority of the shares of Series F
Preferred Stock. If the Corporation and the Representative so agree, the fair
market value shall be the amount so agreed upon.
(2) If no such agreement is reached
within thirty (30) days after negotiations commence, the Corporation, on the one
hand, and the Representative, on the other hand, shall within fifteen (15)
business days thereafter each select an investment banker to value such
securities or assets. The Corporation shall give representatives of each
investment banker full access to all information that they may reasonably
request concerning the Corporation. Within thirty (30) days of their selection,
each investment banker must propose a fair market value for such securities or
assets.
(3) If the fair market value proposed
by the investment banker selected by the Representative is lower or higher by
not more than 10% of
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the fair market value proposed by the Corporation's investment banker, then the
fair market value shall be the average of such proposed fair market values. If,
however, the fair market value proposed by the investment banker selected by the
Representative is more than 10% higher than the fair market value proposed by
the Corporation's investment banker, then the parties again shall consult as to
a fair market value. If they are unable to agree on a fair market value within
fifteen (15) days after the receipt of the investment bankers' reports, they
shall cause their investment bankers to jointly select a third investment banker
who shall have access to all information it may reasonably request concerning
the Corporation.
(4) The third investment banker shall
have within thirty (30) days after its selection to choose the fair market value
which best reflects its professional opinion of the fair market value of such
securities or assets, which value shall be either the fair market value proposed
by the Corporation's investment banker or the fair market value proposed by the
investment banker selected by the Representative and which choice shall be final
and be deemed to be the fair market value. The party whose investment banker's
proposed fair market value was not chosen shall be responsible for all of the
costs and expenses incurred by, and the fees of, the third investment banker.
For such purpose, the holders of the Preferred Stock shall be deemed to
constitute a single party and shall bear the costs, if any, imposed by the
immediately preceding sentence severally in proportion to the number of shares
of Preferred Stock held. Otherwise, the Corporation shall be responsible for all
reasonable costs and expenses incurred by the holders and Corporation for each
of the investment bankers retained in connection with the Corporation's purchase
of the holders' shares of Preferred Stock.
(5) The investment bankers appointed
for purposes of determining the fair market value of such securities or assets
may apply such factors and discounts as are customarily utilized.
(iii) The Corporation shall give each holder of
record of Existing Preferred Stock written notice of such impending transaction
not later than twenty (20) days prior to the stockholders' meeting called to
approve such transaction, or twenty (20) days prior to the closing of such
transaction, whichever is earlier, and shall also notify such holders in writing
of the final approval of such transaction. The first of such notices shall
describe the material terms and conditions of the impending transaction and the
provisions of this Section 1, and the Corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no event
take place sooner than twenty (20) days after the Corporation has given the
first notice provided for herein or sooner than ten (10) days after the
Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of Existing Preferred Stock (excluding the Series F-2 Preferred
Stock) that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of Existing Preferred Stock (excluding the Series F-2 Preferred Stock) and a
majority of the voting power of the Series F Preferred Stock (excluding the
Series F-2 Preferred Stock) then outstanding.
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2. Distributions. When, as and if declared by the
-------------
Corporation's Board of Directors, and subject to the Protective Provisions of
the holders of Preferred Stock, for all distributions of funds and assets of the
Corporation, holders of Existing Preferred Stock shall be entitled to receive
distributions at the same time and on the same basis as holders of Common Stock
when, as and if declared by the Corporation's Board of Directors (each holder of
shares of Existing Preferred Stock to be entitled to the same amount of
distributions as would have been declared or paid thereon had such shares been
converted into Common Stock as of the record date fixed for determining the
holders of Common Stock entitled to receive such distribution).
3. Redemption.
----------
(a) On or after the later of (i) such date (the "Note
Payment Date") as all of the Corporation's Senior Secured Discount Notes due
2001 or senior debt securities of the Corporation containing substantially
identical terms issued in exchange therefor (collectively, the "Senior Notes")
shall have been repaid in full (whether by repurchase, redemption, payment at
maturity or otherwise) or (ii) December 31, 1998, but within forty-five (45)
days (the "Redemption Date") after the receipt by the Corporation of a written
request from the holders of not less than a majority of the then outstanding
shares of Series B, Series C, Series D, Series E and Series F-1 Preferred Stock
(voting on an as converted basis) that shares of Series B, Series C, Series D,
Series E and Series F Preferred Stock be redeemed (a "Redemption Request"), the
Corporation shall in accordance with this Section 3, to the extent it may
lawfully do so, redeem all of the shares of Series B, Series C, Series D, Series
E and Series F Preferred Stock by paying in cash therefor a sum per share (with
respect to each series of Preferred Stock, the "Redemption Price") equal to the
greater of (1) the then fair market value of the Series B Preferred Stock on an
as-converted basis for each share of Series B Preferred Stock, the then fair
market value of the Series C Preferred Stock on an as-converted basis for each
share of Series C Preferred Stock, the then fair market value of the Series D
Preferred Stock on an as-converted basis for each share of Series D Preferred
Stock, the then fair market value of the Series E Preferred Stock on an as-
converted basis for each share of Series E Preferred Stock and the then fair
market value of the Series F Preferred Stock on an as-converted basis for each
share of Series F Preferred Stock, as the case may be, as determined in
accordance with subsection V.B.1.(e)(ii) hereof (except that, to the extent the
holders of Preferred Stock are entitled to vote on any matters relating to such
valuation, only holders of Preferred Stock which is being redeemed shall be
entitled to so vote, and the "closing" as used therein shall instead refer to
the redemption provided for by this subsection 3(a)), or (2) the full Preferred
Preferential Amount payable in respect of each such series of Preferred Stock in
accordance with subsection V.B.1(a). All payments by the Corporation in respect
of any redemption shall be made to the holders of the Junior Preferred Stock and
Series F Preferred Stock in the same priorities or order of distribution and in
the same proportions as distributions of funds and assets are to be made to such
holders in the case of a liquidation, dissolution or winding-up of the
Corporation. In the event of a liquidation, dissolution or winding-up of the
Corporation prior to the payment in full of the Redemption Price for any shares
to be redeemed hereunder, the partial payment hereunder shall be credited toward
the payment of the Preferred Preferential Amount to be paid to the holders of
each series of Preferred Stock.
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In addition to the above redemption right of the holders of the
Junior Preferred and Series F Preferred Stock, on or after the later of (i) the
Note Payment Date or (ii) December 31, 2000, but within forty-five (45) days (a
"Series F Redemption Date") after the receipt by the Corporation of a written
request from the holders of not less than a majority of the then outstanding
shares of Series F-1 Preferred Stock that shares of Series F Preferred Stock be
redeemed (a "Series F Redemption Request"), the Corporation shall in accordance
with this Section 3, to the extent it may lawfully do so, redeem all of the
shares of Series F Preferred Stock by paying in cash therefor at the Redemption
Price of the Series F Preferred Stock.
Upon the occurrence of a Change of Control (as defined in the
Securities Purchase Agreement dated as of December 6, 1995 among the Corporation
and the investors named therein (the "Securities Purchase Agreement")) that is
not approved by all of the Series F Directors (as defined in subsection
V.B.6(b)), then the holders of a majority of the shares of Series F-1 Preferred
Stock then outstanding shall have the right, by written demand to the
Corporation (a "Series F Redemption Request"), to require the Corporation, on or
after the Note Payment Date, to redeem immediately all of the shares of Series F
Preferred Stock then outstanding, at a price per share equal to the Redemption
Price of the Series F Preferred Stock on the date of redemption (a "Series F
Redemption Date").
(b) Within ten (10) days after receipt of a Redemption
Request or a Series F Redemption Request, written notice shall be mailed, first
class postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of Series B,
Series C, Series D, Series E and Series F Preferred Stock, or solely to each
holder of record of Series F Preferred Stock, as the case may be, at the address
last shown on the records of the Corporation for such holder, notifying such
holder of the redemption to be effected, specifying the Redemption Date or
Series F Redemption Date, as the case may be, the Redemption Price, the place at
which payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares (the "Redemption Notice").
Except as provided in subsection (3)(c) below, on or after the Redemption Date
or Series F Redemption Date, as the case may be, each holder of Series B, Series
C, Series D, Series E and Series F Preferred Stock, or solely to each holder of
record of Series F Preferred Stock, as the case may be, shall surrender to the
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
respective Redemption Price of such 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 cancelled.
(c) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of a holder
of shares of Series B, Series C, Series D, Series E and Series F Preferred Stock
as a holder of such Preferred Stock (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. From and after a Series F Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of a
holder of shares of Series F Preferred
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Stock as a holder of such Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of Series B, Series C, Series D, Series E and
Series F Preferred Stock on any Redemption Date or Series F Redemption Date, as
the case may be, are insufficient to redeem the total number of shares of Series
B, Series C, Series D, Series E and Series F Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to redeem shares
of Series B, Series C, Series D, Series E and Series F Preferred Stock to be
redeemed in the order and in the priorities set forth in subsection V.B.3(a)
above. The shares of Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Preferred Stock, such funds will immediately be
used to redeem the balance of the shares which the Corporation has become
obliged to redeem on any Redemption Date or Series F Redemption Date but which
it has not redeemed.
(d) On or prior to the Redemption Date or a Series F
Redemption Date, as the case may be, the Corporation shall deposit the
respective Redemption Price of all shares of Preferred Stock designated for
redemption in the Redemption Notice, and not yet redeemed or converted, with a
bank or trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or after the
Redemption Date or a Series F Redemption Date, as the case may be, upon receipt
of notification from the Corporation that such holder has surrendered his, her
or its share certificate to the Corporation pursuant to subsection V.B.(3)(b)
above. As of the date of such deposit (even if prior to the Redemption Date or a
Series F Redemption Date), the deposit shall constitute full payment of the
shares to their holders, and from and after the date of the deposit the shares
so called for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor, and
the right to convert such shares as provided in Section V.B.4 below. Such
instructions shall also provide that any moneys deposited by the Corporation
pursuant to this subsection (3)(d) for the redemption of shares thereafter
converted into shares of the Common Stock pursuant to Section V.B.4 below prior
to the Redemption Date or a Series F Redemption Date, as the case may be, shall
be returned to the Corporation forthwith upon such conversion. The balance of
any moneys deposited by the Corporation pursuant to this subsection (3)(d)
remaining unclaimed at the expiration of two (2) years following the Redemption
Date shall thereafter be returned to this corporation upon its request expressed
in a resolution of its Board of Directors.
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4. Conversion. The holders of Existing Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred
----------------
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the Corporation or
any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Issue Price by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series B Issue Price by
the Conversion Price applicable to such share, determined as hereafter provided,
in effect on the date the certificate is surrendered for conversion. Each share
of Series C Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series C Issue Price by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. Each share of Series D Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series D Issue Price by
the Conversion Price applicable to such share, determined as hereafter provided,
in effect on the date the certificate is surrendered for conversion. Each share
of Series E Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series E Issue Price by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. Each share of Series F Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series F Issue Price by
the Conversion Price applicable to such share, determined as hereafter provided,
in effect on the date the certificate is surrendered for conversion. The initial
Conversion Price per share for shares of Series A Preferred Stock shall be the
Original Series A Issue Price; the initial Conversion Price per share for shares
of Series B Preferred Stock shall be the Original Series B Issue Price; the
initial Conversion Price per share for shares of Series C Preferred Stock shall
be the Original Series C Issue Price; the initial Conversion Price per share for
shares of Series D Preferred Stock shall be the Original Series D Issue Price;
the initial Conversion Price per share for shares of Series E Preferred Stock
shall be the Original Series E Issue Price; and the initial Conversion Price per
share for shares of Series F Preferred Stock shall be the Original Series F
Issue Price; provided, however, that the Conversion Price for each series of
Existing Preferred Stock shall be subject to applicable
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adjustment as set forth in subsection V.B.4(d) below. Notwithstanding the
provisions of this subsection V.B.4(a), shares of Preferred Stock originally
issued to, or at any time held by, Toronto Dominion Investments, Inc. or any of
its affiliates ("Toronto Dominion") may be converted into Common Stock only
under the following circumstances: (i) by Toronto Dominion or an affiliate of
Toronto Dominion provided that no such conversion would cause Toronto Dominion
or such affiliate to hold securities issued by the Corporation in excess of the
amount permitted under the terms and provisions of the Bank Holding Company Act
of 1956, as amended from time to time (and any successor law thereto), and the
rules and regulations promulgated from time to time thereunder (the "Bank
Holding Company Act"), (ii) in connection with a transfer or assignment thereof
as part of a widely dispersed public distribution of such stock or (iii) in
connection with a transfer or assignment thereof in such other manner or such
other circumstances that such a conversion would be permissible under the Bank
Holding Company Act.
(b) Automatic Conversion. Each share of Existing Preferred
--------------------
Stock shall automatically be converted into shares of Common Stock at the then
effective Conversion Price immediately upon, except as provided below in
subsection V.B.4(c) below, the Corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (a "Public Offering"), the public
offering per share price of which is not less than two times the then applicable
Conversion Price for the Series D Preferred Stock and the aggregate offering
price is not less than $8,000,000; provided, however, that upon such Public
-------- -------
Offering the shares of Series F Preferred Stock shall not automatically be
converted into Common Stock unless the following shall occur (a "Threshold
Public Offering"): (i) the Public Offering is consummated on or prior to
December 31, 1998, (ii) the Public Offering per share price is at least two
times the Original Series F Issue Price and (iii) the aggregate offering price
is not less than $25,000,000.
(c) Mechanics of Conversion. Before any holder of Existing
-----------------------
Preferred Stock shall be entitled to convert the same into shares of Common
Stock pursuant to subsection (a) above, or in the event that any Existing
Preferred Stock is automatically converted pursuant to subsection (b) above, the
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Preferred
Stock. If the conversion is pursuant to subsection (a) above, the holder
electing to convert any Existing Preferred Stock shall give written notice to
the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering
13
<PAGE>
Existing Preferred Stock for conversion, be conditioned upon the closing with
the underwriter(s) of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock upon conversion of the
Existing Preferred Stock shall not be deemed to have converted such series of
Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) Conversion Price Adjustments of Preferred Stock for
---------------------------------------------------
Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the
- ---------------------------------------------------
Existing Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) (A) If the Corporation shall issue, after
the time this Amended and Restated Certificate of Incorporation becomes
effective ("Effective Time"), any Additional Stock (as defined below) without
consideration or for a consideration per share less than the applicable
Conversion Price for such series of Preferred Stock in effect immediately prior
to the issuance of such Additional Stock, the applicable Conversion Price for
the Series B, Series C, Series D, Series E and Series F Preferred Stock in
effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock which would be outstanding immediately
prior to such issuance assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock (not including shares excluded from the
definition of Additional Stock by subsection V.B.4(d)(ii)) plus the number of
shares of Common Stock that the aggregate consideration received by the
Corporation for such issuance would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock which would
be outstanding immediately prior to such issuance assuming the conversion of all
outstanding shares of Preferred Stock into Common Stock (not including shares
excluded from the definition of Additional Stock by subsection V.B.4(d)(ii))
plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price
for the Series B, Series C, Series D, Series E or Series F Preferred Stock shall
be made in an amount less than one cent per share, provided that any adjustments
which are not required to be made by reason of this sentence shall be carried
forward and shall be taken into account in any subsequent adjustment. Except to
the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment
of such Conversion Price pursuant to this subsection V.B.4(d)(i) shall have the
effect of increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
(C) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash
14
<PAGE>
shall be deemed to be the fair value thereof as determined in good faith by the
Corporation's Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether
before, on or after the Effective Time) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of
shares of Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments) of
such options to purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections V.B.4(d)(i)(C) and (d)(i)(D)), if any, received by the Corporation
upon the issuance of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or exchangeability,
including, without limitation, the passage of time, but without taking into
account potential antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the Corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the Corporation (without
taking into account potential antidilution adjustments) upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the
number of shares of Common Stock deliverable or in the consideration payable to
the Corporation upon exercise of such options or rights or upon conversion of or
in exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series B, Series C, Series D, Series E or Series F
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such change, but
no further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
15
<PAGE>
(4) Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series B, Series C, Series
D, Series E or Series F Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common
Stock deemed issued and the consideration deemed paid therefor pursuant to
subsections V.B.4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in either subsection
V.B.4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to subsection
V.B.4(d)(i)(E)) by the Corporation after the Effective Time other than
(A) shares of Common Stock issued pursuant
to transaction described in subsection V.B.4(d)(iii), (e) or (f) hereof;
(B) shares of Common Stock issuable or
issued to employees, consultants, directors or vendors (if in transactions with
primarily non-financing purposes) of the Corporation directly or pursuant to a
stock option plan or restricted stock plan approved by the stockholders and
Board of Directors of the Corporation at any time when the total number of
shares of Common Stock so issuable or issued (and not repurchased at cost by the
Corporation in connection with the termination of employment) does not exceed
3,000,000 (as appropriately adjusted for any stock dividends, combinations,
splits or the like with respect to shares of Common Stock) plus such additional
number of shares of Common Stock as shall be approved by holders of at least
sixty-six and two-thirds percent (66-2/3%) of the then outstanding shares of
Series B, Series C, Series D, Series E and Series F Preferred Stock;
(C) shares of Common Stock issuable as a
result of the conversion of any shares of Existing Preferred Stock;
(D) shares of Common Stock issued or deemed
issued to a corporation, partnership or other entity with which the Corporation
has a partnership, joint venture or other business relationship, provided that
such issuances are for other than primarily equity financing purposes; provided
that holders of at least eighty percent (80%) of the Series F-1 Preferred Stock
then outstanding shall have consented thereto in writing;
(E) shares of Common Stock issued or deemed
issued in connection with the acquisition by the Corporation of the stock or
assets of another corporation, partnership or other entity; provided that
holders of at least eighty percent (80%) of the Series F-1 Preferred Stock then
outstanding shall have consented thereto in writing;
16
<PAGE>
(F) shares of Common Stock issued or deemed
issued in connection with any equipment lease financing or the incurrence by the
Corporation of any indebtedness for money borrowed; provided that holders of at
least eighty percent (80%) of the Series F-1 Preferred Stock then outstanding
shall have consented thereto in writing;
(G) shares of Common Stock issued or deemed
issued by the Corporation in connection with the merger of a wholly owned
subsidiary of the Corporation with and into International Wireless
Communications, Inc. (including shares of Common Stock (aa) issued or issuable
upon the exercise of options assumed in such merger (bb) issued or issuable upon
the conversion of Preferred Stock and (cc) issued and issuable upon the exercise
of warrants assumed in such merger); or
(H) shares of Common Stock issued or deemed
issued pursuant to warrants issued by the Corporation in connection with the
Senior Notes.
(iii) In the event the Corporation should at any time
or from time to time after the Effective Time fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Existing Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in subsection V.B.4(d)(i)(E).
(iv) If the number of shares of Common Stock
outstanding at any time after the Effective Time is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date of
such combination, the Conversion Price for the Existing Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation
-------------------
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in subsection 4(d)(iii),
then, in each such case for the purpose of this subsection 4(e), the holders of
the Existing Preferred Stock shall be entitled to a share of any such
distribution as such distribution shall be made in accordance with and subject
to the provisions of
17
<PAGE>
Section V.B.2. As provided therein, all distributions shall be made to the
holders of the Preferred Stock and the Common Stock in the same priorities and
order of distribution and in the same proportions as distributions of funds and
assets are to be made in the case of a liquidation, dissolution or winding-up of
the Corporation. All amounts so distributed to the holders of any series of
Preferred Stock or Common Stock, as the case may be, in accordance therewith
shall be credited toward the payment of the Preferred Preferential Amount, the
Series A Preferential Amount or Common Preferential Amount, as the case may be,
to be paid to the holders of each series of Preferred Stock or Common Stock, as
the case may be.
(f) Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger, sale of assets or other transaction provided for
elsewhere in this Section 4 or in Section 2) provision shall be made so that the
holders of the Existing Preferred Stock shall thereafter be entitled to receive
upon conversion of the Preferred Stock the number of shares of stock or other
securities or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of the Existing Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Existing Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
(g) No Impairment. The Corporation will not, by amendment
-------------
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Existing Preferred Stock against
impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Existing Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Preferred
Stock the holder is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Existing Preferred Stock pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock of a series of which the applicable
Conversion Price has been adjusted a certificate setting forth such
18
<PAGE>
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Existing Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth such adjustment
and readjustment, the Conversion Price for such series of Preferred Stock at the
time in effect, and the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of a
share of each series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by
----------------------
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Existing Preferred Stock, at least 20 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Existing Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Existing Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Existing Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Existing Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to these articles.
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, by registered or certified
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Corporation.
5. Conversion of Certain Shares of Series F Preferred Stock.
--------------------------------------------------------
(a) Right to Convert. Each share of Series F-1 Preferred
----------------
Stock held by Toronto Dominion, its affiliate or any transferee thereof shall be
convertible, at the option of the holder thereof and for no additional
consideration, under the circumstances set forth in Section 2A.1 of the Fifth
Amended and Restated Investor Rights Agreement dated on or about December 18,
1995 by and among International Wireless Communications, Inc. and the investors
that are party thereto, at the office of the Corporation or any transfer agent
for such stock, into one fully paid and nonassessable share of Series F-2
Preferred Stock. Each share of Series F-2
19
<PAGE>
Preferred Stock held by Toronto Dominion, its affiliate or any transferee
thereof shall be convertible, at the option of the holder thereof and for no
additional consideration, at any time after the date of issuance of such share,
at the office of the Corporation or any transfer agent for such stock, into one
fully paid and nonassessable share of Series F-1 Preferred Stock; provided,
--------
however, that no such conversion would cause Toronto Dominion or its affiliate
- -------
to hold securities issued by the Corporation in excess of the amount permitted
under the terms and provisions of the Bank Holding Company Act.
(b) Right to Convert on Transfer. Each share of Series F-2
----------------------------
Preferred Stock held by Toronto Dominion, its affiliate or any transferee
thereof shall be convertible, at the option of the holder thereof and for no
additional consideration, at any time after the date of issuance of such share,
at the office of the Corporation or any transfer agent for such stock, into one
fully paid and nonassessable share of Series F-1 Preferred Stock, in connection
with a transfer or assignment thereof (i) as part of a widely dispersed public
distribution of such stock or (ii) in such other manner or such other
circumstances that such a conversion would be permissible under the Bank Holding
Company Act.
(c) Mechanics of Conversion. Before any holder of shares
-----------------------
of Series F-1 Preferred Stock or Series F-2 Preferred Stock shall be entitled to
convert the same into shares of Series F-2 Preferred Stock or Series F-1
Preferred Stock, as applicable, pursuant to subsections (a) or (b) above, the
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or any transfer agent for such stock. The
holder shall give written notice to the Corporation at is principal corporate
office of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Series F-1
Preferred Stock or Series F-2 Preferred Stock, as applicable, are to be issued.
The corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series F-2 Preferred Stock or Series F-1 Preferred
Stock, as applicable, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Series F-1 Preferred
Stock or Series F-2 Preferred Stock, as applicable, to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series F-1 Preferred Stock or Series F-2 Preferred Stock, as
applicable, to be converted, and the person or persons entitled to receive the
shares of Series F-1 Preferred Stock or Series F-2 Preferred Stock, as
applicable, upon such conversion shall be treated for all purposes as the record
holders of such shares of Series F-1 Preferred Stock or Series F-2 Preferred
Stock, as applicable, as of such date.
6. Voting Rights.
-------------
(a) Except as otherwise provided herein, the holder of each
share of Existing Preferred Stock (other than the Series F-2 Preferred Stock)
shall have the right to one vote for each share of Common Stock into which such
series of Preferred Stock could then be converted, and with respect to such
vote, such holder shall have full voting rights and powers equal to the voting
rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common
20
<PAGE>
Stock, with respect to any question upon which holders of Common Stock have the
right to vote. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after aggregating
all shares into which shares of Existing Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
(b) The holders of the Series E Preferred Stock, voting
separately as a class, shall be entitled to elect three (3) directors at each
annual meeting of stockholders of the Corporation at which any director is
elected or at the time of any written consent to action in lieu of any such
meeting. For so long as 20% of the shares of Series F Preferred Stock issued on
the Closing Date (as defined in the Securities Purchase Agreement), pursuant to
the Securities Purchase Agreement remain outstanding, the holders of the Series
F-1 Preferred Stock, voting separately as a class, shall be entitled to elect at
least three (3) directors (the "Series F Directors") at each annual meeting of
stockholders of the Corporation at which any director is elected or at the time
of any written consent to action in lieu of any such meeting; provided, that (i)
--------
for so long as Electra Investment Trust P.L.C. and Electra Associates, Inc.
(collectively, "Electra") owns at least 213,360 shares of Series F Preferred
Stock (as such number may be adjusted appropriately for stock splits, stock
dividends, combinations and other recapitalizations), Electra shall have the
right to elect one (1) of the directors (the "Electra Director") to be elected
by the holders of the Series F-1 Preferred Stock; (ii) for so long as Central
Investment Holdings, Inc. ("CIH") owns at least 213,360 shares of Series F
Preferred Stock (as such number may be adjusted appropriately for stock splits,
stock dividends, combinations and other recapitalizations), CIH shall have the
right to elect one (1) of the directors to be elected by the holder of the
Series F-1 Preferred Stock; and (iii) for so long as Toronto Dominion owns at
least 213,360 shares of Series F Preferred Stock (as such number may be adjusted
appropriately for stock splits, stock dividends, combinations and other
recapitalizations), Toronto Dominion shall have the right to elect one (1) of
the directors to elected by the holders of the Series F Preferred Stock;
provided, however, that Toronto Dominion shall not be entitled to so elect such
- -------- -------
director if exercising this right would be in violation of the Bank Holding
Company Act. At least one of the Series F Directors, which shall be the Electra
Director, if any, shall have the right to be a member of the Audit and
Compensation Committees of the Board, if any, or of any committee of the Board
performing comparable functions.
In addition to the above rights of the holders of the Series F-1
Preferred Stock to elect the Series F Directors of the Corporation and, in
addition to any other rights the holders of the Series F Preferred Stock may
have hereunder, under the Securities Purchase Agreement, or in law or equity, to
the extent provided in Section 7.1 of the Securities Purchase Agreement,
immediately upon written notice to the Corporation from the holders of a
majority of the shares of Series F-1 Preferred Stock then outstanding, the
number of directors constituting the Board of Directors of the Corporation shall
automatically and without further action be increased by one, and upon the
exercise of such right by the holders of the Series F-1 Preferred Stock, the
holders of the shares of Series F-1 Preferred Stock then outstanding shall have
the right to elect, by voting as a class, one additional director to the Board
of Directors of the Corporation; provided, however, that the right of the
holders of Series F-1 Preferred Stock to increase the number of
21
<PAGE>
directors constituting such Board of Directors and to elect such additional
director may only be exercised once. No director(s) so elected by the holders of
the Series E or Series F-1 Preferred Stock, Electra, CIH or Toronto Dominion, as
the case may be, may be removed without the prior consent, given in person or by
proxy, either in writing or at a special meeting called for that purpose, of the
holders of such series of Preferred Stock, voting separately as a class,
Electra, CIH or Toronto Dominion, as the case may be. In case of the death,
resignation or other removal of the director elected by the holders of the
Series E or Series F-1 Preferred Stock or Electra, as the case may be, such
holders may elect, voting separately as a class, by written notification
delivered to the Board of Directors of the Corporation, a successor to hold
office for the unexpired term of such removed director. Except as provided in
this subsection V.B.6(b), the holders of Series E Preferred Stock may not vote
for the election of directors.
(c) The directors not elected to the Corporation's Board of
Directors pursuant to subsection V.B.6(b) hereof shall be elected by the holders
of the Common Stock and Preferred Stock (other than the Series E Preferred Stock
and, for so long as the holders of Series F-1 Preferred Stock shall be entitled
to elect the Series F Directors pursuant to subsection V.B.6(b) hereof, Series
F-1 Preferred Stock), voting separately as a class.
(d) Until the earlier of (i) a Threshold Public Offering
and (ii) the date on which less than 20% of the shares of Series F Preferred
Stock issued on the Closing Date pursuant to the Securities Purchase Agreement
remain outstanding, the majority of the Corporation's Board of Directors may not
be comprised of (y) representatives collectively designated by Vanguard Cellular
Operating Corp. or any of its Affiliates pursuant to subsection V.B.6(b) hereof,
and/or (z) officers of the Corporation (or any individual performing a similar
function).
7. Protective Provisions.
---------------------
(a) So long as any shares of Series B, Series C, Series D,
Series E or Series F-1 Preferred Stock are outstanding, the Corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least fifty percent (50%) in the aggregate
of the then outstanding shares of Series B, Series C, Series D, Series E and
Series F-1 Preferred Stock (voting on an as converted basis):
(i) authorize or create any new class or series
of stock or any instrument convertible into such stock or authorize an increase
in the authorized number of shares of any existing class or series of stock that
has a preference over, or is on a parity with, the Series B, Series C, Series D,
Series E or Series F Preferred Stock with respect to voting, dividends, or upon
liquidation;
(ii) authorize, issue, redeem or acquire any
shares of capital stock of the Corporation, otherwise than pursuant to employee
benefit plans or other compensatory arrangements approved by the Corporation's
Board of Directors; provided, however, that the aggregate number of shares of
such capital stock so approved shall not exceed 2,400,000 shares of Common Stock
(as appropriately adjusted for any stock dividends, combinations, splits or the
like with respect to such shares);
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(iii) approve a Corporate Transaction, as defined
in subsection V.B.1(e)(i);
(iv) approve any amendment of this Amended and
Restated Certificate of Incorporation, as the same may be amended from time to
time or of the by-laws of the Corporation;
(v) permit the Corporation to organize or acquire
an interest in any business unrelated to the international wireless
communications business or the personal communications services (PCS) business;
(vi) declare or pay any dividends in cash, stock
or other property;
(vii) reinvest more than $3 million in proceeds
from the sale or liquidation of any single investment by the Company; or
(viii) liquidate or dissolve the Corporation.
(b) So long as any shares of Series B, Series C, Series D,
Series E or Series F-1 Preferred Stock are outstanding, the Corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least two-thirds (66 2/3%) in the
aggregate of the then outstanding shares of Series B, Series C, Series D, Series
E and Series F-1 Preferred Stock voting on an as converted basis):
(i) increase or decrease the number of authorized
directors of the Corporation; or
(ii) remove with or without cause any officer or
director of the Corporation, excluding directors elected by the holders of
shares of a series of Preferred Stock pursuant to subsection V.B.6(b) hereof
(who may only be removed by such holders).
(c) So long as any shares of Series F-1 Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent) of the holders of at least seventy-five percent (75%)
of the then outstanding shares of Series F-1 Preferred Stock, (i) take any
action which would violate any of the provisions of Section 6.9, 6.11(B), 6.13
or 6.15 of the Securities Purchase Agreement, or (ii) take any other actions
which require the consent of the holders of any other series of Preferred Stock
(whether now existing or created in the future) voting as a class, or with
respect to which a director or other designee of that series of Preferred Stock
must approve such action.
(d) So long as any shares of the Series F-1 Preferred Stock
are outstanding, the Corporation shall not, and shall not permit any of its
Subsidiaries to, take any action (or fail to take any action, as the case may
be) that would violate any of the provisions of Sections 6.1 or 6.14 of the
Securities Purchase Agreement without first obtaining the approval (by vote or
written consent) of (i) the holders of at least eighty percent (80%) of the then
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outstanding shares of Series F-1 Preferred Stock or (ii) at least (A) a majority
of the members of the Board of Directors of the Corporation and (B) all of the
Series F Directors. So long as any shares of Series F-1 Preferred Stock are
outstanding, the Corporation shall not, and shall not permit any of its
Subsidiaries to, take any action (or fail to take any action, as the case may
be) that would violate any of the provisions of Section 5.3, 5.4, 5.6, 6.4, 6.8
or 6.16 of the Securities Purchase Agreement without first obtaining the
approval (by vote or written consent) of (i) the holders of at least seventy-
five percent (75%) of the then outstanding shares of Series F-1 Preferred Stock
or (ii) at least (A) a majority of the members of the Board of Directors of the
Corporation and (B) one Series F Director, if there shall be two Series F
Directors on the Board of Directors of the Corporation, or a majority of the
Board of Directors of the Corporation, if there shall be more than two Series F
Directors on the Board of Directors of the Corporation. So long as any shares of
Series F-1 Preferred Stock are outstanding, the Corporation shall not, and shall
not permit any of its Subsidiaries to, take any action that would violate any of
the provisions of Section 6.5, 6.6, 6.7, 6.10 or 6.11(A) of the Securities
Purchase Agreement without first obtaining the approval (by vote or written
consent) of (i) the holders of at least seventy-five (75%) of the then
outstanding shares of Series F-1 Preferred Stock or (ii) at least (A) seventy-
five percent (75%) of the members of the Board of Directors of the Corporation
and (B) at least one Series F Director, if there shall be two Series F Directors
on the Board of Directors of the Corporation, or a majority of the Series F
Directors, if there shall be more than two Series F Directors on the Board of
Directors of the Corporation. Notwithstanding the foregoing, if any the
foregoing actions may not be approved by the requisite number of Series F
Directors solely because the number of Series F Directors present at such
meeting is insufficient to approve such action, then such meeting of the Board
of Directors shall be adjourned and held on a date, not less than 10 days nor
more than 20 days following such adjournment, on which such requisite number of
Series F Directors are present at such meeting (whether in person or by
telephone); provided, that if there is no date during such period on which the
--------
requisite number of Series F Directors may be present, such action may be taken
at any meeting held not less than 20 days nor more than 30 days following such
originally adjourned meeting if approved by (i) at least a majority or seventy-
five (75%), as the case may be, of the members of the Board of Directors of the
Corporation and (ii) all of the Series F Directors present, if any, at such
meeting.
(e) So long as any shares of a series of Existing Preferred
Stock (an "Existing Series") are outstanding, the Corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the shares of such Existing Series then
outstanding, amend the Corporation's Amended and Restated Certificate of
Incorporation to alter or change the rights, preferences or privileges of the
shares of such Existing Series, if such Existing Series would be adversely
affected by such amendment in a manner different from other then outstanding
Existing Series (it being understood that, without limiting the foregoing,
different Existing Series shall not be affected differently because of
differences in the amounts of their respective issue prices, liquidation
preferences and redemption prices or because of changes in the public offering
price per share at which Preferred Stock automatically converts to Common Stock
pursuant to subsection V.B.4(b) above).
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(f) So long as any shares of Series E Preferred Stock are
outstanding, the Corporation shall not without, first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least two-
thirds (2/3) of the shares of Series E Preferred Stock then outstanding, amend
subsection V.B.6(b) hereof to adversely affect the right of holders of Series E
Preferred Stock to elect a director of the Corporation pursuant thereto. So long
as any shares of Series F-1 Preferred Stock are outstanding, the Corporation
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least two-thirds (2/3) of the shares of
Series F-1 Preferred Stock then outstanding, amend subsection V.B.6(b) hereof to
adversely affect the right of holders of Series F-1 Preferred Stock to elect
directors of the Corporation pursuant thereto.
8. Status of Redeemed and Converted Stock. In the event any
--------------------------------------
shares of Preferred Stock shall be redeemed or converted pursuant to Sections 3
or 4, respectively hereof, the shares so redeemed or converted shall be
cancelled and shall not be issuable by the Corporation. The Amended and Restated
Certificate of Incorporation of the Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of
---------------
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
------------------
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 1 of Division (B) of Article V hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock
-------------
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of the Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE VI
Except as otherwise provided in this Amended and Restated Certificate
of Incorporation, in furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind any or all of the Bylaws of the Corporation.
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ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
A director of the Corporation shall, to the full extent permitted by
the Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article IX, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article IX, shall
eliminate or reduce the effect of this Article IX, in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article IX,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision. If the Delaware General Corporation Law is amended to
authorize, with the approval of the Corporation's stockholders, further
reductions in the liability of the Corporation's directors, then a director of
the Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
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IN WITNESS WHEREOF, said International Wireless Communications
Holdings, Inc. has caused this certificate to be signed by its President, John
D. Lockton, and its Secretary, Aarti C. Gurnani, this ______ day of _______,
1996.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:__________________________________________
John D. Lockton, President
Attest:
___________________________________
Aarti C. Gurnani, Secretary
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
(a Delaware Corporation)
ARTICLE I
OFFICES
Section 1. The registered office shall be located at 15 E. North
Street, in the City of Dover, Kent County, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the board of directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect by plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than 10 nor more than 60 days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The
<PAGE>
list shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than 10 nor more than 60 days before the date
of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of 50% of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for the meeting as originally notified. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation a different vote is required, in which case
such express provision shall govern the control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or
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any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
SECTION 1. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
Section 2. The number of directors which shall constitute the whole
board shall be eleven (11). Each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 3. Unless otherwise provided in the certificate of
incorporation, or any amendments thereto, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office for the remainder of the term of the directors whom they replaced and
until their successors are duly elected and shall qualify, unless sooner
displaced. If there are no directors in office, then an election of directors
may be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship the directors then in office shall
constitute less than a majority of the whole board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors,
3
<PAGE>
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on three days' notice to each director, either personally, by mail, or
by telegram, telex, or facsimile transmission; special meetings shall be called
by the president or secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director, in
which case special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the board, 50% of the directors shall
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the board of directors, except as may be otherwise specifically provided
by statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Members of the board of directors, or any committee
designated by the board of directors, may participate in a meeting of the board
of directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 11. On or before thirty (30) days before the beginning of
each fiscal year (commencing with the 1997 fiscal year) the board of directors
of the corporation shall adopt and approve an annual plan (the "Annual Plan")
for the next fiscal year. Each such Annual Plan shall set forth the operating
and capital expenditures budgets for the corporation for such fiscal year in
such detail as the board of directors shall reasonably determine is appropriate.
Without the prior approval of the board of directors of the corporation, the
corporation shall not be authorized to:
1. except as set forth in the Annual Plan, incur in any
fiscal year capital expenditures exceeding $100,000 in the aggregate;
4
<PAGE>
2. except as set forth in the Annual Plan, incur any
guarantees or incur, assume or permit any indebtedness of the Corporation in the
aggregate amount greater than $100,000.
For purposes of this Section 11, "guarantee" shall mean any liability
as a surety, guarantor, account party with respect to standby letters of credit
or any other liability which constitutes the economic equivalent of a guarantee
whether by agreement to purchase any obligations, stock, assets, goods or
services, or otherwise, for or upon the indebtedness or obligation of any
person, and "Indebtedness" shall mean indebtedness for money borrowed.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the Delaware General Corporation Law, fix any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
Section 13. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
5
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COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 15 Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram, telex, or facsimile
transmission.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and there shall be a chairman, a president, a vice-president,
a secretary and a chief financial officer. The board of directors may also
choose additional managing directors, vice-presidents, and one or more assistant
secretaries and assistant chief financial officers. Any number of offices may be
held by the same person, unless the certificate of incorporation or these by-
laws otherwise provide.
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Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a chairman, a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the chairman of the board, the
president, if any, shall preside at all meetings of the Board of Directors and
of the stockholders at which he shall be present. He shall have and may exercise
such powers as are, from time to time, assigned to him by the Board and as may
be provided by law.
THE PRESIDENT
Section 8. The president shall be chief executive officer of the
corporation. In the absence of the chairman, the president shall preside at all
meetings of the stockholders and the board of directors. The president shall
have general and active management of the business of the corporation and shall
see that all orders and resolutions of the board of directors are carried into
effect.
Section 9. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE MANAGING DIRECTORS
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the managing director, if any, (or in the event
there be more than one managing
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director, the managing directors in the order designated by the directors, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
managing directors shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE VICE-PRESIDENTS
Section 11. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 12. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. She shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision she shall be. She shall have custody of the
corporate seal of the corporation and she, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by her
signature.
Section 13. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (of
it there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary, and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE CHIEF FINANCIAL OFFICER AND ASSISTANT CHIEF FINANCIAL OFFICER
Section 14. The chief financial officer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
8
<PAGE>
Section 15. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 16. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 17. The assistant chief financial officer, or if there shall
be more than one, the assistant chief financial officers in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election) shall, in the absence of the treasurer or in the event
of his inability or refusal to act, perform such duties and exercise the powers
of the treasurer and shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.
Upon the face or back of each stock certificate issued to represent
any partly paid share, or upon the books and records of the corporation in the
case of uncertificated partly paid share, shall be set forth the total amount of
the consideration to be paid therefor and the amount paid thereon shall be
stated.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the Delaware General Corporation Law of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or faces of the certificate which the corporation shall issue to represent
such class or series of stock, a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special
9
<PAGE>
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware
General Corporation Law or a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the board of directors may require the
owner, or his legal representative, to give the corporation a bond in such sum
as it may direct as indemnity against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instruments from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful
10
<PAGE>
action, the board of directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting: provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
11
<PAGE>
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and such other information as
the Board may direct. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers and
directors to the extent permitted by the General Corporation Law of Delaware.
The corporation may indemnify employees and agents of the corporation in
accordance with Delaware law as the board of directors shall determine in its
sole discretion.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
12
<PAGE>
CERTIFICATE OF THE SECRETARY OF
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
The undersigned, Aarti C. Gurnani, hereby certifies that she is the
duly elected and acting Secretary of International Wireless Communications
Holdings, Inc., a Delaware corporation (the "Corporation"), and that the Bylaws
attached hereto constitute the Bylaws of said Corporation as duly adopted by
Action by Unanimous Written Consent in Lieu of the Organizational Meeting of the
Board of Directors on August 7, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed her name
this 7th day of August, 1996.
__________________________________
Aarti C. Gurnani
Secretary
13
<PAGE>
EXHIBIT 4.1
================================================================================
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
AS ISSUER
AND
MARINE MIDLAND BANK
AS TRUSTEE
_________________
INDENTURE
DATED AS OF AUGUST 15, 1996
________________
$196,720,000
14% SENIOR SECURED DISCOUNT NOTES DUE 2001
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
310(A)(1).................................................. 7.10
(A)(2).................................................. 7.10
(A)(3).................................................. N.A.
(A)(4).................................................. N.A.
(A)(5).................................................. 7.10
(B)..................................................... 7.10
(C)..................................................... N.A.
311(A)..................................................... 7.11
(B)..................................................... 7.11
(C)..................................................... N.A.
312(A)..................................................... 2.05
(B)..................................................... 11.03
(C)..................................................... 11.03
313(A)..................................................... 7.06
(B)(1).................................................. 7.06; 10.03; 11.02
(B)(2).................................................. 7.06; 10.03
(C)..................................................... 7.06; 11.02
(D)..................................................... 7.06
314(A)..................................................... 4.03
(B)..................................................... 10.02
(C)(1).................................................. 11.04
(C)(2).................................................. 11.04
(C)(3).................................................. N.A.
(D).....................................................10.03, 10.04, 10.05
(E)..................................................... 11.05
(F)..................................................... N.A.
315(A)..................................................... 7.01
(B)..................................................... 7.05, 11.02
(C)..................................................... 7.01
(D)..................................................... 7.01
(E)..................................................... 6.11
316(A)(LAST SENTENCE)...................................... 2.09
(A)(1)(A)............................................... 6.05
(A)(1)(B)............................................... 6.04
(A)(2).................................................. N.A.
(B)..................................................... 6.07
(C)..................................................... 2.12
317(A)(1).................................................. 6.08
(A)(2).................................................. 6.09
(B)..................................................... 2.04
318(A)..................................................... 11.01
(B)..................................................... N.A.
(C)..................................................... 11.01
</TABLE>
N.A. MEANS NOT APPLICABLE.
*THIS CROSS-REFERENCE TABLE IS NOT PART OF THE INDENTURE.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE............................ 1
SECTION 1.01. DEFINITIONS............................................ 1
SECTION 1.02. OTHER DEFINITIONS......................................21
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT......22
SECTION 1.04. RULES OF CONSTRUCTION..................................22
ARTICLE 2
THE SECURITIES........................................................23
SECTION 2.01 FORM AND DATING........................................23
SECTION 2.02 EXECUTION AND AUTHENTICATION...........................23
SECTION 2.03 REGISTRAR AND PAYING AGENT.............................25
SECTION 2.04 PAYING AGENT TO HOLD ASSETS IN TRUST...................25
SECTION 2.05 HOLDER LISTS...........................................26
SECTION 2.06 TRANSFER AND EXCHANGE..................................26
SECTION 2.07 REPLACEMENT SECURITIES.................................26
SECTION 2.08 OUTSTANDING SECURITIES.................................27
SECTION 2.09 TREASURY SECURITIES....................................27
SECTION 2.10 TEMPORARY SECURITIES...................................27
SECTION 2.11 CANCELLATION...........................................28
SECTION 2.12 CUSIP NUMBER...........................................28
SECTION 2.13 DEPOSIT OF MONEYS......................................28
SECTION 2.14 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES............28
SECTION 2.15 SPECIAL TRANSFER PROVISIONS............................30
SECTION 2.16 RECORD DATE............................................34
ARTICLE 3
REDEMPTION AND REPURCHASE.............................................35
SECTION 3.01. OFFER TO REPURCHASE....................................35
SECTION 3.02. DEPOSIT OF REPURCHASE PRICE............................36
SECTION 3.03. DELIVERY OF SECURITIES AND PAYMENT
OF PURCHASE PRICE......................................37
SECTION 3.04. SECURITIES REPURCHASED IN PART.........................37
SECTION 3.05 OPTIONAL REDEMPTION....................................37
ARTICLE 4
COVENANTS.............................................................37
SECTION 4.01. PAYMENT OF SECURITIES..................................37
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY........................38
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 4.03. REPORTS................................................38
SECTION 4.04. COMPLIANCE CERTIFICATES................................39
SECTION 4.05. TAXES..................................................40
SECTION 4.06. WAIVER OF STAY, EXTENSION AND USURY LAWS...............40
SECTION 4.07. RESTRICTED PAYMENTS....................................40
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES...........................................41
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
STOCK..................................................41
SECTION 4.10. ASSET SALES............................................43
SECTION 4.11. TRANSACTIONS WITH AFFILIATES...........................45
SECTION 4.12. LIENS..................................................46
SECTION 4.13. LIMITATION ON LINES OF BUSINESS........................46
SECTION 4.14 CORPORATE EXISTENCE....................................46
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.............46
SECTION 4.16. SUBSIDIARY STRUCTURE...................................47
SECTION 4.17. STATUS AS INVESTMENT COMPANY...........................47
SECTION 4.18. DESIGNATION OF RESTRICTED SUBSIDIARY AS UNRESTRICTED
SUBSIDIARY AND RESTRICTED AFFILIATE AS UNRESTRICTED
AFFILIATE; REDESIGNATION OF UNRESTRICTED SUBSIDIARY AS
RESTRICTED SUBSIDIARY AND UNRESTRICTED AFFILIATE AS
RESTRICTED AFFILIATE...................................47
SECTION 4.19 INTERNAL REVENUE SERVICE FILING AND
WITHHOLDING INFORMATION................................48
ARTICLE 5
SUCCESSORS............................................................49
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS...............49
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED......................50
ARTICLE 6
DEFAULTS AND REMEDIES.................................................50
SECTION 6.01. EVENTS OF DEFAULT......................................50
SECTION 6.02. ACCELERATION...........................................52
SECTION 6.03. OTHER REMEDIES.........................................53
SECTION 6.04. WAIVER OF PAST DEFAULTS................................53
SECTION 6.05. CONTROL BY MAJORITY....................................53
SECTION 6.06. LIMITATION ON SUITS....................................54
SECTION 6.07. RIGHTS OF HOLDERS OF SECURITIES TO RECEIVE PAYMENT.....54
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.............................54
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.......................55
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.10. PRIORITIES.............................................55
SECTION 6.11. UNDERTAKING FOR COSTS..................................56
ARTICLE 7
TRUSTEE...............................................................56
SECTION 7.01 DUTIES OF TRUSTEE......................................56
SECTION 7.02 RIGHTS OF TRUSTEE AND EACH AGENT.......................58
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE...........................59
SECTION 7.04 DISCLAIMER OF TRUSTEE AND AGENTS.......................59
SECTION 7.05 NOTICE OF DEFAULT......................................59
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS..........................60
SECTION 7.07 COMPENSATION AND INDEMNITY.............................60
SECTION 7.08 REPLACEMENT OF TRUSTEE.................................61
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.......................62
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION..........................62
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY..63
SECTION 7.12 AUTHENTICATING AGENTS..................................63
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................64
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE
OR COVENANT DEFEASANCE.................................64
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.........................64
SECTION 8.03. COVENANT DEFEASANCE....................................65
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.............65
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS...............67
SECTION 8.06. REPAYMENT TO COMPANY...................................67
SECTION 8.07. REINSTATEMENT..........................................68
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER......................................68
SECTION 9.01 WITHOUT CONSENT OF HOLDERS.............................68
SECTION 9.02 WITH CONSENT OF HOLDERS................................69
SECTION 9.03 COMPLIANCE WITH TIA....................................70
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS......................70
SECTION 9.05 NOTATION ON OR EXCHANGE OF SECURITIES..................71
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC........................71
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 10
COLLATERAL AND SECURITY...............................................72
SECTION 10.01. PLEDGE AGREEMENT.......................................72
SECTION 10.02. RECORDING AND OPINIONS.................................72
SECTION 10.03. RELEASE OF COLLATERAL..................................73
SECTION 10.04. CERTIFICATES OF THE COMPANY............................74
SECTION 10.05. CERTIFICATES OF THE TRUSTEE............................74
SECTION 10.06. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE
UNDER THE PLEDGE AGREEMENT.............................74
SECTION 10.07. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE
UNDER THE PLEDGE AGREEMENT.............................75
SECTION 10.08. TERMINATION OF SECURITY INTEREST.......................75
SECTION 10.09. INTERCREDITOR AGREEMENT................................75
ARTICLE 11
MISCELLANEOUS.........................................................75
SECTION 11.01. TRUST INDENTURE ACT CONTROLS...........................75
SECTION 11.02. NOTICES................................................76
SECTION 11.03. COMMUNICATION BY HOLDERS OF SECURITIES WITH OTHER
HOLDERS OF SECURITIES..................................77
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.....77
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..........77
SECTION 11.06. RULES BY TRUSTEE AND AGENTS............................78
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.......................................78
SECTION 11.08. GOVERNING LAW..........................................78
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..........78
SECTION 11.10. SUCCESSORS.............................................78
SECTION 11.11. SEVERABILITY...........................................78
SECTION 11.12. COUNTERPART ORIGINALS..................................79
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.......................79
SECTION 11.14. LEGAL HOLIDAYS.........................................79
</TABLE>
<PAGE>
EXHIBITS
EXHIBIT A-1 - FORM OF INITIAL SECURITY
EXHIBIT A-2 - FORM OF EXCHANGE SECURITY
EXHIBIT B - FORM OF LEGEND FOR GLOBAL NOTE
EXHIBIT C - FORM OF INTERCREDITOR AND COLLATERAL AGENCY
AGREEMENT
EXHIBIT D - FORM OF COMPANY PLEDGE AGREEMENT
EXHIBIT E - TRANSFEREE CERTIFICATE FOR NON-QIB ACCREDITED
INVESTORS
EXHIBIT F - TRANSFEREE CERTIFICATE FOR REGULATIONS TRANSFERS
<PAGE>
INDENTURE dated as of August 15, 1996 between International Wireless
Communications Holdings, Inc., a Delaware corporation (the "Company"), and
Marine Midland Bank, as trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 14% Senior
Secured Discount Notes due 2001 (the "Initial Securities") and 14% Senior
Secured Discount Notes due 2001 to be issued in exchange for the Initial
Securities pursuant to the Registration Rights Agreement (the "Exchange
Securities" and, together with the Initial Securities, the "Securities") and, to
provide therefor, the Company has duly authorized the execution and delivery of
this Indenture. Pursuant to the terms of the Purchase Agreement dated August 9,
1996 (the "Purchase Agreement") among the Company, IWC and the Initial
Purchasers (each as defined herein), the Company has agreed to issue and sell
196,720 units (the "Units") in accordance with the Unit Agreement dated as of
August 15, 1996 (the "Unit Agreement") among the Company, Bankers Trust Company,
as Unit Agent and Warrant Agent, and the Trustee, each Unit consisting of $1,000
principal amount at maturity of the Securities and one Warrant (as defined
herein) initially entitling the holder thereof to purchase 11.638 shares of
Common Stock of the Company from the Company at an exercise price of $.01 per
share, subject to adjustment as provided in the Warrant Agreement (as defined
herein). The Securities and the Warrants will become separately transferable on
the Separation Date (as defined herein). All things necessary to make the
Securities, when duly issued and executed by the Company, and authenticated and
delivered hereunder, the valid obligations of the Company, and to make this
Indenture a valid and binding agreement of the Company, have been done.
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Accreted Value" means, as of any date of determination, for each $1,000 in
principal amount of Securities the sum of (a) $508.35 and (b) the portion of the
excess of the principal amount of each Security over the amount stated in clause
(a) that shall have been amortized through such date, such amount to be so
amortized on a daily basis and compounded semi-annually on each February 15 and
August 15 at the rate of 14% per annum from the date of issuance of the
Securities through the date of determination.
<PAGE>
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"Additional Interest" shall have the meaning set forth in the Registration
Rights Agreement.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purpose of this definition: "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that: (i) holding office as an executive officer or director of a Person or (ii)
beneficial ownership of 10% or more of the equity securities of a Person, either
individually or as part of a group, shall be deemed to be control.
"Agent" means any Registrar, Paying Agent, Authenticating Agent or co-
registrar.
"Agent Members" has the meaning provided in Section 2.14.
"Asset Sale" means the sale, lease, conveyance or other disposition of any
assets other than a sale of Cash Equivalents for cash (including, without
limitation, by way of a sale-and-leaseback), whether in a single transaction or
a series of related transactions, (a) that have a fair market value in excess of
$500,000, or (b) for net proceeds in excess of $500,000. Notwithstanding the
foregoing, (i) a transfer of assets by the Company to a Wholly Owned Restricted
Subsidiary of the Company or by a Wholly Owned Restricted Subsidiary of the
Company to the Company or to another Wholly Owned Restricted Subsidiary of the
Company shall not be deemed to be an Asset Sale, (ii) Permitted Investments made
solely with cash and Cash Equivalents shall not be deemed to be an Asset Sale
and (iii) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company will be governed by Section 4.15
and/or Section 5.01 and not by Section 4.10.
"Asset Sale Offer" has the meaning provided in Section 4.10.
"Authenticating Agent" means any Person authorized pursuant to Section 7.12
to act on behalf of the Trustee to authenticate Securities.
"Authorized Officer" means, with respect to any Person, each of the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of such Person, or any other officer designated
2
<PAGE>
as an Authorized Officer by the Board of Directors (or similar governing body of
such Person) in a writing delivered to the Trustee.
"Bank Financing Conditions" means (i) the due execution and delivery by or
on behalf of the lender or lenders parties to a Permitted Bank Facility of the
Intercreditor Agreement, (ii) the due acknowledgment of, and consent to, the
Intercreditor Agreement by the Company, and (iii) the receipt by the Trustee of
an Officers' Certificate and Opinion of Counsel that the conditions set forth in
the foregoing clauses (i) and (ii) have been complied with.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or
foreign law for the relief of debtors.
"Basket Investments" has the meaning specified in the definition of
Permitted Investments.
"Board of Directors" means the Board of Directors or any authorized
committee of the Board of Directors. Unless otherwise indicated, "Board of
Directors" shall mean the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such certificate,
and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"Cash Equivalents" means (i) United States dollars or other currencies,
(ii) securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit, Eurodollar time deposits and bankers' acceptances with maturities not
exceeding six months and overnight bank deposits with any commercial bank,
depository institution or trust company incorporated or doing business under the
laws of the United States of America, any state thereof or the District of
Columbia or a branch or subsidiary of any such depository institution or trust
company operating outside the United States, provided, that such depository
institution or
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trust company has, at the time of the Investment, (A) capital and surplus in
excess of $250 million and (B) outstanding short-term debt securities which are
rated at least A-1 by Standard & Poor's Ratings Service or at least P-1 by
Moody's Investors Service, Inc., or carry an equivalent rating by a nationally
recognized statistical rating organization if both the two named rating agencies
cease publishing ratings of investments, (iv) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above, (v) commercial paper having
a rating in the highest rating categories from Standard & Poor's Ratings Service
or Moody's Investors Service, Inc. or carry an equivalent rating by a nationally
recognized statistical rating organization if both of the two named rating
agencies cease establishing ratings of investments and in each case maturing
within six months after the date of acquisition and (vi) money market mutual or
similar funds having assets in excess of $250 million, provided, that with
respect to any Non-Domestic Person, Cash Equivalents shall also mean those
investments that are comparable to clauses (iii) through (v) above in such
Person's country of organization or country where it conducts business
operations.
"Certificated Securities" has the meaning provided in Section 2.01.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, whether direct or
indirect (by way of a merger, consolidation or otherwise), by the Company or a
Restricted Subsidiary of the Company, in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole, to any Person other than a Wholly
Owned Restricted Subsidiary of the Company; (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company; (iii) any Person or group (as
such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other
than Permitted Holders, directly or indirectly acquires more than 50% of the
total voting power of all classes of voting stock of the Company and/or warrants
or options to acquire such voting stock, calculated on a fully diluted basis; or
(iv) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Closing Price" means, on any Trading Day with respect to any share of
Capital Stock, the last reported sale price regular way for a share of such
Capital Stock or, in case no such reported sale takes place on such day, the
reported closing bid price regular way, in either case on the New York Stock
Exchange or, if such shares of Capital Stock are not listed or admitted to
trading on such Exchange, on the principal national securities exchange on which
such shares are listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the Nasdaq National Market or,
if such shares are not listed or admitted to trading on any national securities
exchange or quoted on such Market but the issuer is a "Foreign Issuer" (as
defined in Rule 3b-4(b) under the Exchange Act) and the principal securities
exchange on which such shares are listed or admitted to trading is a "Designated
Offshore Securities Market" (as defined in Rule 902(a) under
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the Securities Act), the reported closing bid price regular way on such
principal exchange, or, if such shares are not listed or admitted to trading on
any national securities exchange or quoted on such automated quotation system
and the issuer and principal securities exchange do not meet such requirements,
the closing bid price in the over-the-counter market as furnished by any New
York Stock Exchange member firm that is selected from time to time by the
Company for that purpose and is reasonably acceptable to the Trustee.
"Collateral" means the Company Collateral and the IWC Collateral.
"Collateral Agent" means (i) so long as no Intercreditor Agreement is
entered into in connection with one or more Permitted Bank Facilities, Bankers
Trust Company or any successor collateral agent under the Pledge Agreements, and
(ii) in the event an Intercreditor Agreement is entered into, initially Bankers
Trust Company (or, in the event such Intercreditor Agreement is entered into at
a time when a successor collateral agent holds office under the Pledge
Agreements, such successor collateral agent), and thereafter any successor
Collateral Agent appointed as provided in such Intercreditor Agreement.
"Company" means International Wireless Communications Holdings, Inc., a
Delaware corporation.
"Company Collateral" means any assets or property of the Company defined as
"Collateral" in the Company Pledge Agreement.
"Company Pledge Agreement" means the Pledge Agreement dated as of the date
of this Indenture and substantially in the form of Exhibit D hereto, as amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (a) an amount
equal to any extraordinary loss of such Person or any of its Restricted
Subsidiaries plus any net loss realized in connection with an Asset Sale by such
Person or any of its Restricted Subsidiaries (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (b) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent such provision for taxes was included in
computing Consolidated Net Income, plus (c) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including amortization of original issue discount, non-cash interest
payments and the interest component of any payments associated with Capital
Lease Obligations and net payments (if any) pursuant to Hedging Obligations), to
the extent such expense was deducted in computing Consolidated Net Income, plus
(d) depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent such depreciation and amortization were deducted in
computing Consolidated Net Income, in each case,
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on a consolidated basis with respect to such Person and its Restricted
Subsidiaries and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, interest
and the depreciation and amortization of, a Restricted Subsidiary of a Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow of
such Person only to the extent (and in the same proportion) that the Net Income
of such Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to such Person by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders. In
addition, for purposes of computing Consolidated Cash Flow, (i) acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers and consolidations and including any related financing
transactions, during the most recently completed four full fiscal quarters for
which financial statements are available or subsequent to such four-quarter
reference period and on or prior to the date on which the calculation of the
Consolidated Cash Flow is made (the "Calculation Date") shall be deemed to have
occurred on the first day of the four-quarter reference period, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"Consolidated Debt" means, with respect to any Person as of any date of
determination, the aggregate amount of Indebtedness and Disqualified Stock of
such Person and its Restricted Subsidiaries outstanding as of such date of
determination, determined on a consolidated basis in accordance with GAAP;
provided that, for purposes of calculating the Company's Consolidated Debt as a
percentage of the Company's Total Market Capitalization, all Project Financing
of the Company's Restricted Subsidiaries that has not been Guaranteed by the
Company shall be excluded in calculating the amount of such Consolidated Debt
and the amount of such Total Market Capitalization.
"Consolidated Debt to Consolidated Cash Flow Ratio" means, as at any date
of determination, the ratio of the Consolidated Debt of the Company as of such
date to the Consolidated Cash Flow of the Company for the most recently
completed four full fiscal quarters for which internal financial statements are
available as of such date of determination .
"Consolidated Invested Equity Capital" means, with respect to any Person as
of any date, the sum of the Invested Equity Capital of Person as of such date
and, without duplication, the Invested Equity Capital of each of its Restricted
Subsidiaries and Restricted Affiliates (and their Restricted Subsidiaries) as of
such date. For purposes of calculating the Consolidated Invested Equity Capital
of any Person as of any date, in order to avoid duplication, the Invested Equity
Capital of a Restricted Subsidiary or Restricted Affiliate (or their Restricted
Subsidiaries) of such Person shall not include any amounts that would be
included in the Consolidated Invested Equity Capital of any equity owner of such
Restricted Subsidiary or Restricted Affiliate (or their Restricted
Subsidiaries), to the extent that such amounts were utilized by such equity
owner prior to such date to permit the
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incurrence of Project Financing pursuant to clause (e) of the second paragraph
of Section 4.09. For example, if a direct Restricted Subsidiary of the Company
has Consolidated Invested Equity Capital of $100 and incurs $200 of Project
Financing, then a direct or indirect Restricted Subsidiary (or a Restricted
Affiliate) of such first Restricted Subsidiary will not be deemed to have any
Invested Equity Capital based on contributions or loans to it by such first
Restricted Subsidiary. In addition, the Invested Equity Capital of a Restricted
Subsidiary or Restricted Affiliate of a Person will never be considered to be
greater than the Invested Equity Capital of such Person, except as a result of
contributions of Invested Equity Capital to such Restricted Subsidiary or
Restricted Affiliate by third parties.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, that (i) the Net Income of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to such Person or a Wholly Owned Restricted Subsidiary thereof; (ii) the
Net Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded; (iii) the
cumulative effect of a change in accounting principles shall be excluded and
(iv) the Net Income of any Unrestricted Subsidiary of such Person shall be
excluded, whether or not distributed to such Person or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock).
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
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"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the
maturity of Securities.
"Domestic Intermediate Holding Company" means any Intermediate Holding
Company organized under the laws of the United States or any political
subdivision thereof and all of the outstanding Capital Stock of which is pledged
to the Collateral Agent pursuant to an Intermediate Holding Company Pledge
Agreement.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Securities" has the meaning provided in the preamble to this
Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession in the United States, which are in effect on the date of this
Indenture.
"Global Security" means a security evidencing all or a part of the
Securities issued to the Depository in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit B.
"Government Securities" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Security
or a specific payment of principal of or interest on any such Government
Security held by such custodian for the account of the holder of such depository
receipt; provided, that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable
8
<PAGE>
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Security or the specific payment of
principal of or interest on the Government Security evidenced by such depository
receipt.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirectly, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness. The amount of any Guarantee shall be equal to the maximum
potential liability in respect of the Guarantee, even if less than the
Indebtedness supported by such Guarantee.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) the net cost to such Person
of foreign exchange contracts and currency protection arrangements and (iii)
obligations under other similar agreements or arrangements designed to protect
such Person against fluctuations in interest rates or currencies.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness (other than
letters of credit) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person), except any Lien described in clauses (h) and (i) of
the definition of "Permitted Liens" and, to the extent not otherwise included,
the Guarantee by such Person of any Indebtedness of any other Person (whether or
not such Guarantee would be required to be reflected on a balance sheet).
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Purchasers" means BT Securities Corporation, Toronto Dominion
Securities (USA) Inc. and Salomon Brothers Inc.
"Initial Securities" has the meaning provided in the preamble to this
Indenture.
"Institutional Accredited Investor" means an institution other than a QIB
that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act.
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"Intercreditor Agreement" means any Intercreditor and Collateral Agency
Agreement in the form of Exhibit C hereto between the Collateral Agent, on the
one hand, and the lender or lenders parties to a Permitted Bank Facility, on the
other hand, and acknowledged and consented to by the Company.
"Intermediate Holding Company" means any direct Wholly Owned Restricted
Subsidiary of IWC formed solely for purposes of holding Permitted Investments.
"Intermediate Holding Company Pledge Agreement" means any pledge agreement
entered into by IWC in accordance with Section 2.2 of the Company Pledge
Agreement, as any such agreement may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Invested Equity Capital" means, with respect to any Person as of any date,
the sum of (i) the total dollar amount contributed in cash plus the value of all
property contributed (valued at the lower of fair market value at the time of
contribution, determined in good faith by the Company's Board of Directors, or
the book value of such property at the time of contribution on the books of the
Person making such contribution) to such Person since the date of its creation
in the form of Equity Interests (other than Disqualified Stock), plus, without
duplication, (ii) the total dollar amount contributed in cash plus the value of
all property contributed (valued at the lower of fair market value at the time
of contribution, determined in good faith by the Company's Board of Directors,
or the book value of such property at the time of contribution on the books of
the Person making such contribution) to such Person since the date of creation
by the holders of its Equity Interests (and their Affiliates) in consideration
of the issuance of preferred equity or Indebtedness, on a basis that is
substantially proportionate to their Equity Interests (with any
disproportionately large equity interests received by the Company, a Restricted
Subsidiary of the Company, a Restricted Affiliate or a Restricted Subsidiary of
a Restricted Affiliate relative to their respective contributions being ignored
for this purpose), plus, without duplication, (iii) the total dollar amount
contributed in cash plus the value of all property contributed (valued at the
lower of fair market value at the time of contribution, determined in good faith
by the Company's Board of Directors, or the book value of such property at the
time of contribution on the books of the Person making such contribution) to
such Person since the date of its creation by the Company or a Wholly Owned
Restricted Subsidiary of the Company in consideration of the issuance of
preferred equity or Indebtedness, less (iv) the fair market value of all
interest, dividends and other distributions (in whatever form and however
designated) made by such Person since the date of its creation to the holders of
its Equity Interests (and their Affiliates), provided that in no event shall the
aggregate amount of interest, dividends and other distributions made to any
holder of Equity Interests of a Person (or its Affiliates) operate to reduce the
Invested Equity Capital of such Person by more than the total contributions to
such Person (per clauses (i) through (iii) above) by such equity holder (and its
Affiliates), and less (v) the total amount of Basket Investments (measured as of
the date made but without giving effect to any proration) made by such Person or
any of its Restricted Subsidiaries or Restricted Affiliates since the date of
this Indenture that are outstanding as of such date.
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"Investment" means, with respect to any Person, any investment by such
Person in other Persons (including Affiliates) in the form of loans (including
Guarantees), advances (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), capital
contributions, or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, or any binding contractual obligation not subject
to a condition within the sole control of the Company to make any such
investment or enter into any such transaction on a future date prior to the
Maturity Date or upon the happening of any event, and all other items that are
or would be classified as investments on a balance sheet in accordance with
GAAP. Except as otherwise specified, Investments will be valued as of the date
made for all purposes under this Indenture.
"IRA" means the Fifth Amended and Restated Investor Rights Agreement dated
as of December 18, 1995, as in effect on the date of this Indenture.
"Issue Date" means the closing date for the sale and original issuance of
the Securities under this Indenture.
"IWC" means International Wireless Communications, Inc., a Delaware
corporation and a direct Wholly Owned Restricted Subsidiary of the Company.
"IWC Collateral" means any assets or property of IWC defined as
"Collateral" in any Intermediate Holding Company Pledge Agreement.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Liens" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Maturity Date" means August 15, 2001.
"Minority Owned Affiliate" of any specified Person means any other Person
in which such specified Person owns Equity Interests other than a direct or
indirect Subsidiary of the specified Person.
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"Mobilcom Mexico" means Corporacion Mobilcom, S.A. de C.V., an Unrestricted
Affiliate of the Company on the date of this Indenture.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or (b)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries, and (ii) any extraordinary
gain (but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale or the
liquidation of any Investment, net of the direct costs relating to such Asset
Sale or the liquidation of any Investment (including, without limitation,
reasonable legal, accounting and investment banking fees, and sales commissions)
and any relocation expenses incurred as a result thereof, taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale or the liquidation of any Investment (other than
intercompany Indebtedness and Subordinated Indebtedness) and any reserve for
adjustment in respect of the sale price of such asset or assets.
"Non-Domestic Person" means any Subsidiary or Minority Owned Affiliate of
the Company that is organized under the laws of any jurisdiction, or has its
principal business operations, outside the United States.
"Non-Recourse Debt" means, with respect to any Person, Indebtedness or that
portion of Indebtedness (a) as to which the specified Person (i) does not
provide credit support of any kind (including, without limitation, pursuant to
any undertaking, agreement or instrument that would constitute Indebtedness),
(ii) is not directly or indirectly liable (as a guarantor or otherwise), or
(iii) does not constitute the lender; and (b) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of such Indebtedness to take any action against the
specified Person or would permit any holder of Indebtedness of the specified
Person to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and (c) as to
which the lenders have been notified in writing that they will not have any
recourse to the stock or assets of the specified Person.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"Offering Memorandum" means the final offering memorandum of the Company,
dated August 9, 1996, which describes the Securities.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary, any Assistant Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the Chief Executive Officer,
the President, the Chief Operating Officer or the Chief Financial Officer of the
Company that meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Paying Agent" has the meaning provided in Section 2.03, except that,
during the continuance of a Default or Event of Default and for the purposes of
Articles Three and Eight and Sections 4.10 and 4.15, the Paying Agent shall not
be the Company or any Affiliate of the Company.
"Permitted Bank Facility" means, at any time, a single credit facility
between the Company and the lender or lenders parties thereto providing for
loans (i) incurred in compliance with Section 4.09 and (ii) as to which the Bank
Financing Conditions shall have been satisfied.
"Permitted Basket Investments" means Basket Investments in Unrestricted
Affiliates that do not exceed $40 million (or the equivalent amount in one or
more foreign currencies) at any one time (measured by the fair market value of
each such Investment at the time made as determined in good faith by the
Company's Board of Directors pursuant to a Board Resolution).
"Permitted Holders" means Vanguard Cellular Systems, Inc., a North Carolina
corporation, and its wholly-owned subsidiaries.
"Permitted Investments" means (a) Investments in Cash Equivalents, (b)
Investments in Restricted Subsidiaries of the Company, Restricted Affiliates and
Restricted Subsidiaries of any Restricted Affiliates of the Company, (c) all
Investments that were outstanding on the date hereof, and (d) Investments by the
Company or any Restricted Subsidiary or Restricted Affiliate in Unrestricted
Subsidiaries or Unrestricted Affiliates (collectively, "Basket Investments"), in
each case only to the extent that such Investments are in Persons that are
primarily engaged in Related Businesses; provided that any such Investment is
either a Permitted Basket Investment or the aggregate amount of all Basket
Investments, other than Permitted Basket Investments, at any one time
outstanding (measured by the fair market value of each such Investment at the
time made as
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determined in good faith by the Company's Board of Directors) does not exceed
the sum of (i) $10 million (or the equivalent amount in one or more foreign
currencies), plus (ii) the aggregate net cash proceeds from the sales of Equity
Interests other than Disqualified Stock received by the Company since the date
of this Indenture, plus (iii) the aggregate net cash proceeds from sales of
Subordinated Indebtedness of the Company received by the Company since the date
of this Indenture, plus (iv) to the extent that any Investment pursuant to this
clause (d) was made in an Unrestricted Subsidiary or Unrestricted Affiliate and
is sold for cash or otherwise liquidated for cash, 50% of the Net Proceeds from
the sale or liquidation of such Investment, plus (v) to the extent that any
Unrestricted Subsidiary is properly designated as a Restricted Subsidiary in
accordance with the terms of this Indenture, or to the extent that any
Unrestricted Affiliate is properly designated as a Restricted Affiliate in
accordance with the terms of this Indenture, the lesser of (x) the initial
amount of all Investments made since the date of this Indenture in such
Unrestricted Subsidiary or Unrestricted Affiliate and (y) the fair market value
of all such Investments as of the date of such designation less the amount of
----
Indebtedness guaranteed by the Company, a Restricted Subsidiary, Restricted
Affiliate, or the Restricted Subsidiary of a Restricted Affiliate pursuant to
Section 4.09. For purposes of this definition, only the Company's Pro Rata
Portion of any Basket Investment will be counted in determining the amount of
Basket Investments outstanding at any time or proposed to be made.
"Permitted Liens" means (a) Liens in favor of the Company or a Wholly Owned
Restricted Subsidiary of the Company; (b) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation by the Company of such merger or consolidation and do
not extend to any assets other than those of the Person merged into or
consolidated with the Company; (c) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation by the
Company of such acquisition; (d) Liens to secure the performance of statutory
obligations, surety or appeal bounds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business; (e) Liens existing on
the date of this Indenture; (f) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (g) Liens
incurred in the ordinary course of business of the Company or any Restricted
Subsidiary of the Company with respect to obligations that do not exceed $5
million (or the equivalent in one or more foreign currencies) measured at the
time such Lien was incurred and that (A) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (B) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary; (h) Liens on assets of Restricted Subsidiaries of the Company, a
Restricted Affiliate or a Restricted Subsidiary of a Restricted Affiliate
securing Project Financing that is permitted by this Indenture to be incurred;
(i) Liens on assets or the Equity Interests of Unrestricted Subsidiaries,
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Unrestricted Affiliates or Unrestricted Subsidiaries of Unrestricted Affiliates
that secure Indebtedness of such Unrestricted Subsidiaries, Unrestricted
Affiliates or Unrestricted Subsidiaries of Unrestricted Affiliates that
constitutes Non-Recourse Debt with respect to the Company and its Restricted
Subsidiaries, Restricted Affiliates and Restricted Subsidiaries of Restricted
Affiliates; (j) Liens created pursuant to the terms of the Pledge Agreements;
(k) Liens on the Collateral which secure a Permitted Bank Facility and rank pari
passu with the Lien securing the Securities; and (l) the Lien in favor of the
Trustee and the Agents arising under Section 7.07 of this Indenture.
"Permitted Pledge Foreclosure" means any Asset Sale resulting from the
foreclosure on or judicial enforcement of any rights or remedies under or with
respect to any Lien described in clause (i) of the definition of Permitted
Liens; provided that the Company shall have delivered to the Trustee, with
respect to any such Lien, a Board Resolution set forth in an Officers'
Certificate to the effect that such Lien arose in the ordinary course of the
Company's business pursuant to a bona fide pledge or similar arrangement that
was in the best interests of the Company.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company,
a Restricted Subsidiary of the Company, a Restricted Affiliate or a Restricted
Subsidiary of a Restricted Affiliate issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company, a Restricted Subsidiary of the Company, a
Restricted Affiliate or a Restricted Subsidiary of a Restricted Affiliate;
provided that, unless such Indebtedness is being incurred to substantially
concurrently repay the Securities in full at maturity: (1) the principal amount
(or accreted value, as applicable) of such Indebtedness does not exceed the
principal amount (or accreted value, as applicable) of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (2) such Indebtedness
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is Subordinated
Indebtedness, then such Indebtedness is Subordinated Indebtedness; and (4) such
Indebtedness is incurred by the Company or the Restricted Subsidiary or
Restricted Affiliate (or Restricted Subsidiary thereof) who is the obligor of
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means an individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Pledge Agreements" means (i) the Company Pledge Agreement and (ii) any
Intermediate Holding Company Pledge Agreement.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Exhibit A-1.
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"Project Financing" means any Indebtedness after the date of this Indenture
by a Restricted Subsidiary of the Company, a Restricted Affiliate or a
Restricted Subsidiary of a Restricted Affiliate that is Non-Recourse Debt with
respect to the Company (except to the extent permitted by the covenant described
under clause (h) in Section 4.09) and each of its other Restricted Subsidiaries,
Restricted Affiliates and Restricted Subsidiaries of Restricted Affiliates
except any such Restricted Subsidiary, Restricted Affiliates and Restricted
Subsidiaries of a Restricted Affiliate that owns, either directly or indirectly
through a directly owned Restricted Subsidiary or Restricted Affiliate, all or a
portion of the business that will use the proceeds of such Project Financing.
"Pro Rata Portion" means, when applied to the Company for purposes of
determining the amount of Net Proceeds from an Asset Sale made by a Restricted
Subsidiary (other than a Wholly Owned Restricted Subsidiary) that constitute
Excess Proceeds or for purposes of determining the amount of an Investment that
will be deemed to be outstanding under a particular covenant or definition, that
portion of such Net Proceeds or Investment as corresponds to the Company's
direct or indirect percentage ownership interest in the profits of the Person
who engaged in the Asset Sale or the Person in whom the Investment was made, as
applicable (which would be 100% in the case of any Investments made by the
Company in a Wholly Owned Subsidiary). The Pro Rata Portion of the Net Proceeds
from an Asset Sale shall be determined in good faith by the Company's Board of
Directors in connection with such Asset Sale. The Pro Rata Portion of an
Investment as of any date shall be determined in good faith either by the
Company's Board of Directors or in accordance with procedures established as to
such Investment by the Company's Board of Directors.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Redemption Date" means, with respect to any Securities, the Maturity Date
of such Security or the earlier date on which such Security is to be redeemed by
the Company pursuant to the terms of the Securities.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement by
and between the Company and the Initial Purchasers, relating to the Securities
and dated as of the Issue Date, as the same may be amended, supplemented or
modified from time to time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
"Related Business" means any business in which the Company, its
Subsidiaries or Minority Owned Affiliates are engaged, directly or indirectly,
(i) that uses existing or future technology for the transmission and delivery of
video, voice or other data, or (ii) that supports or is incidental to any
business listed in clause (i).
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"Repurchase Date" means (i) in the case of an Asset Sale Offer, the Asset
Sale Purchase Date or (ii) in the case of a Change of Control Offer, the date
Securities are purchased by the Company, which shall be a Business Day no
earlier than 30 days or later than 60 days from the date that such Offer is
mailed to Holders pursuant to Section 3.01 hereof.
"Repurchase Offer" means an Asset Sale Offer or a Change of Control Offer,
as applicable.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of its knowledge of
and familiarity with the particular subject.
"Restricted Affiliate" means any direct or indirect Minority Owned
Affiliate of the Company that has been designated in a Board Resolution as a
Restricted Affiliate based on a determination by the Board of Directors that the
Company has, directly or indirectly, the requisite control over such Minority
Owned Affiliate to prevent it from incurring any Indebtedness or issuing any
preferred stock or taking any other action at any time in contravention of
Sections 4.09 and 4.16 that are applicable to Restricted Affiliates. The Company
will be required to deliver an Officers' Certificate to the Trustee, including a
copy of the Board Resolution, upon designating any Minority Owned Affiliate as a
Restricted Affiliate.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under the
Securities Act; provided, that the Trustee or the Registrar shall be entitled to
request and conclusively rely upon an Opinion of Counsel with respect to whether
any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning provided in the preamble to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest to occur of (i) November 15, 1996,
(ii) the occurrence of an Exercise Event (as defined in the Warrant Agreement),
(iii) the date a registration statement with respect to a registered exchange
offer for the Securities or a shelf registration statement for the
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Securities is declared effective under the Securities Act and (iv) such earlier
date as the Initial Purchasers may, in their discretion, deem appropriate.
"Series F Purchase Agreement" means the Securities Purchase Agreement dated
as of December 6, 1995, between the Company and the purchasers of the Company's
Series F Preferred Stock, par value $.01 per share, as in effect on the date
hereof.
"Significant Restricted Subsidiary" means any Restricted Subsidiary of the
Company with assets having a book value of $3 million or more.
"Subordinated Indebtedness" means any Indebtedness of the Company that by
its terms is expressly subordinated in right of payment to the prior payment in
full of the Securities and that does not provide for (i) any scheduled payment
of principal or interest or redemption prior to the maturity or repayment in
full of the Securities or (ii) any offer to purchase prior to the maturity or
repayment in full of the Securities other than an offer to purchase (a
"Permitted Offer to Purchase") that (x) arises from any event or circumstance
that obligates the Company to make an Asset Sale Offer or Change of Control
Offer and (y) provides that the repurchase obligation is subject to the prior
consummation of any such Asset Sale Offer or Change of Control Offer in
accordance with the terms of this Indenture.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person or a combination thereof and (ii) any partnership of which more
than 50% of the partnership's capital accounts, distribution rights or general
or limited partnership interests are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof. Unless otherwise specified, the term
"Subsidiary" as used herein shall mean a Subsidiary of the Company.
"Take Along Asset Sale" means any Asset Sale involving the sale, lease,
conveyance or other disposition of all or any portion of any Investment held by
the Company or any Restricted Subsidiary in any Minority Owned Affiliate
effected (i) at the direction of the holders of a majority of the Voting Equity
Interests of such Minority Owned Affiliate pursuant to the exercise of any
"drag-along" or similar rights available to such holders or (ii) pursuant to the
exercise of any "take along" or similar rights available to the Company or such
Restricted Subsidiary.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
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"TD Loan Agreement" means the Loan Agreement dated as of July 23, 1996
between IWC and Toronto Dominion (Texas), Inc.
"Total Market Capitalization" of any Person means, as of any date of
determination, the sum of (1) the Consolidated Debt of such Person on such date,
plus (2) the Total Market Value of Equity of such Person on such date.
"Total Market Value of Equity" of any Person means, as of any date of
determination, the sum of (1) the product of (i) the aggregate number of
outstanding primary shares of common stock of such Person (which shall not
include any options or warrants on, or securities convertible or exchangeable
into, shares of such common stock) and (ii) the average Closing Price of such
common stock over the 20 consecutive Trading Days immediately preceding such
date of determination, plus (2) the stated liquidation preference of any
outstanding shares of preferred stock of such Person outstanding as of such date
of determination. If no such Closing Price exists with respect to any class of
common stock, the value of such shares for purposes of clause (1) of the
preceding sentence will be determined by the Board of Directors of such Person
on the basis of a valuation opinion issued by an investment banking firm of
national standing with experience in such valuations that has been filed with
the Trustee.
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
"Transfer Amount" has the meaning provided in Section 2.15.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters or, in the
case of a successor trustee, an officer assigned to the department, division or
group performing the corporate trust work of such successor.
"Unit Agent" has the meaning provided in the preamble to this Indenture.
"Unit Agreement" has the meaning provided in the preamble to this
Indenture.
"United States" has the meaning provided in Regulation S.
"Unrestricted Affiliate" means any direct or indirect Minority Owned
Affiliate of the Company other than a Restricted Affiliate.
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"Unrestricted Subsidiary" means any Person that is designated by the Board
of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but
in each case only to the extent that such Person: (a) is not a party to any
contract, agreement, understanding or other arrangement of any kind with the
Company or any of its Restricted Subsidiaries other than on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained from Persons who are not Affiliates of the Company; (b) is a Person
with respect to which neither the Company nor any of its Restricted Subsidiaries
has any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (c) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries, except
insofar as such subscription, maintenance or preservation of financial condition
or achievement of operating results, or guarantee or credit support described in
the foregoing clauses (b) and (c) would be permissible under this Indenture; and
(d) has at least one director on its board of directors that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries and
has at least one executive officer that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors will be required to be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07. If at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09, the Company shall be in default of
such covenant).
"U.S. Government Obligations" means direct obligations of, and obligations
guaranteed by, the United States of America for the payment of which the full
faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Person" has the meaning provided in Regulation S.
"Voting Equity Interests" of a Person means Equity Interests of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
Board of Directors (irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Warrant" means a warrant to purchase common stock, $.01 par value per
share, of the Company issued pursuant to the Warrant Agreement.
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"Warrant Agent" means the warrant agent under the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement dated as of the date of
this Indenture between the Company and Bankers Trust Company, as warrant agent,
as the same may be amended, modified or supplemented from time to time.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each of the remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than the directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of that Person or a combination thereof.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of that Person or a
combination thereof.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Term Defined In Section
<C> <C>
"Affiliate Transaction" 4.11
"Acceleration Notice 6.02
"Asset Sale Offer" 4.10
"Asset Sale Offer Period" 4.10
"Asset Sale Payment" 4.10
"Asset Sale Purchase Date" 4.10
"Certificated Securities" 2.01
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Covenant Defeasance" 8.03
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Restricted Payments" 4.07
</TABLE>
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<TABLE>
<C> <C>
"Separation Legend" 2.15
"Unrestricted Investment" 4.16
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder of a Security;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Securities means the Company and any successor obligor
upon the Securities.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions;
(6) "herein", "hereof" and words of similar import refer to this Indenture
as a whole and not to any particular Article, Section or other subdivision; and
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(7) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2
THE SECURITIES
SECTION 2.01 FORM AND DATING.
The Initial Securities and the Exchange Securities, and the notation
relating to the Trustee's certificate of authentication shall be substantially
in the form of Exhibits A-1 and A-2, respectively. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the Securities, annexed hereto as
Exhibits A-1 and A-2, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A or to Non-U.S.
Persons in accordance with Regulation S may be issued initially in the form of
one or more permanent Global Securities in registered form, substantially in the
form set forth in Exhibit A-1 ("Global Securities"), deposited with, or on
behalf of, the Depository and registered in the name of Cede & Co. or such other
nominee, as nominee of the Depository, or will remain in the custody of the
Registrar pursuant to the Fast Balance Certificate Agreement between the
Depository and the Registrar, and shall bear the legend set forth on Exhibit B.
The aggregate principal amount of any Global Security may from time to time be
increased or decreased by adjustments made on the records of the Depository and
the Registrar, as the custodian for the Depository.
Initial Securities offered and sold to Institutional Accredited Investors
who are not QIBs (excluding Non-U.S. Persons) shall be issued in the form of
certificated securities in registered form in substantially the form set forth
in Exhibit A-1 (the "Certificated Securities").
SECTION 2.02 EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by
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manual or facsimile signature. The Company's seal shall also be reproduced on
the Securities and may be in facsimile form.
If an Officer or Assistant Secretary whose signature is on a Security was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the
Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Securities for original issue in
the aggregate principal amount of $196,720,000 and (ii) Exchange Securities from
time to time for issue, in the aggregate principal amount not to exceed
$196,720,000 for issuance in exchange for a like principal amount of Securities
pursuant to an exchange offer registration statement under the Securities Act,
in each case upon receipt of a written order of the Company in the form of an
Officers' Certificate (which need not comply with Section 11.05). Exchange
Securities may have such distinctive series designation as, and such changes in
the form thereof, as are specified in the written order referred to in the
preceding sentence. The Officers' Certificate shall specify the amount of
Securities to be authenticated, the series and type of Securities and the date
on which the Securities are to be authenticated, whether the Initial Securities
are to be Initial Securities or Exchange Securities, whether the Securities are
to be Certificated Securities or a Global Security and whether or not the
Securities shall bear the Private Placement Legend, or such other information as
the Trustee may reasonably request. The aggregate principal amount of Securities
outstanding at any time may not exceed $196,720,000, except as provided in
Section 2.07. Upon receipt of a written order of the Company, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent (an "Authenticating Agent")
reasonably acceptable to the Company to authenticate the Securities. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
Authenticating Agent has the same rights as an Agent to deal with the Company
and Affiliates of the Company. The Trustee hereby appoints Bankers Trust Company
to be the Authenticating Agent on the Issue Date.
The Securities shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
The Trustee is hereby authorized to enter into the Unit Agreement and to
take all actions provided for therein.
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SECTION 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be located in
the Borough of Manhattan in the City of New York, State of New York), where (a)
Securities may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Securities may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Registrar shall
keep a register of the Securities and of their transfer and exchange. The
Company, upon notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional paying agent. The Company upon notice to
the Trustee may change any Registrar or Paying Agent without notice to any
Holder. The Company may act as Registrar or Paying Agent, except that for
purposes of Articles Three and Eight and Sections 4.10 and 4.15, the Paying
Agent shall not be the Company or any Affiliate of the Company.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee,
in advance, of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints Bankers Trust Company at 4 Albany Street,
New York, New York 10006, as Registrar and Paying Agent until such time as such
Agent has resigned or a successor has been appointed.
SECTION 2.04 PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that each Paying Agent shall hold in trust for the benefit of the
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or premium or Additional Interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any default by the Company (or any
other obligor on the Securities) in making any such payment. The Company, upon
written direction to the Paying Agent, at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent and the completion of any
accounting required to be made hereunder, the Paying Agent shall have no further
liability for such assets.
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SECTION 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S)312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee at such times as the
Trustee may request in writing, and in any event in intervals of not more than
six months commencing on the Issue Date, a list in such form and as of such date
as the Trustee may reasonably require of the names and addresses of the Holders,
including the aggregate principal amount of the Securities held by each thereof,
which list may be conclusively relied upon by the Trustee.
SECTION 2.06 TRANSFER AND EXCHANGE.
Subject to the provisions of Section 2.14 and 2.15, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-Registrar's written request. No service
charge shall be made for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or other governmental charge payable upon exchanges or transfers
pursuant to Section 2.02, 2.10, 3.04, 4.10, or 9.05). The Registrar or co-
Registrar shall not be required to register the transfer of or exchange of any
Security during a Change of Control Offer or an Asset Sale Offer if such
Security is tendered pursuant to such Change of Control Offer or Asset Sale
Offer and not withdrawn.
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Depository of
such Global Security (or, its agent), and that ownership of a beneficial
interest in the Global Security shall be required to be reflected in a book-
entry system.
SECTION 2.07 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. Such Holder must provide an
indemnity bond or other indemnity sufficient, in the judgment of the Company and
the Trustee, to protect the Company, the Trustee or any Agent from any loss
which any of them may suffer if a Security is replaced. The Company may charge
such Holder for its reasonable
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out-of-pocket expenses in replacing a Security, including reasonable fees and
expenses of counsel. Every replacement Security shall constitute an additional
obligation of the Company.
SECTION 2.08 OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those canceled by the Trustee, those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced
Security is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant
to Section 2.07.
If the principal amount of any Security is considered paid under Section
4.01, it ceases to be outstanding and interest ceases to accrue.
If on the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S.
Government Obligations sufficient to pay all of the principal of, and premium
and Additional Interest, if any, due on the Securities payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant
to the terms of this Indenture, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver, consent or notice,
Securities owned by the Company or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any direction,
waiver or consent, only Securities which the Trustee actually knows are so owned
shall be so considered. The Company shall notify the Trustee, in writing, when
it or any of its Affiliates repurchases or otherwise acquires Securities, of the
aggregate principal amount of such Securities so repurchased or otherwise
acquired. The Trustee may require an Officers' Certificate listing Securities
owned by the Company, a subsidiary of the Company or any Affiliate of the
Company.
SECTION 2.10 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated.
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Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and execute,
and the Trustee shall authenticate upon receipt of a written order of the
Company pursuant to Section 2.02, definitive Securities in exchange for
temporary Securities.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of (subject to the record retention requirements of the Exchange
Act) (but shall not be required to destroy) all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that the Company has
paid or delivered to the Trustee for cancellation. If the Company shall acquire
any of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12 CUSIP NUMBER.
The Company in issuing the Securities may use a "CUSIP" number, and if so,
the Trustee shall use the CUSIP number in notices of exchange or other notices
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
SECTION 2.13 DEPOSIT OF MONEYS.
Prior to 11:00 a.m. New York City time on the Business Day preceding the
Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on the Maturity Date, in a timely manner which permits the Paying Agent to remit
payment to the Holders on the Maturity Date.
SECTION 2.14 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in the name of
the Depository for such Global Securities or the nominee of such Depository,
(ii) be delivered to the Registrar as custodian for such Depository and (iii)
bear legends as set forth in Exhibit B.
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Members of, or participants in, the Depository ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depository, or the Registrar as its custodian, or under the Global
Security, and the Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Securities may be transferred or
exchanged for Certificated Securities in accordance with the rules and
procedures of the Depository and the provisions of Section 2.15. In addition,
Certificated Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the Company
notifies the Registrar that the Depository is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Certified Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Certificated Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and cause to be
delivered, one or more Certificated Securities in an aggregate principal amount
of the beneficial interest in the Global Security so transferred.
(d) In connection with the transfer of Global Securities as an entirety to
beneficial owners pursuant to the second sentence of paragraph (b), the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and cause to
be delivered to each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Securities, an equal aggregate
principal amount of Certificated Securities of authorized denominations.
(e) Any Certificated Security constituting a Restricted Security delivered
in exchange for an interest in a Global Security pursuant to paragraph (b) or
(c) shall, except as otherwise provided by paragraphs (a)(i)(w) and (z) of
Section 2.15, bear the legend regarding transfer restrictions applicable to the
Certificated Securities set forth in Exhibit A-1.
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(f) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
(g) Beneficial owners of interest in a Global Security may receive
Certificated Securities in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In connection with the
authentication and delivery of the Certificated Security, the Registrar shall
reflect on its books and records a decrease in the principal amount at rity of
such Global Security and the Company shall execute and the tee shall
authenticate and deliver one or more Certificated Securities having an equal
aggregate principal amount at maturity.
SECTION 2.15 SPECIAL TRANSFER PROVISIONS.
(a) Transfers to Institutional Accredited Investors Who Are Not QIBs.
----------------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of a Security constituting a Restricted Security to any
Institutional Accredited Investor who is not a QIB (excluding Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Securities
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (w) the requested transfer is after August 15,
1999, (x) the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit E hereto, (y)
[intentionally omitted], or (z) the Trustee and Registrar have received
both an Opinion of Counsel and an Officers' Certificate directing transfer
without a Private Placement Legend; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Security, upon receipt by the Registrar of
(x) the documents, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
of such transfer and a decrease in the principal amount of the Global
Security in an amount equal to the principal amount of the beneficial
interest in the Global Security to be transferred, and the Company shall
execute, and the Trustee, upon receipt of a written order of the Company in
the form of an Officers' Certificate, shall authenticate and deliver, one
or more Certificated Securities in an aggregate principal amount of the
beneficial interest in the Global Security so transferred.
(b) Transfers to QIBs. The following provisions shall apply with respect
-----------------
to the registration of any proposed transfer of a Security constituting a
Restricted Security to a QIB (excluding Non-U.S. Persons):
(i) if the Security to be transferred consists of (a) Certificated
Securities or a beneficial interest in a Global Security (other than
transfers of beneficial interests within the
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same Global Security), the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has signed
the certification provided for on the form of Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A or (b) a beneficial interest in a Global Security that is to
be transferred within the same Global Security, the transfer of such
interest may be effected only through the book entry system maintained by
the Depository;
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Certificated Securities which after
transfer are to be evidenced by an interest in the Global Security, upon
receipt by the Registrar of the Certificated Security, duly endorsed or
accompanied by appropriate instruments of transfer, together with a
certificate to the effect that such transferee is a QIB and instructions
given in accordance with the Depository's and the Registrar's procedures,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security in an amount equal
to the principal amount of the Certificated Securities to be transferred,
and the Trustee shall cancel or cause to be canceled the Certificated
Securities so transferred; and
(iii) with respect to transfers that consist of beneficial
interests in a Global Security which after transfer are to be evidenced by
a Certificated Security and upon compliance by the transferor with the
provisions set forth in clause (i) above, the Registrar shall reflect on
its books and records the date and a decrease in the principal amount of
the Global Security in an amount equal to the principal amount of the
beneficial interest in the Global Security so transferred.
(c) Transfers to Non-U.S. Persons at Any Time. The following provisions
-----------------------------------------
shall apply with respect to any transfer of a Restricted Security to a Non-U.S.
Person:
(i) the Registrar shall register any proposed transfer to any Non-
U.S. Person if the Security to be transferred is a Certificated Security or
a beneficial interest in a Global Security (other than transfers of
beneficial interests within the same Global Security) only upon receipt of
a certificate substantially in the form of Exhibit F hereto from the
proposed transferee;
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(ii) (x) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of a beneficial interest in a Global
Security which after transfer is to be evidenced by a beneficial interest
in a different Global Security, upon receipt by the Registrar of (1) the
documents required by paragraph (i) and (2) instructions in accordance with
the Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records (A) the date, (B) a decrease in the
principal amount of the Global Security in which the transferor owns the
beneficial interest to be transferred in an amount equal to the principal
amount of the beneficial interest to be transferred and (C) an increase in
the principal amount of the Global Security in which the transferee will
hold its beneficial interest in like amount and (y) if the proposed
transferee is an Agent Member, and the Securities to be transferred consist
of Certificated Securities which after transfer is to be evidenced by a
beneficial interest in a Global Security, upon receipt by the Registrar of
(1) the documents required by paragraph (i) and (2) instructions in
accordance with the Depository's and the Registrar's procedures, the
Registrar shall reflect on its books and records (A) the date and (B) an
increase in the principal amount of the Global Security in an amount equal
to the principal amount of the Certificated Securities to be transferred,
and the Trustee shall cancel or cause to be canceled the Certificated
Securities so transferred;
(iii) with respect to transfers that consist of beneficial
interests in a Global Security which after transfer are to be evidenced by
a Certificated Security and upon compliance by the transferee with the
provisions set forth in clause (i) above, the Registrar shall reflect on
its books and records the date and a decrease in the principal amount of
such Global Security in an amount equal to the principal amount of the
beneficial interests in such Global Security so transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one
or more Certificated Securities of authorized denominations representing,
in the aggregate, the principal amount of the beneficial interest in the
Global Security transferred; and
(iv) transfers of beneficial interests in the same Global Security
may be effected only through the book entry system maintained by the
Depository.
(d) Private Placement Legend. Upon the transfer, exchange or replacement
------------------------
of Securities not bearing the Private Placement Legend, the Registrar shall
deliver Securities that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Securities that bear the Private
Placement Legend unless (i) the circumstances contemplated by paragraph
(a)(i)(w) or (z) of this Section 2.15 exist, (ii) there is delivered to the
Registrar and the Trustee an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Securities have been sold
pursuant to an effective registration statement under the Securities Act.
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(e) Separation from Warrants. The following restrictions and related
------------------------
provisions on transfer shall apply with respect to the Securities until the
Separation Date:
(i) Until 5:00 p.m. New York City time on the Separation Date, no
Certificated Securities or any beneficial interest in the Global
Security may be sold, assigned or otherwise transferred to any
Person unless simultaneously with such transfer, the Trustee
receives confirmation from the Warrant Agent for the Warrants
that the holder thereof has requested a transfer to the same
transferee of one Warrant for each $1,000 aggregate principal
amount of the Securities transferred. In connection with the
foregoing, upon original issuance (if prior to the Separation
Date) and, thereafter until the Separation Date, the
certificates representing the Securities will bear a legend in
the following form:
"UNTIL THE EARLIEST TO OCCUR OF (i) NOVEMBER 15, 1996, (ii)
THE OCCURRENCE OF AN EXERCISE EVENT (AS DEFINED IN THE
WARRANT AGREEMENT REFERRED TO IN THE INDENTURE GOVERNING THE
SECURITIES EVIDENCED HEREBY), (iii) THE DATE A REGISTRATION
STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR
THE SECURITIES OR A SHELF REGISTRATION STATEMENT FOR THE
SECURITIES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (iv) SUCH EARLIER DATE AS MAY BE
DETERMINED BY THE INITIAL PURCHASERS (AS DEFINED IN THE
INDENTURE GOVERNING THE SECURITIES EVIDENCED HEREBY), THE
SECURITIES EVIDENCED HEREBY MAY NOT BE SOLD, ASSIGNED OR
OTHERWISE TRANSFERRED TO ANY PERSON UNLESS, SIMULTANEOUSLY
WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME
TRANSFEREE ONE WARRANT TO PURCHASE COMMON STOCK, PAR VALUE
$.01 PER SHARE, OF INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC. FOR EACH $1,000 PRINCIPAL AMOUNT OF
SECURITIES SO TRANSFERRED."
By accepting a Security bearing the legend above (the
"Separation Legend"), each Holder shall be bound by all of the
terms and provisions of the Warrant Agreement (a copy of which
is available on request to the Company or the Warrant Agent) as
fully and effectively as if such Holder signed the same.
(ii) On or following the Separation Date, a Holder may surrender the
certificate evidencing the Securities to the Trustee for the
exchange of such certificate for
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one or more certificates that do not bear the Separation Legend,
representing in the aggregate a principal amount of Securities
equal to the principal amount of Securities represented by the
certificate so surrendered.
(iii) If the Separation Date occurs prior to November 15, 1996, the
Company shall notify the Trustee and the Registrar at least ten
Business Days prior thereto and shall give, or shall cause the
Registrar to give, written notice thereof in the Company's name
and at its expense to each Holder by first-class mail, postage
prepaid.
(f) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, and the Separation Legend, each Holder of such a Security
acknowledges the restrictions on transfer of such Security set forth in this
Indenture and in the Private Placement Legend and the Separation Legend and
agrees that it will transfer such Security only as provided in this Indenture.
In connection with any transfers of Securities, each Holder or beneficial owner
agrees by its acceptance of the Securities to furnish the Registrar and the
Company such certifications, legal opinions or other information as such Person
may reasonably require to confirm that such transfer is being made pursuant to
an exemption from, or a transaction not subject to, the registration
requirements of the Securities Act; provided that the Registrar shall not be
required to determine (but may rely on a determination made by the Company with
respect to) the sufficiency of any such certifications, legal opinions or other
information.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.14 or this Section 2.15 for a
period of ten years following the Maturity Date. The Company shall have the
right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
(g) Restricted Period under Regulation S. Notwithstanding the other
------------------------------------
provisions of this Section 2.15, Initial Securities offered and sold by the
Initial Purchasers in reliance on Regulation S shall not be transferred to a
U.S. Person or for the account or benefit of a U.S. Person during the applicable
"restricted period" (as defined in Regulation S).
SECTION 2.16 RECORD DATE.
The record date for purposes of determining the identity of Holders of the
Securities entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in Section 9.04 and TIA (S)316(c).
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ARTICLE 3
REDEMPTION AND REPURCHASE
SECTION 3.01. OFFER TO REPURCHASE.
In the event that, pursuant to Sections 4.10 or 4.15 hereof, the Company
shall be required to commence a Repurchase Offer, it shall follow the procedures
specified below.
The Company shall send, by first class mail, a notice of such Repurchase
Offer to the Trustee and each of the Holders at the following times: (i) upon
the commencement of an Asset Sale Offer or (ii) within 30 days following any
Change of Control, as applicable. The notice of Repurchase Offer, which shall be
sent to all Holders, shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to such Repurchase Offer. The
notice of Repurchase Offer, which shall govern the terms of the Repurchase
Offer, shall state:
(a) that the Repurchase Offer is being made pursuant to this Section
3.01 and Section 4.10 or 4.15 hereof, as applicable, and the length of time
that such Repurchase Offer shall remain open;
(b) in the case of an Asset Sale Offer, the Asset Sale Payment and
the Asset Sale Purchase Date;
(c) in the case of a Change of Control Offer, the Change of Control
Payment and the Repurchase Date;
(d) that any Security not tendered or accepted for payment shall
continue to accrete;
(e) that, unless the Company defaults in making such payment, any
Security accepted for payment pursuant to a Repurchase Offer shall cease to
accrete after the Repurchase Date;
(f) that Holders electing to have a Security purchased pursuant to
any Repurchase Offer shall be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Company, the Depository or a Paying Agent at the
address specified in the notice at least three Business Days before the
repurchase date;
(g) that Holders shall be entitled to withdraw their election if the
Company or the Paying Agent, as the case may be, receives, not later than
the expiration of the Asset Sale Offer Period (with respect to an Asset
Sale Offer) or not later than the close of business on the second Business
Day preceding the applicable Repurchase Date (with respect to a Change of
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Control Offer), a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Securities the Holder
delivered for purchase, the certificate number(s) of any Certificated
Securities the Holder owns and a statement that such Holder is withdrawing
his election to have such Securities purchased;
(h) that Holders whose Securities were purchased only in part shall
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof; and
(i) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of Repurchase
Offer in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
Repurchase Date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities in connection with a Repurchase Offer. To the extent
that the provisions of any securities laws and regulations conflict with the
Repurchase Offer provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the Indenture by virtue thereof.
SECTION 3.02. DEPOSIT OF REPURCHASE PRICE.
One Business Day prior to any Repurchase Date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the repurchase
price required by this Indenture for all Securities to be repurchased on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the repurchase price of all Securities repurchased.
If the Company complies with the provisions of the preceding paragraph, on
and after the Repurchase Date, the Securities or the portions of Securities to
be repurchased in accordance with the provisions of this Indenture shall cease
to accrete.
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SECTION 3.03. DELIVERY OF SECURITIES AND PAYMENT OF PURCHASE PRICE.
One Business Day prior to any Repurchase Date, the Company shall deliver or
cause to be delivered to the Trustee the Securities so accepted together with an
Officers' Certificate stating the aggregate principal amount of Securities or
portions thereof being purchased by the Company and that such securities were
accepted for repurchase by the Company in accordance with the terms of Section
3.01 hereof. The Company or the Paying Agent, as the case may be, shall promptly
(but in any case not later than five days after the repurchase date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Securities tendered by such Holder and accepted by the Company for purchase, and
the Company shall promptly issue a new Security, and the Trustee, upon written
request from the Company shall authenticate and mail or deliver such new
Security to such Holder, in a principal amount equal to any unpurchased portion
of the Security surrendered, if any, provided, that each such new Security shall
be in a principal amount of $1,000 or an integral multiple thereof. Any Security
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company shall publicly announce the results of the
Repurchase Offer on or as soon as practicable after the Repurchase Date.
SECTION 3.04. SECURITIES REPURCHASED IN PART.
Upon surrender of a Security that is repurchased in part, the Company shall
issue, and upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Security equal in principal
amount to the unpurchased portion of the Security surrendered.
SECTION 3.05 OPTIONAL REDEMPTION.
The Securities shall not be redeemable at the Company's option prior to
maturity.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay or cause to be paid the principal of, and premium and
Additional Interest, if any, on the Securities on the dates and in the manner
provided in the Securities. Principal, and premium and Additional Interest, if
any, shall be considered paid on the date due if the Trustee or Paying Agent, if
other than the Company, holds as of 11:00 a.m. New York City time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium and Additional
Interest, if any, then due, and the Trustee or Paying Agent is not prohibited
from paying such money to the Holders in accordance
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with the terms of this Indenture. The Company shall promptly provide the Trustee
and the Paying Agent with a copy of the Registration Rights Agreement and any
amendments thereto.
The Company shall pay, to the extent such payments are lawful, interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal, premium and Additional Interest from time to time on demand
at the rate borne by the Securities plus 2% per annum. Interest shall be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in this Indenture, the
Company may, to the extent it is required to do so by law, deduct or withhold
income or other similar taxes imposed by the United States of America from
principal or interest payments hereunder.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 11.02.
SECTION 4.03. REPORTS.
(a) At the Company's expense, following the first fiscal quarter ending
after the date of this Indenture and regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the rules and
regulations of the SEC, for so long as the Securities remain outstanding, the
Company shall furnish to the Holders (i) within 45 days after the end of each of
the first three fiscal quarters of each fiscal year and 90 days of the end of
each fiscal year all quarterly and annual financial information, as the case may
be, that would be required to be contained in a filing with the SEC on Forms 10-
Q and 10-K (or any successor Forms) if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K (or
any successor Form) if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the SEC, the
Company will file a copy of all such information and reports with the SEC for
public availability (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
(b) The Company will, for so long as any Securities remain outstanding,
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
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(c) Such reports shall be delivered to the Registrar and the Registrar
will mail them at the Company's expense to the Holders at their addresses
appearing in the register of Securities maintained by the Registrar.
(d) The Company shall also comply with the provisions of TIA (S)314(a).
SECTION 4.04. COMPLIANCE CERTIFICATES.
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Pledge Agreement, and further, stating,
as to each such Officer signing such certificate, that to the best of his or her
knowledge the Company has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and the Pledge Agreement and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture or the Pledge Agreement (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of the Securities is prohibited or if such
event has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
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SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries and
Restricted Affiliates to pay, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Securities.
SECTION 4.06. WAIVER OF STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law or any other
law that would prohibit or forgive the Company from paying all or any portion of
the principal of and/or premium on the Securities as contemplated herein,
whenever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture, and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or Restricted Affiliates to, directly or indirectly: (i) declare or
pay any dividend or make any distribution on account of the Equity Interests of
the Company (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company; (iii)
purchase, redeem or otherwise acquire or retire for value any Subordinated
Indebtedness; or (iv) make or permit to remain outstanding any Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments").
The foregoing provisions will not prohibit (a) the redemption, repurchase,
retirement or other acquisition for value of any Equity Interests of the Company
in exchange for, or out of the net cash proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock), (b) the
defeasance, redemption or repurchase of any Subordinated Indebtedness (in whole
or in part) with the net proceeds from an incurrence of Permitted Refinancing
Indebtedness, (c) the repurchase of Subordinated Indebtedness pursuant to a
Permitted Offer to Purchase, (d) the making or retention of any Permitted
Investment, (e) the repayment of any Indebtedness under the TD Loan Agreement on
the Issue Date, or (f) payments in an aggregate amount not to exceed $1 million
to redeem or repurchase at original issuance cost the Common Stock of terminated
or deceased employees under any employee stock option or stock purchase
agreements.
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Not later than the date of making any Restricted Payment (other than an
Investment in Cash Equivalents), the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which its calculations were computed.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
such Restricted Subsidiary to (a)(i) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (A) on its
Capital Stock or (B) with respect to any other interest or participation in, or
measured by, its profits, or (ii) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (b) make loans or advances to the Company or
any of its Restricted Subsidiaries, or (c) sell, lease or transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (i)
this Indenture, the Pledge Agreements and the Securities, (ii) applicable law,
(iii) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any Restricted Subsidiary as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that the Consolidated Cash Flow of such Person is not taken
into account in determining whether such acquisition was permitted by the terms
of the Indenture, (iv) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, (v) Indebtedness outstanding on the
date hereof, or (vi) Project Financing permitted under this Indenture and any
other Indebtedness consisting of Non-Recourse Debt with respect to the Company
or any Restricted Subsidiary, Restricted Affiliate, or Restricted Subsidiary of
any Restricted Affiliate, provided that the Consolidated Cash Flow of any
Persons incurring such Indebtedness is not taken into account when determining
the Consolidated Cash Flow of the Company. Notwithstanding the foregoing,
neither IWC nor any Intermediate Holding Company shall create or suffer to exist
any such encumbrances or restrictions, except those imposed by applicable law or
by this Indenture or the Securities.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any Restricted or Unrestricted
Subsidiary of the Company, Restricted Affiliate or Subsidiary of a Restricted
Affiliate to, directly or indirectly, create, incur, issue, assume, guaranty or
otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and that the Company will
not
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issue any Disqualified Stock and will not permit any Restricted or Unrestricted
Subsidiary of the Company, Restricted Affiliate or Subsidiary of a Restricted
Affiliate to issue any shares of preferred stock; provided, however, that the
Company may incur Subordinated Indebtedness (including Acquired Debt that is
such Subordinated Indebtedness), or issue shares of Disqualified Stock, if: (i)
the Company's Consolidated Debt to Consolidated Cash Flow Ratio is less than 7
to 1, in the case of any such incurrence or issuance on or before August 15,
1998, or less than 5 to 1, in the case of any such incurrence or issuance at any
time thereafter, in each case, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock or preferred stock had
been issued, as the case may be, at the beginning of the applicable four-quarter
period; or (ii) the Company's Consolidated Debt does not exceed 25% of the
Company's Total Market Capitalization, calculated as of the date of incurrence
or issuance and on a pro forma basis after giving effect to such incurrence or
issuance (including a pro forma application of the net proceeds therefrom).
The provisions of the foregoing paragraph will not apply to: (a) issuances
of preferred stock or Indebtedness by a Restricted Subsidiary or Unrestricted
Subsidiary of the Company, a Restricted Affiliate or a Subsidiary of a
Restricted Affiliate to the holders (or their Affiliates) of the common equity
of such Subsidiary, Restricted Affiliate or Subsidiary of a Restricted Affiliate
on a basis that is substantially proportionate to their common equity interests;
(b) the Securities; (c) intercompany Indebtedness between or among the Company,
a Restricted Subsidiary of the Company, a Restricted Affiliate or a Restricted
Subsidiary of a Restricted Affiliate to the extent permitted by the other
provisions of the Indenture; (d) the incurrence by the Company, a Restricted
Subsidiary of the Company, a Restricted Affiliate or a Restricted Subsidiary of
a Restricted Affiliate of Permitted Refinancing Indebtedness; (e) the incurrence
by a Restricted Subsidiary of the Company, a Restricted Affiliate or a
Restricted Subsidiary of a Restricted Affiliate of Project Financing, the
proceeds of which are used by such Restricted Subsidiary, Restricted Affiliate
or Restricted Subsidiary of a Restricted Affiliate, directly or indirectly, to
construct, develop, improve, acquire or operate a Related Business; provided
that no single Restricted Subsidiary (together with its consolidated Restricted
Subsidiaries and its Restricted Affiliates) and no single Restricted Affiliate
(together with its consolidated Restricted Subsidiaries and its Restricted
Affiliates), pro forma for such incurrence and the application of the net
proceeds therefrom, may, on the date of such incurrence, have an aggregate
principal amount of Project Financing outstanding, determined without
duplication, that exceeds the greater of (1) five times the Consolidated Cash
Flow of such Restricted Subsidiary or Restricted Affiliate for the most recently
completed four full fiscal quarters for which internal financial statements are
available as of the date of such incurrence (calculated on a pro forma basis as
if such Project Financing had been incurred and the proceeds therefrom applied
at the beginning of the applicable four-quarter period) or (2) two times the
Consolidated Invested Equity Capital of such Restricted Subsidiary or Restricted
Affiliate at such time; (f) the issuance by Unrestricted Subsidiaries of the
Company or Unrestricted Subsidiaries of Restricted Affiliates of preferred stock
or the incurrence by Unrestricted Subsidiaries of the Company or Unrestricted
Subsidiaries of Restricted Affiliates of Non-Recourse Debt with respect to the
Company, a Restricted Subsidiary, Restricted Affiliate, or Restricted Subsidiary
of a Restricted Affiliate;
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provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt
of an Unrestricted Subsidiary with respect to the Company and its Restricted
Subsidiaries, its Restricted Affiliates and Restricted Subsidiaries of
Restricted Affiliates, such event shall be deemed to constitute an incurrence by
a Restricted Subsidiary of all of the Indebtedness of such Subsidiary or a
Restricted Affiliate of all of the Indebtedness of such Minority Owned
Affiliate, as the case may be; (g) the incurrence by the Company of Subordinated
Indebtedness in an aggregate principal amount (or accreted value, as applicable)
at any one time outstanding (measured as of the date of incurrence and without
giving effect to subsequent accretion) not to exceed the sum of $100 million (or
the equivalent amount in one or more foreign currencies); (h) Guarantees by the
Company, a Restricted Subsidiary, Restricted Affiliate, or Restricted Subsidiary
of a Restricted Affiliate of the Company of Project Financing of the Company's
Restricted Subsidiaries, Restricted Affiliates or Restricted Subsidiaries of its
Restricted Affiliates not to exceed $10 million (or the equivalent amount in one
or more foreign currencies) at the time such Project Financing was guaranteed in
an aggregate principal amount outstanding and related accrued interest at any
one time outstanding (in addition to Guarantees outstanding on the date of this
Indenture); (i) the guarantee by the Company, its Restricted Subsidiaries,
Restricted Affiliates or Restricted Subsidiaries of Restricted Affiliates of
Indebtedness of Unrestricted Affiliates, but only to the extent that upon the
incurrence of such guarantee of such Indebtedness the Company would be able to
make at least $1.00 of additional Investments pursuant to clause (d) of the
definition of Permitted Investments; and (j) a Permitted Bank Facility in an
aggregate amount not to exceed $20 million in principal amount, with any letters
of credit issued thereunder being deemed to have a principal amount equal to the
maximum exposure thereof.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale (other than a Permitted Pledge
Foreclosure) unless (i) the Company (or the applicable Restricted Subsidiary, as
the case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (as evidenced by a Board Resolution set forth in
an Officers' Certificate delivered to the Trustee) of the assets sold or
otherwise disposed of and (ii) in the case of any Asset Sale other than a
Permitted Pledge Foreclosure, at least 85% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided, however, that the amount of (A) any liabilities of any Restricted
Subsidiary as shown on such Restricted Subsidiary's most recent balance sheet or
in the notes thereto (other than liabilities that are incurred in connection
with, or in contemplation of, such Asset Sale) that are assumed by the
transferee of any such assets and (B) any notes or other obligations received by
the Company or such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this paragraph.
Notwithstanding the immediately preceding paragraph, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraph
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if (i) the Company or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as evidenced by a
Board Resolution set forth in an Officers' Certificate delivered to the
Trustee), (ii) at least 85% of the consideration for such Asset Sale (other than
any Take-Along Asset Sale) constitutes assets or property of a kind usable by
the Company in accordance with Section 4.13 ("Related Business Assets") and
(iii) at the time of such Asset Sale (other than any Take-Along Asset Sale) and
after giving pro forma effect thereto, the Company would be permitted to incur
at least $1.00 of additional Subordinated Indebtedness pursuant to the first
paragraph of Section 4.09; provided that any consideration received from such
Asset Sale (including any Take-Along Asset Sale) by the Company or any
Restricted Subsidiary not constituting cash or Related Business Assets shall
constitute Net Proceeds subject to the provisions of the next paragraphs.
Within 270 days after any Asset Sale (or, in the case of any Permitted
Pledge Foreclosure or Asset Sale compelled by a governmental authority, such
later date as the Company or the applicable Restricted Subsidiary shall receive
any Net Proceeds from such Asset Sale), the Company (or the applicable
Restricted Subsidiary, as the case may be) may apply the Net Proceeds from such
Asset Sale to make a Permitted Investment (other than an Investment in Cash
Equivalents). Any Net Proceeds from an Asset Sale that are not applied within
270 days after such Asset Sale (or, in the case of any Permitted Pledge
Foreclosure or Asset Sale compelled by a governmental authority, such later date
as the Company or the applicable Restricted Subsidiary shall receive any Net
Proceeds from such Asset Sale) to make a Permitted Investment as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds,"
provided that, in the case of an Asset Sale by a Restricted Subsidiary of the
Company that is not a Wholly Owned Restricted Subsidiary of the Company, only
the Company's Pro Rata Portion of such Net Proceeds to the extent not reinvested
shall constitute Excess Proceeds. Pending final application of any Net Proceeds
of an Asset Sale to a Permitted Investment (other than Cash Equivalents) or to
an Asset Sale Offer, such Net Proceeds may only be invested in Cash Equivalents.
When the aggregate amount of Excess Proceeds exceeds $5 million, the Company
will be required to make an offer to all Holders of Securities (an "Asset Sale
Offer") to purchase the maximum principal amount of Securities that may be
purchased with the Excess Proceeds at an offer price in cash equal to the
Accreted Value thereof plus accrued Additional Interest, if any, to the date of
repurchase in accordance with the procedures set forth in Section 3.01. The
Asset Sale Offer shall remain open for a period of 20 Business Days following
its commencement and no longer, except to the extent that a longer period is
required under applicable law (the "Asset Sale Offer Period"). No later than
five Business Days after the termination of the Asset Sale Offer Period (the
"Asset Sale Purchase Date"), the Company shall purchase the principal amount of
Securities required to be purchased pursuant to this Section 4.10. To the extent
that the aggregate Accreted Value of Securities tendered pursuant to an Asset
Sale Offer plus accrued Additional Interest, if any, is less than the Excess
Proceeds to be applied to purchase Securities, the Company may use any remaining
Excess Proceeds for any purpose permitted by the other provisions of this
Indenture. If the aggregate Accreted Value of Securities surrendered by Holders
thereof plus accrued Additional Interest, if any, exceeds the amount of
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Excess Proceeds, the Trustee will select the Securities to be purchased on a pro
rata basis (based upon the Accreted Value outstanding). Upon completion of each
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
If an Asset Sale is (i)(A) compelled by action by a governmental authority
or (B) in the case of Mobilcom Mexico, pursuant to a Take Along Asset Sale, and
(ii) for consideration less than fair market value (as determined in good faith
by the Board of Directors), such sale shall not be deemed to be in contravention
of the requirement set forth in clause (i) of the first paragraph of this
Section 4.10 to the extent that the difference between such fair market value
and the actual consideration received in such Asset Sale (and all other such
Asset Sales subject to this paragraph on a cumulative basis) is less than 10% of
the Total Market Value of Equity of the Company. Without limiting the foregoing,
any Asset Sale pursuant to that certain Agreement dated October 2, 1995 between
the Company and Permata Merchant Bank Berhad (without giving effect to any
amendments or modifications thereto) shall not be deemed to be in contravention
of the requirement set forth in clause (i) of the first paragraph of this
Section 4.10.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or Guarantee with, or for
the benefit of, any Affiliate of the Company (each of the foregoing, an
"Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person and (b) the Company
delivers to the Trustee (i) with respect to any Affiliate Transaction involving
aggregate payments in excess of $1 million, a resolution of the Board Resolution
set forth in an Officers' Certificate to the effect that such Affiliate
Transaction complies with clause (a) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (ii) with respect to any Affiliate Transaction involving aggregate
payments in excess of $5 million, an opinion as to the fairness to the Company
or such Restricted Subsidiary from a financial point of view issued by an
investment banking firm of national standing; provided, however, that none of
the following shall be deemed to be an Affiliate Transaction: (1) any employment
agreement, stock option agreement or other agreement relating to the terms of
employment or compensation entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with past
practice of the Company or such Restricted Subsidiary; (2) transactions between
or among the Company and/or any of its Restricted Subsidiaries or Restricted
Affiliates or Restricted Subsidiaries of Restricted Affiliates that would not be
deemed to be Affiliates but for the Company's direct or indirect ownership
interest therein; (3) transactions effected pursuant to the IRA, the Series F
Purchase Agreement and the Registration Rights Agreement; or (4) solely for
purposes of clause (b)(ii) above, transactions pursuant to a joint venture, co-
investment agreement or similar agreement with an Affiliate in which the Company
or
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its Restricted Subsidiaries make an Investment in any Person who is not an
Affiliate of either the Company or its co-investing Affiliate at the time such
Investment is made, but only to the extent such Investment is acquired solely
for cash and the Company or its Restricted Subsidiary and such co-investing
Affiliate are investing on substantially identical terms.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
cause or suffer to exist any Lien of any kind (other than Permitted Liens) upon
any property or assets, now owned or hereafter acquired, of the Company or any
such Restricted Subsidiary, or upon any income or profits therefrom or assign or
convey any right to receive income therefrom.
SECTION 4.13. LIMITATION ON LINES OF BUSINESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly engage to any substantial extent in any
line or lines of business other than a Related Business.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or such
Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of business of the
Company and its Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders of the Securities.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Company shall make an offer
to each Holder to repurchase all or any part (equal to $1,000 in principal
amount or an integral multiple thereof) of each Holder's Securities (a "Change
of Control Offer") at a purchase price in cash equal to 101% of the Accreted
Value thereof plus accrued Additional Interest, if any, to the date of
repurchase (the "Change of Control Payment"), pursuant to the provisions of
Article 3 hereof.
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SECTION 4.16. SUBSIDIARY STRUCTURE.
Notwithstanding anything in this Indenture to the contrary, the Company
shall not make any Investment in any Person, directly or indirectly, other than
through IWC, which will be required to hold, directly or indirectly through any
Intermediate Holding Company, all Investments made by the Company or any of its
Restricted Subsidiaries or Restricted Affiliates; provided, however, that (i)
-------- -------
the Company may hold cash or Cash Equivalents in amounts necessary to meet
payroll and other operating expenses of the Company and (ii) the Company may
make inter-company loans to any Intermediate Holding Company provided that any
such loans are evidenced by a note or notes that are pledged to the Collateral
Agent pursuant to the Company Pledge Agreement. In addition (i) IWC shall at all
times continue to be a direct Wholly Owned Restricted Subsidiary of the Company
and the Company will not have any other direct Subsidiaries, (ii) IWC shall not
(although its Restricted Subsidiaries and Restricted Affiliates, other than an
Intermediate Holding Company, may, to the extent permitted by Section 4.09)
incur any Indebtedness, except intercompany Indebtedness from IWC to the Company
that is pledged pursuant to the Company Pledge Agreement, or issue any preferred
stock, (iii) no Intermediate Holding Company shall (although its Restricted
Subsidiaries and Restricted Affiliates may, to the extent permitted by Section
4.09) incur any Indebtedness, except intercompany Indebtedness from any such
Intermediate Holding Company to IWC or the Company that, in the case of a
Domestic Intermediate Holding Company, is pledged pursuant to an Intermediate
Holding Company Pledge Agreement, (iv) IWC will not consolidate or merge with or
into any Person other than an Intermediate Holding Company provided that IWC is
the surviving corporation and (v) no Intermediate Holding Company will
consolidate or merge with or into any Person other than IWC provided that IWC is
the surviving corporation.
SECTION 4.17. STATUS AS INVESTMENT COMPANY.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, conduct its business in a fashion that would cause it to be
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation under the Investment Company Act of 1940, as amended.
SECTION 4.18. DESIGNATION OF RESTRICTED SUBSIDIARY AS UNRESTRICTED SUBSIDIARY
AND RESTRICTED AFFILIATE AS UNRESTRICTED AFFILIATE; REDESIGNATION
OF UNRESTRICTED SUBSIDIARY AS RESTRICTED SUBSIDIARY AND
UNRESTRICTED AFFILIATE AS RESTRICTED AFFILIATE.
The Board of Directors may designate a Restricted Subsidiary (other than
IWC or any Intermediate Holding Company) to be an Unrestricted Subsidiary and
may designate a Restricted Affiliate to be an Unrestricted Affiliate if as a
result of such designation no Default or Event of Default shall have occurred
and be continuing, and if, after giving pro forma effect to such
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designation, the Company would have been permitted to make at least $1.00 of
additional Investments pursuant to clause (d) of the definition of Permitted
Investments. Upon the designation of any Restricted Subsidiary as an
Unrestricted Subsidiary, or the designation of any Restricted Affiliate as an
Unrestricted Affiliate, all previous Investments by the Company in a Wholly
Owned Restricted Subsidiary and the Company's Pro Rata Portion of any
Investments by any of its Restricted Subsidiaries or Restricted Affiliates in
such Restricted Subsidiary or Restricted Affiliate (in all other cases) will be
deemed to constitute an Investment made on the date of such designation in an
Unrestricted Subsidiary or Unrestricted Affiliate, as applicable, in an amount
equal to the greatest of (x) the aggregate original fair market value of such
Investments (or the Company's Pro Rata Portion thereof, as applicable) as
determined in good faith by the Company's Board of Directors, (y) the net book
value of such Investments at the time of such designation (or the Company's Pro
Rata Portion thereof, as applicable), and (z) the fair market value of such
Investments at the time of such designation (or the Company's Pro Rata Portion
thereof, as applicable) as determined in good faith by the Company's Board of
Directors. Such designation will only be permitted if (i) such Investment (or
the Company's Pro Rata Portion thereof, as applicable) would be permitted at
such time by the terms of Section 4.07 and (ii) if such Restricted Subsidiary or
Restricted Affiliate, as applicable, otherwise meets the definition of an
Unrestricted Subsidiary or an Unrestricted Affiliate, as applicable, and (except
as provided in clause (iii) below) has no Indebtedness other than Non-Recourse
Debt with respect to the Company and its Restricted Subsidiaries, its Restricted
Affiliates and Restricted Subsidiaries of Restricted Affiliates, and (iii) any
Guarantee by the Company of such Non-Recourse Debt is permitted pursuant to
clause (i) in the second paragraph of Section 4.09.
The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary and may designate any Unrestricted
Affiliate to be a Restricted Affiliate; provided, that such designation shall be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary or
Restricted Affiliate, as applicable, of all outstanding Indebtedness of such
Unrestricted Subsidiary or Unrestricted Affiliate, as applicable, and such
designation shall only be permitted if (1) as a result of such designation no
Default or Event of Default shall have occurred and be continuing, (2)
immediately after giving pro forma effect to such designation, all Indebtedness
of the Subsidiary or Affiliate so designated would be permitted under Section
4.09 if it were incurred by a Restricted Subsidiary or Restricted Affiliate, as
applicable, on the date of designation, and (3) such designation does not and
will not result in the creation of any Lien on any asset of the Company or any
of its Restricted Subsidiaries (including the Subsidiary so designated), except
Liens permitted by the Indenture to be incurred.
SECTION 4.19 INTERNAL REVENUE SERVICE FILING AND WITHHOLDING INFORMATION.
The Company shall file Internal Revenue Service Form 8281, Information
Return for Publicly Offered Original Issue Discount Instruments, with the
Internal Revenue Service no later than the date such filing is required to be
made and shall mail a copy of such filing to the Trustee and the
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paying within 15 days after such filing with the Internal Revenue Service. Upon
the written request of the Paying Agent, the Company shall promptly prepare and
deliver to the Paying Agent all information requested by the Paying Agent in
order that the Paying Agent can timely comply with the applicable withholding
requirements of the Internal Revenue Service and prepare the applicable Form
1099 OID for distribution to the Holders of Certificated Securities.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation) or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another Person unless (i) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under this Indenture, the Pledge Agreements, the Intercreditor
Agreement and the Securities, (iii) immediately after such transaction, no
Default or Event of Default exists and (iv) the Company or any Person formed by
or surviving any such consolidation or merger, or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) shall have Consolidated Net Worth (immediately after the transaction
but prior to any purchase accounting adjustments resulting from the transaction)
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) shall, at the time of such transaction and
after giving pro forma effect thereto (as if such transaction had occurred at
the beginning of the most recently ended four-quarter period for which internal
financial statements are available immediately preceding the date of such
transaction, for purposes of calculating the Consolidated Debt to Consolidated
Cash Flow Ratio, and as if such transaction had occurred as of such date for
purposes of calculating Consolidated Debt as a percentage of Total Market
Capitalization), be permitted to incur at least $1.00 of additional Subordinated
Indebtedness pursuant to Section 4.09 hereof. Notwithstanding the foregoing,
nothing in this Section 5.01 shall restrict or limit the Company's ability to
transfer all or substantially all of its assets (other than those pledged
pursuant to the Pledge Agreement) to a Wholly Owned Restricted Subsidiary.
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SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of, and premium and Additional Interest, if any, on the Securities
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company defaults in the payment when due of Additional
Interest, premium or of the principal or Accreted Value (as applicable) of
the Securities, at maturity, upon acceleration, repurchase or otherwise;
(2) the Company or any of its Restricted Subsidiaries or Restricted
Affiliates fails to comply with any of the provisions of Section 4.07,
4.09, 4.10, 4.15, 4.16, or 5.01 hereof;
(3) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the
Securities for 60 days after notice to the Company by the Trustee, or
notice to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Securities then outstanding;
(4) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is Guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness
or Guarantee now exists, or is created after the date of this Indenture,
which default (i) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such
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default (a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5 million or more;
(5) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Restricted Subsidiaries and such judgment or judgments are
not paid, discharged or stayed for a period of 60 days, provided that the
aggregate of all such undischarged judgments exceeds $3 million;
(6) the Company or any of its Significant Restricted Subsidiaries
pursuant to or within the meaning of Bankruptcy Law:
(a) commences a voluntary case or proceeding with respect to
itself;
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property;
(d) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it;
(e) makes a general assignment for the benefit of its creditors;
(f) generally is not paying its debts as they become due; or
(g) takes any corporate action to authorize or effect any of the
forgoing.
(7) a court of competent jurisdiction enters a judgment, decree or
order under Bankruptcy Law that is for relief against the Company or any
Significant Restricted Subsidiary in an involuntary case or proceeding
which shall:
(a) approve a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any Significant
Restricted Subsidiary;
(b) appoint a Custodian for the Company or any Significant
Restricted Subsidiary, or for all or substantially all of the property
of the Company or any Significant Restricted Subsidiary; or
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(c) order the winding-up or liquidation of the Company or any
Significant Restricted Subsidiary.
and, in each case, the judgment, order or decree remains unstayed and in
effect for 60 days.
(8) the Company or IWC breaches any material representation, warranty
or agreement set forth in any Pledge Agreement or the Intercreditor
Agreement, or a default by the Company or IWC in the performance of any
covenant set forth in any Pledge Agreement or the Intercreditor Agreement
occurs, or the Company or IWC repudiates its obligations under any Pledge
Agreement or the Intercreditor Agreement, or any substantive provision of
any Pledge Agreement or the Intercreditor Agreement is held in any judicial
proceeding to be unenforceable against the Company or IWC or invalid or
ceases for any reason to be in full force and effect.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
paragraph (6) or (7) of Section 6.01 with respect to the Company or any
Significant Restricted Subsidiary) occurs and is continuing and has not been
waived pursuant to Section 6.04, the Trustee may, by written notice to the
Company, or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding, by written notice to the Company and the Trustee,
and the Trustee shall, upon the request of such Holders, declare all Securities
to be due and payable by notice in writing to the Company specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same shall become effective immediately due and
payable. If an Event of Default specified in paragraph (6) or (7) of Section
6.01 occurs and is continuing with respect to the Company or any Significant
Restricted Subsidiary, all outstanding Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in principal amount of the
Securities then outstanding (by notice to the Trustee) may rescind and cancel a
declaration of acceleration and its consequences if (i) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default have been cured or waived, except nonpayment of
the principal or interest on the Securities which have become due solely by such
declaration of acceleration, (iii) the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (iv) in the event of the cure or waiver of a
Default or Event of Default of the type described in paragraphs (6) or (7) of
Section 6.01, the Trustee shall have received an Officers' Certificate and an
Opinion of Counsel that such Default or Event of Default has been cured or
waived and the Trustee shall be entitled to conclusively rely upon such
Officers' Certificate and Opinion of Counsel. No such rescission shall affect
any subsequent Default or Event of Default or impair any right consequent
thereto. In the event of any such acceleration of the Securities, the Company
will become obligated to pay the Accreted Value of the Securities plus accrued
Additional Interest, if any, immediately.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, and premium and Additional
Interest, if any, on the Securities or to enforce the performance of any
provision of the Securities, this Indenture, the Pledge Agreements or the
Intercreditor Agreement.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Security in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.07 and 9.02, the Holders of not less than a majority
in aggregate principal amount of the then outstanding Securities by notice to
the Trustee may on behalf of the Holders of all of the Securities waive an
existing Default or Event of Default and its consequences hereunder, except a
continuing Default or Event of Default in the payment of the principal of, or
premium and Additional Interest, if any, on the Securities (which is required to
be unanimous), or in respect of a covenant or a provision which cannot be
amended or modified without the consent of all Holders. In the event of any
Event of Default specified in Section 6.01(4) above, such Event of Default and
all consequences thereof (including, without limitation, any acceleration or
resulting payment default) shall be annulled, waived and rescinded automatically
and without any action by the Trustee or the Holders of the Securities, if
within 20 days after such Event of Default arose (x) the Indebtedness or
Guarantee that is the basis for such Event of Default has been discharged, (y)
the holders thereof have rescinded or waived the acceleration, notice or action
giving rise to such Event of Default or (z) if the default that is the basis for
such Event of Default has been cured. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, Holders of a majority in principal amount of the
then outstanding Securities may direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee or exercising
any trust or power conferred on it, including, without limitation, any remedies
provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture that
the Trustee determines may be unduly prejudicial to the rights of other Holders
of Securities or that may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee, in its
discretion, which is not inconsistent with such direction.
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SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) the Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity or security against any
loss, liability or expense to be incurred in compliance with such request which
is reasonably satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of satisfactory indemnity or security; and
(5) during such 45-day period the Holders of a majority in principal amount
of the outstanding Securities do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS OF SECURITIES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, and premium and
Additional Interest, if any, on the Security, on or after the respective due
dates expressed in the Security (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(1) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, and premium and accrued Additional Interest, if any, remaining
unpaid on the Securities and interest on overdue principal and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company (or any
other obligor upon the Securities), its creditors or its property, and shall be
entitled and empowered to collect, receive and distribute any monies or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, any other amounts due the Trustee under Section
7.07. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
Except as otherwise required pursuant to the terms of the Intercreditor
Agreement, if the Trustee collects any money pursuant to this article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: if the Holders are forced to proceed against the Company directly
without the Trustee, to Holders for their collection costs;
Third: to Holders of Securities for amounts due and unpaid on the
Securities for principal, and premium and Additional Interest, if any, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Securities for principal, and premium and Additional Interest, if
any, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
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The Trustee may fix a record date and payment date for any payment to
Holders of Securities pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Security pursuant to
Section 6.07, or a suit by Holders of more than 10% in principal amount of the
then outstanding Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default actually known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in its exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under this Indenture at the request of any of the Holders of
the Securities, unless they shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
(b) Except during the continuance of a Default or an Event of Default
actually known to the Trustee:
(1) The Trustee and the Agents need perform only those duties as are
specifically set forth in this Indenture or the TIA and no duties,
covenants, responsibilities or obligations shall be implied in this
Indenture that are adverse to the Trustee or the Agents.
(2) In the absence of bad faith on its part, the Trustee or any Agent
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates (including
Officers' Certificates) or opinions (including Opinions of Counsel)
furnished to the Trustee or any Agent and conforming to the requirements of
this Indenture. However, as to any certificates or opinions which are
required by any provision of this Indenture to be delivered or provided to
the Trustee or any Agent, the
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Trustee or such Agent shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture, but not to verify the contents thereof.
(c) Notwithstanding anything to the contrary herein contained, the Trustee
may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) Neither the Trustee nor any Agent shall be liable for any error of
judgment made in good faith by a Trust Officer (or an officer of the
Agent), unless it is proved that the Trustee or such Agent was negligent in
ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee or any Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of such
funds is not assured to it or it does not receive an indemnity satisfactory to
it in its sole discretion against such risk, liability, loss, fee or expense
which might be incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee or any Agent is subject to paragraphs (a), (b), (c) and (d) of this
Section 7.01.
(f) Neither the Trustee nor any Agent shall be liable for interest on any
money or assets received by it except as the Trustee or any such Agent may agree
in writing with the Company. Assets held in trust by the Trustee or any Agent
need not be segregated from other assets except to the extent required by law.
(g) In the absence of bad faith, negligence or wilful misconduct on the
part of the Trustee, the Trustee shall not be responsible for the application of
any money by any Paying Agent other than the Trustee.
(h) Any provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.01 and, upon qualification of this Indenture under
TIA, TIA (S) 315.
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SECTION 7.02 RIGHTS OF TRUSTEE AND EACH AGENT.
Subject to Section 7.01:
(a) The Trustee and each Agent may request and rely conclusively and shall
be fully protected in acting or refraining from acting upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. Neither the Trustee nor any Agent need investigate any fact or matter
stated in the document.
(b) Before the Trustee or any Agent acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.04 and 11.05. Neither the Trustee
nor any Agent shall be liable for and shall be fully protected in respect of any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee and any Agent may act through their attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
(other than an agent who is an employee of the Trustee or such Agent) or
attorney appointed with due care.
(d) Neither the Trustee nor any Agent shall be liable for any action that
it takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers conferred upon it by this Indenture;
provided, however, that the Trustee's conduct does not constitute willful
misconduct, negligence or bad faith.
(e) Neither the Trustee nor any Agent shall be bound to make any
investigation into the facts or matters stated in any resolution, certificate
(including any Officers' Certificate), statement, instrument, opinion (including
any Opinion of Counsel), notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee or an Agent, in their
discretion, may make such further inquiry or investigation into such facts or
matters as they may see fit and, if the Trustee or any Agent shall determine to
make such further inquiry or investigation, they shall be entitled, upon
reasonable notice to the Company, to examine the books, records, and premises of
the Company, personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders of the Securities pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred by it in compliance with such request, order or direction.
(g) The Trustee or any Agent may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability with respect to any action taken,
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omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company, any Subsidiary of
the Company, or their respective Affiliates, with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
Trustee or resign. The Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04 DISCLAIMER OF TRUSTEE AND AGENTS.
Neither the Trustee nor any Agent makes any representation as to the
validity, effectiveness or adequacy of this Indenture, the Securities, the Unit
Agreement, the Pledge Agreements, the Intercreditor Agreement or any prospectus
or offering circular distributed in connection with the initial sale of the
Securities, and it shall not be accountable for the Company's use of the
proceeds from the Securities or any money paid to the Company or upon the
Company or upon the Company's direction under any provision of this Indenture,
the Trustee shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital of the Company in this Indenture, the
Securities other than the Trustee's certificate of authentication or any
document issued in connection with the sale of the Securities.
SECTION 7.05 NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to each Holder, as their
names and addresses appear on the Holder list described in Section 2.05, notice
of the uncured Default or Event of Default within 90 days after the Trustee
receives such notice. Except in the case of a Default or an Event of Default in
payment of principal of, or premium or Additional Interest on, any Security,
including an accelerated payment and the failure to make payment on the
Repurchase Date pursuant to a Change of Control Offer or an Asset Sale Offer,
and, except in the case of a failure to comply with Article Five, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders. The Trustee shall not be deemed to have knowledge of a Default
or Event of Default other than (i) any Event of Default occurring pursuant to
Section 6.01(1); or (ii) any Default or Event of Default of which a Trust
Officer shall have received written notification or obtained actual knowledge.
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SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after August 15 of each year beginning with August 15, 1997,
the Trustee shall, to the extent that any of the events described in TIA (S)
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be mailed
to the Company and filed with the SEC and each stock exchange, if any, on which
the Securities are listed.
The Company shall promptly notify the Trustee if the Securities become
listed on any stock exchange and the Trustee shall comply with TIA (S)
313(d).
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee and any Agent in their capacity as
such from time to time such compensation as may be agreed upon in writing by the
Company and the Trustee or such Agent. The Trustee's and the Agents'
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee and any Agent upon
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by them in connection with the performance of their duties and
the discharge of their obligations under this Indenture. Such expenses shall
include the reasonable fees and expenses of the Trustee's and Agents' agents and
counsel.
The Company shall indemnify the Trustee and the Agents and their agents,
employees, officers, stockholders and directors for, and hold them harmless
against, any loss, liability, damage, claim or expense incurred by them except
for such actions to the extent caused by any negligence, bad faith or willful
misconduct on their part, arising out of or in connection with the acceptance or
administration of this trust including the reasonable costs and expenses of
defending themselves against any claim or liability in connection with the
exercise or performance of any of their rights, powers or duties hereunder. The
Trustee and the Agents shall notify the Company promptly of any claim asserted
against the Trustee or any Agent for which indemnity may be sought; provided,
--------
however, that the failure to provide such notice shall not affect the right to
- -------
indemnity provided for herein. The Company shall defend the claim and the
Trustee and the Agents shall cooperate in the defense. The Trustee and the
Agents may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its written consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee or any Agent as a result of the
violation of this Indenture by the Trustee or such Agent or if such loss or
liability arose through its negligence, bad faith or willful misconduct.
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To secure the Company's payment obligations in this Section 7.07, the
Trustee and the Agents shall have a lien prior to the Securities on all assets
or money held or collected by the Trustee and the Agents, in their capacity as
Trustee or Agent, as the case may be, except assets or money held in trust to
pay principal of, or premium or Additional Interest on, particular Securities or
that constitute Collateral.
When the Trustee or an Agent incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) occurs, such expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for such services shall be preferred over the status of the Holders
in a proceeding under Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee or Agent, the discharge of the Company's obligations
pursuant to Article 8 and any rejection or termination under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the resignation or
removal of the Trustee or any Agent, the discharge of the Company's obligations
under Article Eight or any rejection or the termination of this Indenture under
any Bankruptcy Law or otherwise.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company in writing
at least 10 days in advance of such resignation. The Holders of a majority in
principal amount of the then outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee and may appoint a successor trustee with
the Company's consent. A resignation or removal of the Trustee and appointment
of a successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section. The Company may remove
the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order for relief is
entered with respect to the Trustee under any Bankruptcy Law;
(c) a receiver or other public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in
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principal amount of the Securities may, with the Company's consent, appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Promptly after that, the retiring
Trustee shall transfer, after payment of all sums then owing to the Trustee
pursuant to Section 7.07, all property held by it as Trustee to the successor
Trustee, subject to the lien provided in Section 7.07, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by a Holder who has been a Holder for
at least six months fails to comply with Section 7.10, any Holder may (at its
expense) petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another Person, the
resulting, surviving or transferee Person without any further act shall, if such
resulting, surviving or transferee Person is otherwise eligible hereunder, be
the successor Trustee; provided that such Person shall be otherwise qualified
and eligible under this Article Seven.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the requirement of
TIA (S)(S) 310(a)(1) and 310(a)(5). The Trustee (or in the case of a corporation
included in a bank holding company system, the related bank holding company)
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. In addition, if the
Trustee is a corporation included in a bank holding company system, the Trustee,
independently of such bank holding company, shall meet the capital requirements
of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S) 310(b); provided,
however, that there shall be excluded from the operation of TIA (S) 310(b)(1)
any indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding,
if the requirements for
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such exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S)
310 shall apply to the Company and any other obligor of the Securities.
SECTION 7.11 PREFERENTIAL COLLECTION OF
CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall apply to the Company and any other obligor of
the Securities.
SECTION 7.12 AUTHENTICATING AGENTS.
(a) The Trustee may appoint one or more Authenticating Agents which shall
be authorized to act on behalf of the Trustee in authenticating Securities.
Wherever reference is made in this Indenture to the authentication of Securities
by the Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent must be
acceptable to the Company and must be a corporation or financial institution
organized and doing business under the laws of the United States of America or
of any state and having a principal office and place of business in the Borough
of Manhattan, the City and State of New York, having a combined capital and
surplus of at least $15,000,000, authorized under such laws to engage in a trust
business and subject to supervision or examination by federal or state
authorities. The Trustee hereby appoints Bankers Trust Company as an
Authenticating Agent hereunder and Bankers Trust Company hereby accepts such
appointment.
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving at least 30
days' advance written notice of resignation to the Trustee and the Company. The
Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Company. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 7.12, the Trustee may appoint a
successor Authenticating Agent, shall give written notice of such appointment to
the Company and shall mail notice of such appointment (at the Company's expense)
to all Holders. Any successor Authenticating Agent upon
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acceptance of its appointment hereunder shall become vested with all the rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent. No such Authenticating
Agent shall be appointed unless eligible under the provisions of this Section
7.12. Any Authenticating Agent shall be entitled to reasonable compensation for
its services and, if paid by the Trustee, it shall be a reimbursable expense
pursuant to Section 7.07.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE
OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
Board Resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 be applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 of the option applicable to
this Section 8.02, the Company shall, subject to the satisfaction of the
conditions set forth in Section 8.04, be deemed to have been discharged from its
obligations with respect to all outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
Section 8.04, and as more fully set forth in such Section, payments in respect
of the principal of, and premium and Additional Interest, if any, on such
Securities when such payments are due from the funds held by the Trustee in the
trust, (b) the Company's obligations with respect to such Securities under
Sections 2.03, 2.04 through and including 2.11, 2.13, 2.14 and 2.15 and 4.02
hereof, (c) the rights, powers, trust, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article Eight. Subject to compliance with this Article Eight, the Company may
exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
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SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the
outstanding Securities on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Securities shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding
securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01, but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01, of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04, Sections 6.01(2)
through 6.01(5) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfy the requirements of
Section 7.10 who shall agree to comply with the provisions of this Article
Eight applicable to it) or the Paying Agent on behalf of the Trustee as
trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders, cash in United States dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants selected by the Company, to pay the principal of, and
premium and Additional Interest, if any, on the outstanding Securities on
the stated maturity for payment thereof or on the applicable Repurchase
Date, as the case may be;
(b) in the case of an election under Section 8.02, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee
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confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
of this Indenture, there has been a change in the applicable U.S. federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the outstanding
Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such Legal Defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or would occur as a consequence
therefor, or insofar as Sections 6.01(6) or 6.01(7) are concerned, at any
time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States to the effect that, as of the date of such
opinion, the trust funds will not be subject to the effect of any
applicable Bankruptcy Law, and that the Trustee has a perfected security
interest in such trust funds for the ratable benefit of the Holders;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
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SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") or the
Paying Agent on behalf of the Trustee pursuant to Section 8.04 in respect of the
outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of all sums due and to become due thereon in respect
of principal and premium and Additional Interest, if any, on such Securities.
Such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Securities.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a)), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money held by the Trustee or any Paying Agent under this Article Eight,
in trust for the payment of the principal of, or premium and Additional
Interest, if any, on any Security and remaining unclaimed for two years after
such principal, and premium and Additional Interest, if any, has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as a secured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment which exceeds $1,000,000, may
at the expense of the Company cause to be published once, in the New York Times
and The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
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SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent
is permitted to apply all such money or Government Securities in accordance with
Section 8.02 or 8.03, as the case may be; provided, however, that, if the
Company makes any payment of principal of, or premium or Additional Interest, if
any, or interest on any Security following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 9.02 of this Indenture, the Company, when
authorized by a Board Resolution, the Trustee and the Collateral Agent, as
applicable, together, may amend or supplement this Indenture, the Pledge
Agreements, the Intercreditor Agreement or the Securities without notice to or
consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that such
amendment or supplement does not, in the opinion of the Trustee, adversely
affect the rights of any of the Holders in any material respect;
(2) to provide for uncertificated Securities in addition to or in place of
certificated Securities;
(3) to provide for the assumption of the Company's obligations to Holders
of the Securities in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets pursuant to Article Five hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders of the Securities or that does not adversely affect the
legal rights under this Indenture, the Securities, the Pledge Agreements or the
Intercreditor Agreement of any such Holder;
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(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA; and
(6) to provide for the issuance of the Exchange Securities (which will
have terms identical in all material respects to the Securities issued on the
Issue Date except that the transfer restrictions contained in the Securities
issued on the Issue Date will be modified or eliminated, as appropriate), and
which will be treated together with any outstanding Securities issued on the
Issue Date, as a single issue of Securities;
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02 WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, together with the Trustee and the Collateral Agent, as applicable,
with the written consent of the Holder or Holders of at least a majority in
principal amount of the outstanding Securities may amend or supplement this
Indenture, the Pledge Agreements, the Intercreditor Agreement or the Securities,
without notice to any other Holders. Subject to Sections 6.04 and 6.07, the
Holder or Holders of a majority in aggregate principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture, the Pledge Agreements, the Intercreditor Agreement or the Securities
without notice to any other Holders.
No amendment, supplement or waiver, including a waiver pursuant to Section
6.04, shall, directly or indirectly, without the consent of each Holder of each
Security affected thereby:
(1) reduce the principal amount of the Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Security;
(3) reduce the rate of accretion on any Security;
(4) reduce the repurchase price of or change the time at which the
Securities must be repurchased by the Company upon a Change of Control or Asset
Sale or otherwise amend in any material respect (including through amendment of
any of the definitions relating thereto) or waive the Company's obligation to
make and consummate a Change of Control Offer in the event of a Change of
Control or an Asset Sale Offer in the event of an Asset Sale.
(5) waive a Default or Event of Default in the payment of principal of, or
premium or Additional Interest, if any, on the Securities (except that Holders
of at least a majority in aggregate
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principal amount of the then outstanding Securities may (a) rescind an
acceleration of the Securities that resulted from a non-payment default, and (b)
waive the payment default that resulted from such acceleration);
(6) make any Security payable in money other than that stated in the
Securities;
(7) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal of, or premium and Additional Interest, if any, on the
Securities;
(8) make any change or modification to this Indenture, the Pledge
Agreements or the Intercreditor Agreement, or take or fail to take any action,
that would have the effect of impairing the Lien on the Collateral granted
pursuant to the Pledge Agreements or permitting any release of Collateral from
such Lien except as expressly contemplated by this Indenture, the Pledge
Agreements or the Intercreditor Agreement;
(9) make any changes in Section 6.04 or 6.07 hereof; or
(10) make any change in the foregoing amendment and waiver provisions.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective (as provided in Section 9.04), the Company shall mail to the Holders
affected thereby a notice briefly describing the amendment, supplement or
waiver.
SECTION 9.03 COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent to it
by a Holder is a continuing consent by the Holder and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of his Security by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented
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(and not theretofore revoked such consent) to the amendment, supplement or
waiver (at which time such amendment, supplement or waiver shall become
effective).
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (1) through
(10) of Section 9.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security; provided that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of, or premium
or Additional Interest on, a Security on or after the respective due dates
expressed in such Security, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determine, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to and adopted in accordance with this Article Nine; provided that the
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture. The Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate each stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
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ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.01. PLEDGE AGREEMENT.
(a) As general and continuing security for the due repayment and
satisfaction of all present and future indebtedness, liabilities and obligations
of any kind whatsoever, under, in connection with or relating to this Indenture,
including without limitation, the Securities and any ultimate unpaid balance
thereof and to secure the due performance of all of the other present and future
obligations of the Company to the Trustee (including obligations under Section
7.07 hereof) and the Holders under this Indenture and the Securities, (i) the
Company for all purposes, has entered into the Company Pledge Agreement and
pledged the Company Collateral and (ii) IWC has undertaken to enter into an
Intermediate Holding Company Pledge Agreement prior to forming or acquiring any
interest in a Domestic Intermediate Holding Company, pursuant to which it will
pledge the IWC Collateral relating to such Domestic Intermediate Holding
Company.
(b) The Company covenants and agrees that it has full right, power and
lawful authority to grant, bargain, sell, release, convey, hypothecate, assign,
pledge, transfer and confirm the property constituting the Company Collateral,
in the manner and form done in the Company Pledge Agreement, or intended to be
done, free and clear of all Liens whatsoever (other than the equal and ratable
Liens of lenders under a Permitted Bank Facility, as set forth in the Company
Pledge Agreement), and that (i) it will forever warrant and defend the title to
the same against the claims of all persons whatsoever, (ii) it will execute,
acknowledge and deliver to the Trustee and the Collateral Agent such further
assignments, transfers, assurances or other instruments as the Trustee or the
Collateral Agent may require or request, and (iii) it will do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the Trustee or the Collateral Agent, to assume and confirm to the
Trustee and the Collateral Agent the Company Collateral, or any part thereof, as
from time to time constituted, so as to render the same available for the
security and benefit of the Company Pledge Agreement, this Indenture and of the
Securities. The Company further covenants and agrees that the Company Pledge
Agreement creates or will create, as the case may be, a direct and valid first-
ranking security interest (subject to the equal and ratable Liens of lenders
under a Permitted Bank Facility, as set forth in the Company Pledge Agreement)
on the Company Collateral subject thereto.
SECTION 10.02. RECORDING AND OPINIONS.
(a) The Company shall furnish to the Trustee and the Collateral Agent
simultaneously with the execution and delivery of this Indenture and the
execution of any Pledge Agreement an Opinion of Counsel either (i) stating that
in the opinion of such counsel all action has been taken with respect to the
recording, registering and filing of this Indenture, the Pledge Agreements,
financing statements or other instruments necessary to make enforceable and
perfected the Lien
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intended to be created by the Pledge Agreement, and reciting with respect to the
security interests in the Collateral, the details of such action, or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
make such Lien enforceable and perfected.
(b) The Company shall furnish to the Collateral Agent and the Trustee
within three months after each anniversary of the date of this Indenture, an
Opinion of Counsel, dated as of such date, either (i)(A) stating that, in the
opinion of such counsel, action has been taken with respect to the recording,
registering, filing, re-recording, re-registering and refiling of all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of the
Pledge Agreements and reciting with respect to the security interests in the
Collateral the details of such action or referring to prior Opinions of Counsel
in which such details are given, (B) stating that, based on relevant laws as in
effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders of Securities and the Collateral Agent and the Trustee hereunder
and under the Pledge Agreements, with respect to the security interests in the
Collateral, or (ii) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Lien.
(c) The Company shall otherwise comply with the provisions of TIA
(S)314(b).
SECTION 10.03. RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03,
Collateral may be released from the Lien and security interest created by the
Pledge Agreements at any time or from time to time in accordance with the
provisions of the Pledge Agreements or as provided hereby.
(b) No Collateral shall be released from the Lien and security interest
created by the Pledge Agreements pursuant to the provisions of the Pledge
Agreements unless there shall have been delivered to the Collateral Agent and
the Trustee an Officers' Certificate certifying that all conditions precedent
hereunder have been met. Upon receipt of such Officers' Certificate, the Trustee
shall direct the Collateral Agent to execute, deliver or acknowledge any
necessary or proper instruments of termination, satisfaction or release to
evidence the release of any Collateral permitted to be released pursuant to this
Indenture or the Pledge Agreements.
(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Securities shall have been accelerated
(whether by declaration or otherwise) and the Trustee shall have delivered a
notice of acceleration to the Collateral Agent, no release of Collateral
pursuant to the provisions of the Pledge Agreements shall be effective as
against the Holders of Securities.
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(d) The release of any Collateral from the terms of this Indenture and the
Pledge Agreements shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms hereof or of the Pledge Agreements.
To the extent applicable, the Company shall cause TIA (S)313(b), relating to
reports, and TIA (S)314(d), relating to the release of property or securities
from the Lien and security interest of the Pledge Agreements and relating to the
substitution therefor of any property or securities to be subjected to the Lien
and security interest of the Pledge Agreements, to be complied with. Any
certificate or opinion required by TIA (S)314(d) may be made by an Officer of
the Company except in cases where TIA (S)314(d) requires that such certificate
or opinion be made by an independent Person, which Person shall be an
independent engineer, appraiser or other expert selected or approved by the
Trustee and the Collateral Agent in the exercise of reasonable care.
SECTION 10.04. CERTIFICATES OF THE COMPANY.
(a) The Company shall furnish to the Trustee and the Collateral Agent,
prior to each proposed release of Collateral pursuant to the Pledge Agreements,
(i) all documents required by TIA(S)314(d) and (ii) an Opinion of Counsel to the
effect that such accompanying documents constitute all documents required by TIA
(S)314(d). The Trustee may, to the extent permitted by Sections 7.01 and 7.02
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
SECTION 10.05. CERTIFICATES OF THE TRUSTEE.
In the event that the Company wishes to release Collateral in accordance
with the Pledge Agreements and has delivered the certificates and documents
required by the Pledge Agreements and Sections 10.03 and 10.04 hereof, the
Trustee shall determine whether it has received all documentation required by
TIA (S)314(d) in connection with such release and, based on such determination
and the Opinion of Counsel delivered pursuant to Section 10.04(b), shall deliver
a certificate to the Collateral Agent setting forth such determination and
instructions to release such Collateral.
SECTION 10.06. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER
THE PLEDGE AGREEMENT.
Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee may,
in its sole discretion and without the consent of the Holders of Securities,
direct, on behalf of the Holders of Securities, the Collateral Agent to take all
actions it deems necessary or appropriate in order to (a) enforce any of the
terms of the Pledge Agreements and (b) collect and receive any and all amounts
payable in respect of the Obligations of the Company hereunder. The Trustee
shall have the power to institute and maintain such suits and proceedings as it
may deem expedient to prevent any impairment of the Collateral by any acts that
may be unlawful or in violation of the Pledge Agreements or this Indenture, and
such suits and proceedings as the Trustee may deem expedient
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to preserve or protect its interests and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Holders or of the Trustee).
SECTION 10.07. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
PLEDGE AGREEMENT.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Securities distributed under the Pledge Agreements, and to make
further distributions of such funds to the Holders of Securities according to
the provisions of this Indenture.
SECTION 10.08. TERMINATION OF SECURITY INTEREST.
Upon payment in full of all Obligations of the Company under this Indenture
and the Securities, or upon Legal Defeasance, the Trustee shall, at the request
of the Company, deliver a certificate to the Collateral Agent stating that such
Obligations have been paid in full, and instruct the Collateral Agent to release
the Liens pursuant to this Indenture and the Pledge Agreements.
SECTION 10.09. INTERCREDITOR AGREEMENT.
In the event the Company enters into a Permitted Bank Facility, the Trustee
is authorized to enter into the Intercreditor Agreement and take all actions
provided for therein. The Trustee is further authorized to receive in its own
name or through any Collateral Agent any funds for the benefit of the Holders
distributed under the Pledge Agreements and any Intercreditor Agreement, and to
make further distributions of such funds to the Holders according to the
provisions of this Indenture.
ARTICLE 11
McISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
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SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail,
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company:
International Wireless Communications Holdings, Inc.
400 South El Camino Real
Suite 1275
San Mateo, California 94402
Attention: Chief Financial Officer
With a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
600 Hansen Way
Second Floor
Palo Alto, California 94304
Attention: Brooks Stough
If to the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Services-IWC
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to the Trustee) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery. Notices and
communications to the Trustee shall be deemed to have been given only upon
receipt.
Any notice or communication to a Holder shall be mailed by first class
mail, or by overnight air courier guaranteeing next day delivery to its address
shown on the register kept by the Registrar. Any notice or communication shall
also be so mailed to any Person described in TIA (S)313(c), to the
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extent required by the TIA. Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
If a notice or communication (other than to the Trustee) is mailed in the
manner provided above within the time prescribed, it is duly given, whether or
not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF SECURITIES WITH OTHER HOLDERS OF
SECURITIES.
Holders may communicate pursuant to TIA (S)312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA
(S)312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S)314(a)(4)) shall comply with the provisions of TIA (S)314(e)
and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Securities, this Indenture or the Pledge
Agreements or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Securities.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE SECURITIES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any
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way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
Table of Contents, Cross-Reference Table and Headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference only,
and are not to be considered a part of this Indenture and shall in no way modify
or restrict any of the terms or provisions hereof.
SECTION 11.14. LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made on the next
succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
[Signatures on following page]
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first above written.
Dated: 8/15/96 INTERNATIONAL WIRELESS
---------
COMMUNICATIONS HOLDINGS, INC.
By: /s/ Douglas S. Sinclair
--------------------------------------
Name: Douglas S. Sinclair
Title: Executive Vice President and
Chief Financial Officer
Dated: 8/15/96 MARINE MIDLAND BANK
---------
By: /s/ JAMES D. NESCI
--------------------------------------
Name: JAMES D.NESCI
Title: CORPORATE TRUST OFFICER
<PAGE>
EXHIBIT A-1
[FORM OF INITIAL SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS SECURITY OR THE LAST DATE ON WHICH INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC. (THE "COMPANY") OR ANY AFFILIATE (WITHIN THE
MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, OR ANY SUBSIDIARY THEREOF, (B)
FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT, TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) TO NON-U.S. PERSONS OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE UNIT
AGENT, IN THE CASE OF ANY TRANSFER OF UNITS, THE REGISTRAR, IN THE CASE OF ANY
TRANSFER OF THIS SECURITY AND THE WARRANT AGENT, IN THE CASE OF ANY TRANSFER OF
THE WARRANTS, A SIGNED LETTER (THE FORM OF WHICH LETTER (WHICH IS AN EXHIBIT TO
THE INDENTURE GOVERNING THIS SECURITY) CAN BE OBTAINED FROM THE UNIT AGENT, THE
REGISTRAR OR THE WARRANT AGENT, AS APPLICABLE) CERTIFYING TO THE COMPANY AND
SUCH AGENT OR REGISTRAR THAT SUCH TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR AND IS ACQUIRING SUCH SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, THE HOLDER SHALL, PRIOR TO
SUCH
A-1-i
<PAGE>
TRANSFER, FURNISH TO THE UNIT AGENT, THE REGISTRAR OR THE WARRANT AGENT, AS
APPLICABLE, AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSONS" HAVE THE MEANINGS
GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT." THE ISSUE PRICE IS
$354.32 FOR EACH $1,000 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE DISCOUNT
IS $645.68 OF STATED PRINCIPAL AMOUNT. THE ISSUE DATE IS AUGUST 15, 1996. THE
YIELD TO MATURITY IS 23.06%, COMPOUNDED SEMI-ANNUALLY .
UNTIL THE EARLIEST TO OCCUR OF (i) NOVEMBER 15, 1996, (ii) THE
OCCURRENCE OF AN EXERCISE EVENT (AS DEFINED IN THE WARRANT AGREEMENT REFERRED TO
IN THE INDENTURE GOVERNING THE SECURITIES EVIDENCED HEREBY), (iii) THE DATE A
REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR THE
SECURITIES OR A SHELF REGISTRATION STATEMENT FOR THE SECURITIES IS DECLARED
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (iv) SUCH EARLIER
DATE AS MAY BE DETERMINED BY THE INITIAL PURCHASERS (AS DEFINED IN THE INDENTURE
GOVERNING THE SECURITIES EVIDENCED HEREBY), THE SECURITIES EVIDENCED HEREBY MAY
NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS,
SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME
TRANSFEREE ONE WARRANT TO PURCHASE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. FOR EACH $1,000 PRINCIPAL
AMOUNT OF SECURITIES SO TRANSFERRED.
A-1-ii
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INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
14% SENIOR SECURED DISCOUNT NOTE DUE 2001
CUSIP No. __________
No. $__________
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC., a Delaware
corporation (the "Company"), for value received, promises to pay to
________________ or its registered assigns the principal sum of ___________
Dollars (which amount includes amortization of the original issue discount) on
August 15, 2001.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth in this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated: August 15, 1996
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
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<PAGE>
Trustee's Certificate of Authentication
Dated:_____________________
This is one of the
Securities referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK
as Trustee
By: Bankers Trust Company
as Authenticating Agent
By: __________________________
Authorized Signatory
A-1-iv
<PAGE>
(Reverse of Security)
14% Senior Secured Discount Note due 2001
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. METHOD OF PAYMENT. Amortization of the original issue discount
will accrue semi-annually at the rate of 14% per annum on the initial public
offering price of the Securities. Payment of the principal of, Additional
Interest or premium, if any, on the Securities or such lesser amount payable
upon the acceleration of the maturity of the Securities will include accrued
amortization of the original issue discount. Additional Interest shall be paid
as provided in the Registration Rights Agreement.
The Company shall pay, to the extent such payments are lawful, interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue principal, premium and Additional Interest from time to time on
demand at the rate borne by the Securities plus 2% per annum.
The Holder must surrender this Security to a Paying Agent to collect
payments. The principal of, and premium and Additional Interest, if any, on the
Securities will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment may be made by wire transfer to an account within the United
States or check mailed to the Holders of the Securities at their respective
addresses set forth in the register of Holders of Securities. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Paying Agent maintained for such purpose. All payment shall be
in coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
2. PAYING AGENT AND REGISTRAR. Initially, Bankers Trust Company will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company or any
of its subsidiaries may, subject to certain exceptions, act in any such
capacity.
3. INDENTURE AND PLEDGE AGREEMENTS. The Company issued the Securities
under an Indenture dated as of August 15, 1996 (the "Indenture") between the
Company and the Trustee. The terms of the Indenture include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S)77aaa-77bbbb). The
Securities are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies between the Indenture and the Securities. The
Securities are secured obligations of the Company limited to $196,720,000 in
aggregate principal amount at maturity. The Securities are secured by
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a pledge by the Company of (i) all of the Capital Stock and other Equity
Interests (if any) of IWC, (ii) a pledge by IWC of all of the Capital Stock and
other Equity Interests (if any) of any Domestic Intermediate Holding Company
which may be acquired by IWC from time to time, (iii) all intercompany notes
issued by IWC or any Intermediate Holding Company to the Company (if any) and by
any Domestic Intermediate Holding Company to IWC (if any), and (iv) proceeds of
any of the foregoing (the "Collateral") pursuant to the Pledge Agreements
referred to in the Indenture.
4. OPTIONAL REDEMPTION. The Securities are not redeemable at the
Company's option prior to maturity.
5. MANDATORY REDEMPTION. Except as set forth in paragraph 6 below,
the Company is not required to make mandatory redemption payments with
respect to the Securities.
6. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company will be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 in principal amount or an integral multiple thereof) of each Holder's
Securities at a purchase price in cash equal to 101% of the Accreted Value
thereof plus accrued Additional Interest, if any, to the date of repurchase.
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder setting forth the procedures governing the Change of Control
Offer as required by the Indenture. Holders may elect to have all or a portion
of their Securities purchased by completing the form entitled "Option of Holder
to Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales,
when the aggregate amount of Excess Proceeds exceeds $5 million, the Company
will commence an offer to all Holders of Securities (an "Asset Sale Offer") to
purchase the maximum principal amount of Securities that may be purchased out of
the Excess Proceeds at an offer price in cash in an amount equal to 100% of the
Accreted Value thereof plus accrued Additional Interest, if any, to the date of
repurchase. Holders of Securities that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company at least 20 Business Days
prior to any related purchase date and may elect to have all or a portion of
their Securities purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(c) Holders may elect to have all or a portion of their Securities
purchased by completing the form entitled "Option of Holder to Elect Purchase"
appearing below.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate
A-1-vi
<PAGE>
endorsements and transfer documents and the Company may require a Holder to
pay any taxes and fees required by law or permitted by the Indenture.
8. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
9. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Securities, and any existing default or compliance with any
provision of the Indenture or the Securities may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Securities. Without the consent of any Holder of a Security, the Indenture or
the Securities may be amended or supplemented to, among other things, cure any
ambiguity, defect or inconsistency, to provide for uncertificated Securities in
addition to or in place of certificated Securities, to provide for the
assumption of the Company's obligations to Holders of the Securities in case of
a merger, consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the Holders of the Securities or that does not adversely affect the legal
rights under the Indenture of any such Holder, to provide for the issuance of
Exchange Securities or to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
10. DEFAULTS AND REMEDIES. Events of Default include: (i) default in
payment when due of principal or the Accreted Value (as applicable) of the
Securities when the same becomes due and payable at maturity, upon acceleration,
repurchase or otherwise, (ii) failure by the Company to comply with any of the
provisions of Sections 4.07, 4.09, 4.10, 4.15, 4.16 or 5.01 of the Indenture;
(iii) failure by the Company for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in principal amount of the Securities
then outstanding to comply with certain other agreements in the Indenture or the
Securities; (iv) default under certain other agreements relating to certain
Indebtedness of the Company which default results in the acceleration of such
Indebtedness prior to its express maturity; (v) certain final judgments for the
payment of money that remain undischarged for a period of 60 days; (vi) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Restricted Subsidiaries; and (viii) the breach of any material
representation, warranty or agreement set forth in the Pledge Agreements, or a
default by the Company or IWC in the performance of any covenant set forth in
the Pledge Agreements, or a repudiation by the Company or IWC of its obligations
under the Pledge Agreements or any substantive provision of the Pledge
Agreements being held in any judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare all the
Securities to be due and payable. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Securities will become due and payable without further action or
notice. Holders may not enforce the Indenture or the Securities except as
provided
A-1-vii
<PAGE>
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has been offered indemnity or security reasonably
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Securities may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or premium) if
it determines in good faith that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Securities then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Securities waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal of, or premium or Additional Interest, if any, on the
Securities when due, or in respect of a covenant or provision which cannot be
amended or modified without the consent of all Holders. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
11. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may become the owner or pledgee of Securities or make
loans to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not the Trustee.
12. UNCLAIMED MONEY. If money for the payment of principal, premium or
Additional Interest or interest remains unclaimed for two years, the Trustee
and the Paying Agent will pay the money back to the Company. After that, all
liability of the Trustee and such Paying Agent with respect to such money
shall cease.
13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Equity
Interests or certain Investments, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Restricted Subsidiaries
and merge or consolidate with any other Person, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its assets or adopt a
plan of liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
14. The Indenture contains provisions (which provisions apply to this
Security) which provide that the Company will be discharged from certain
obligations in respect of the Securities and the Indenture upon compliance by
the Company with certain conditions set forth therein.
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Securities and
the Indenture, the predecessor will be released from those obligations.
A-1-viii
<PAGE>
16. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder, of the Company or any of its
Subsidiaries, as such, shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
17. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. GOVERNING LAW. The laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of laws.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COMM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TN (=joint tenants with right of
survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A
(=Uniform Gifts to Minors Act).
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. REGISTRATION RIGHTS. Pursuant to the Registration Rights Agreement
among the Company and the Initial Purchasers on behalf of the Holders, the
Company will be obligated to consummate an exchange offer pursuant to which the
Holder of this Security shall have the right to exchange this Security for the
Company's 14% Senior Secured Discount Note due 2001 (the "Exchange Securities")
which have been registered under the Securities Act, in like principal amount
and having terms identical in all material respects (other than certain transfer
restrictions) as the Securities issued on the Issue Date. The Holders of the
Securities shall be entitled to receive certain additional interest payments in
the event such exchange offer is not consummated and upon the terms of the
Registration Rights Agreement. Additional Interest which may be payable pursuant
to and in accordance with the terms of the Registration Rights Agreement.
Additional Interest which may be payable pursuant to the Registration Rights
Agreement shall be payable as set forth therein. The provision of the
Registration Rights Agreement relating to such Additional Interest are
incorporated herein by reference and made a part hereof as if set forth herein
in full.
A-1-ix
<PAGE>
22. INDENTURE. Each Holder, by accepting a Security, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time. Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
International Wireless Communications Holdings, Inc.
400 South El Camino Real
Suite 1275
San Mateo, California 94402
Attention: Chief Financial Officer
A-1-x
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) August 15, 1999, the undersigned confirms that it has not
utilized and general solicitation or general advertising in connection with the
transfer and that:
[Check One]
---------
[_] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
[_] (b) this Security is being transferred pursuant to Rule 904 under the
Securities Act and documents are being furnished which comply
with the conditions of transfer set forth in this Security and
the Indenture.
[_] (c) this Security is being transferred other than in accordance with (a)
or (b) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
A-1-xi
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the name of any person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.15 of the Indenture shall have
been satisfied.
Date: ____________________
Your Signature:____________________________________
(Sign exactly as your names appears
on the face of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Registrar)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants to the Company, the Registrar
and the Trustee that it is purchasing this Security for its own account or an
account with respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Date:__________________________ ______________________________________________
NOTICE: to be executed by an executive
officer
A-1-xii
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box:
Section 4.10 [_]
Section 4.15 [_]
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, state the amount (in even
multiples of $1,000) you wish to have purchased:
US$_____________
Date:___________________________ Your Signature:___________________________
(sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee: ________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Registrar)
A-1-xiii
<PAGE>
EXHIBIT A-2
[FORM OF EXCHANGE SECURITY]
THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE ISSUE PRICE IS
$354.32 FOR EACH $1,000 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE DISCOUNT
IS $645.68 OF STATED PRINCIPAL AMOUNT. THE ISSUE DATE IS AUGUST 15, 1996. THE
YEILD TO MATURITY IS 23.06%, COMPOUNDED SEMI-ANNUALLY.
UNTIL THE EARLIEST TO OCCUR OF (i) NOVEMBER 15, 1996, (ii) THE OCCURRENCE
OF AN EXERCISE EVENT (AS DEFINED IN THE WARRANT AGREEMENT REFERRED TO IN THE
INDENTURE GOVERNING THE SECURITIES EVIDENCED HEREBY), (iii) THE DATE A
REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR THE
SECURITIES OR A SHELF REGISTRATION STATEMENT FOR THE SECURITIES IS DECLARED
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (iv) SUCH EARLIER
DATE AS MAY BE DETERMINED BY THE INITIAL PURCHASERS (AS DEFINED IN THE INDENTURE
GOVERNING THE SECURITIES EVIDENCED HEREBY), THE SECURITIES EVIDENCED HEREBY MAY
NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS,
SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME
TRANSFEREE ONE WARRANT TO PURCHASE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. FOR EACH $1,000 PRINCIPAL
AMOUNT OF SECURITIES SO TRANSFERRED.
A-2-i
<PAGE>
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
14% SENIOR SECURED DISCOUNT NOTE DUE 2001
CUSIP No. __________
No. $__________
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC., a Delaware
corporation (the "Company"), for value received, promises to pay to
________________ or its registered assigns the principal sum of ___________
Dollars (which amount includes amortization of the original issue discount) on
August 15, 2001.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth in this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated: August 15, 1996
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
A-2-i
<PAGE>
Trustee's Certificate of Authentication
Dated: ______________
This is one of the
Securities referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK
as Trustee
By: Bankers Trust Company
as Authenticating Agent
By: ________________________
Authorized Signatory
A-2-ii
<PAGE>
(Reverse of Security)
14% Senior Secured Discount Note due 2001
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. METHOD OF PAYMENT. Amortization of the original issue discount will
accrue semi-annually at the rate of 14% per annum on the initial public offering
price of the Securities. Payment of the principal of, or premium or Additional
Interest, if any, on the Securities or such lesser amount payable upon the
acceleration of the maturity of the Securities will include accrued amortization
of the original issue discount. Additional Interest shall be paid as provided in
the Registration Rights Agreement.
The Company shall pay, to the extent such payments are lawful, interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal, premium and Additional Interest from time to time on demand
at the rate borne by the Securities plus 2% per annum.
The Holder must surrender this Security to a Paying Agent to collect
payments. The principal of, and premium and Additional Interest, if any, on the
Securities will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment may be made by wire transfer to an account within the United
States or check mailed to the Holders of the Securities at their respective
addresses set forth in the register of Holders of Securities. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Paying Agent maintained for such purpose. All payment shall be
in coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
2. PAYING AGENT AND REGISTRAR. Initially, Bankers Trust Company will act
as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company or any
of its subsidiaries may, subject to certain exceptions, act in any such
capacity.
3. INDENTURE AND PLEDGE AGREEMENT. The Company issued the Securities
under an Indenture dated as of August 15, 1996 (the "Indenture") between the
Company and the Trustee. The terms of the Indenture include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S)77aaa-77bbbb). The
Securities are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies between the Indenture and the Securities. The
Securities are secured obligations of the Company limited to $196,720,000 in
aggregate principal amount at maturity.
A-2-iii
<PAGE>
The Securities are secured by a pledge by the Company of (i) all of the Capital
Stock and other Equity Interests (if any) of IWC, (ii) a pledge by IWC of all of
the Capital Stock and other Equity Interests (if any) of any Domestic
Intermediate Holding Company which may be acquired by IWC from time to time,
(iii) all intercompany notes issued by IWC or any Intermediate Holding Company
to the Company (if any) and by any Domestic Intermediate Holding Company to IWC
(if any), and (iv) proceeds of any of the foregoing (the "Collateral") pursuant
to the Pledge Agreements referred to in the Indenture.
4. OPTIONAL REDEMPTION. The Securities are not redeemable at the
Company's option prior to maturity.
5. MANDATORY REDEMPTION. Except as set forth in paragraph 6 below, the
Company is not required to make mandatory redemption payments with respect to
the Securities.
6. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company will be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 in principal amount or an integral multiple thereof) of each Holder's
Securities at a purchase price in cash equal to 101% of the Accreted Value
thereof plus accrued Additional Interest, if any, to the date of repurchase.
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder setting forth the procedures governing the Change of Control
Offer as required by the Indenture. Holders may elect to have all or a portion
of their Securities purchased by completing the form entitled "Option of Holder
to Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales,
when the aggregate amount of Excess Proceeds exceeds $5 million, the Company
will commence an offer to all Holders of Securities (an "Asset Sale Offer") to
purchase the maximum principal amount of Securities that may be purchased out of
the Excess Proceeds at an offer price in cash in an amount equal to 100% of the
Accreted Value thereof plus accrued Additional Interest, if any, to the date of
repurchase. Holders of Securities that are the subject of an offer to purchase
will receive an Asset Sale Offer at least 20 Business Days from the Company
prior to any related purchase date and may elect to have all or a portion of
their Securities purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(c) Holders may elect to have all or a portion of their Securities
purchased by completing the form entitled "Option of Holder to Elect Purchase"
appearing below.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate
A-2-iv
<PAGE>
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture.
8. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
9. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Securities, and any existing default or compliance with any
provision of the Indenture or the Securities may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Securities. Without the consent of any Holder of a Security, the Indenture or
the Securities may be amended or supplemented to, among other things, cure any
ambiguity, defect or inconsistency, to provide for uncertificated Securities in
addition to or in place of certificated Securities, to provide for the
assumption of the Company's obligations to Holders of the Securities in case of
a merger, consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the Holders of the Securities or that does not adversely affect the legal
rights under the Indenture of any such Holder or to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
10. DEFAULTS AND REMEDIES. Events of Default include: (i) default in
payment when due of principal or the Accreted Value (as applicable) of the
Securities when the same becomes due and payable at maturity, upon acceleration,
repurchase or otherwise, (ii) failure by the Company to comply with any of the
provisions of Sections 4.07, 4.09, 4.10, 4.15, 4.16 or 5.01 of the Indenture;
(iii) failure by the Company for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in principal amount of the Securities
then outstanding to comply with certain other agreements in the Indenture or the
Securities; (iv) default under certain other agreements relating to certain
Indebtedness of the Company which default results in the acceleration of such
Indebtedness prior to its express maturity; (v) certain final judgments for the
payment of money that remain undischarged for a period of 60 days; (vi) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Restricted Subsidiaries; and (viii) the breach of any material
representation, warranty or agreement set forth in the Pledge Agreements, or a
default by the Company or IWC in the performance of any covenant set forth in
the Pledge Agreements, or a repudiation by the Company or IWC of its obligations
under the Pledge Agreements or any substantive provision of the Pledge
Agreements being held in any judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare all the
Securities to be due and payable. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Securities will become due and payable without further action or
notice. Holders may not enforce the Indenture
A-2-v
<PAGE>
or the Securities except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Securities unless it has been offered
indemnity or security reasonably satisfactory to it. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or premium) if it determines that in good faith withholding
notice is in their interest. The Holders of a majority in aggregate principal
amount of the Securities then outstanding by notice to the Trustee may on behalf
of the Holders of all of the Securities waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of principal of, or premium or Additional
Interest, if any, on the Securities when due, or in respect of a covenant or
provision which cannot be amended or modified without the consent of all
Holders. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
11. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities or make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not the
Trustee.
12. UNCLAIMED MONEY. If money for the payment of principal, premium or
Additional Interest remains unclaimed for two years, the Trustee and the Paying
Agent will pay the money back to the Company. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on
the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Equity
Interests or certain Investments, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Restricted Subsidiaries
and merge or consolidate with any other Person, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its assets or adopt a
plan of liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
14. The Indenture contains provisions (which provisions apply to this
Security) which provide that the Company will be discharged from certain
obligations in respect of the Securities and the Indenture upon compliance by
the Company with certain conditions set forth therein.
A-2-vi
<PAGE>
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Securities and the
Indenture, the predecessor will be released from those obligations.
16. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder, of the Company or any of its
Subsidiaries, as such, shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
17. AUTHENTICATION. This Security shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. GOVERNING LAW. The laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of laws.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COMM (=tenants in common), TEN ENT (=tenants
by the entireties), JT TN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. INDENTURE. Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture.
A-2-vii
<PAGE>
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
International Wireless Communications Holdings, Inc.
400 South El Camino Real
Suite 1275
San Mateo, California 94402
Attention: Chief Financial Officer
A-2-viii
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to :
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: ____________________
Your Signature:___________________________________
(Sign exactly as your names appears
on the face of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Registrar)
A-2-ix
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box:
Section 4.10 [ ]
Section 4.15 [ ]
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, state the amount (in even
multiples of $1,000) you wish to have purchased:
US$_____________
Date:___________________________ Your Signature:____________________________
(sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Registrar)
A-2-x
<PAGE>
================================================================================
EXHIBIT B
(FORM OF LEGEND FOR BOOK-ENTRY SECURITIES)
B-i
<PAGE>
EXHIBIT B
(Form of Legend for Book-Entry Securities)
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF THE DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IT IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OF OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-ii
<PAGE>
================================================================================
EXHIBIT C
(Form of Intercreditor and Collateral Agency Agreement)
C-i
<PAGE>
EXHIBIT C
---------
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
This Intercreditor and Collateral Agency Agreement (this "Agreement"),
dated as of the day of _______ 199_, is by and among Marine Midland Bank, as
trustee (the "Trustee"), under the Indenture, dated as of August __, 1996 (the
"Indenture"), between International Wireless Communications Holdings, Inc., a
Delaware corporation (the "Company"), and the Trustee, and ___________________,
as [agent (the "Agent")] [lender (the "Lender")] under ___________ (the "Bank
Facility"), and Bankers Trust Company, as Collateral Agent (as defined below).
All terms used herein which are defined in Section 1 hereof or in the text of
any other Section hereof shall have the meanings given therein. Capitalized
terms used but not defined herein shall have the meanings assigned thereto in
the Indenture.
1. Definitions.
-----------
For the purposes of this Agreement, the following terms shall have the
meanings specified with respect thereto below. Any plural term that is used
herein in the singular shall be taken to mean each entity or item of the defined
class and any singular term that is used herein in the plural shall be taken to
mean all of the entities or items of the defined class, collectively.
"Avoided Payments" shall mean any payment of any Secured Indebtedness
made to any Secured Party hereunder that is subsequently invalidated, declared
fraudulent or preferential, set aside or required to be paid to a trustee,
receiver, or any other party under any bankruptcy act, state or federal law,
common law or equitable cause.
"Collateral" shall mean all property and assets, and interests in
property and assets, upon or in which the Company has granted a lien or security
interest to the Collateral Agent or any Secured Party to secure any Secured
Indebtedness.
"Collateral Agent" shall mean Bankers Trust Company, in its capacity
as agent for the Secured Parties pursuant to this Agreement, or any successor or
replacement agent which may be appointed pursuant to this Agreement.
"Collateral Agent Expenses" shall mean all reasonable costs and
expenses incurred by the Collateral Agent under this Agreement and the Pledge
Agreements when acting with a good faith belief that its actions are not
contrary to the provisions of this Agreement, including in connection with the
realization upon or protection of the Collateral or enforcing or defending any
lien upon or security interest in the Collateral or any other action taken under
or in connection with this Agreement or the Pledge Agreements, reasonable
expenses incurred for legal counsel in connection with the foregoing, and any
other costs, expenses or liabilities incurred by the Collateral Agent for which
the Collateral Agent is entitled to be reimbursed or indemnified pursuant to
this Agreement or any Collateral Document.
C-i
<PAGE>
"Collateral Agent Obligations" shall mean, without duplication, all
obligations of the Company to pay, reimburse or indemnify the Collateral Agent
for any Collateral Agent Expenses.
"Collateral Documents" shall mean the Pledge Agreements, any other
agreement, document or instrument in effect on the date hereof or executed after
the date hereof under which the Company has granted a lien upon or security
interest in any property or assets to secure all or any part of the Secured
Indebtedness and all financing statements, certificates, documents and
instruments relating thereto or executed or provided in connection therewith,
each as amended, restated, supplemented or otherwise modified from time to time.
"Enforcement" shall mean (a) for any Secured Party or any holder of
Securities to make demand for payment of or accelerate the time for payment
prior to the scheduled payment date of any Secured Indebtedness, (b) for any
Secured Party or any holder of Securities to commence the judicial enforcement
of any rights or remedies under or with respect to any Financing Agreement or
any Secured Indebtedness, or to set-off or appropriate any balances held by it
for the account of the Company or any other property at any time held or owing
by it to or for the credit or for the account of the Company, (c) for the
Collateral Agent to commence the judicial enforcement of any rights or remedies
under any Collateral Document (other than an action solely for the purpose of
establishing or defending the lien or security interest intended to be created
by any Collateral Document upon or in any Collateral as against or from claims
of third parties on or in such Collateral), to set-off or appropriate any
balances held by it for the account of the Company or any other property at any
time held or owing by it to or for the credit or for the account of the Company
or to otherwise take any action to realize upon the Collateral, or (d) the
commencement by, against or with respect to the Company of any proceeding under
any bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law or for the
appointment of a receiver for the Company or its assets.
"Event of Default" shall mean an "Event of Default", as defined in any
Financing Agreement.
"Financing Agreements" shall mean the Indenture and [insert names of
documents governing the Bank Facility.]
"Lender(s)" shall mean the lenders under the Bank Facility.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, and a
government or any department or agency thereof.
"Refinanced Person" shall have the meaning given in Section 16(b).
"Refinancing Person" shall have the meaning given in Section 16(b).
C-ii
<PAGE>
"Repurchase Offer" shall have the meaning specified in
the Indenture.
"Required Secured Parties" at any time shall mean the holders of more
than 50% of the aggregate outstanding principal amount of the Securities and the
indebtedness outstanding under the Bank Facility.
"Requisite Lenders" shall have the meaning specified in (insert name
of applicable Financing Agreement relating to the Bank Facility); provided,
--------
however, that upon and after the day that is 91 days after the payment in full
- -------
of all obligations of the Company to the Lenders under (insert name of
applicable Financing Agreement), all requirements herein for the approval or
consent of the Requisite Lenders shall refer to the approval or consent of the
Trustee.
"Requisite Securityholders" at any time shall mean holders of
Securities (or, without duplication, the Trustee acting at the direction of
holders of Securities) representing, in the aggregate, more than 50% of the
aggregate outstanding principal amount of all Securities; provided, however,
-------- -------
that upon and after the day that is 91 days after the payment in full of all
obligations of the Company under the Indenture and the Securities to the Trustee
and the holders of the Securities, all requirements herein for the approval or
consent of the Requisite Securityholders shall refer to the approval or consent
of the Requisite Lenders.
"Secured Indebtedness" shall mean the Collateral Agent Obligations and
the indebtedness, liabilities and obligations of the Company under the Indenture
and the Securities to the Trustee and the holders from time to time of the
Securities and under a Financing Agreement relating to a Bank Facility to the
Lenders thereunder, and any agent for such Lenders, now or hereafter owed to any
Secured Party evidenced by or arising under, by virtue of or pursuant to the
Financing Agreements, the Securities, or the Collateral Documents, whether such
indebtedness, liabilities and obligations are direct or indirect, now exist or
hereafter arise, and all renewals and extensions thereof; provided, however,
-------- -------
that maximum amount of indebtedness, liabilities and obligations of the Company
to all Lenders under any Financing Agreements relating to the Bank Facility
shall not exceed $20 million (or such other amount permitted to be incurred by
the Company under the Indenture).
"Secured Parties" shall mean the Lender[s] and the Trustee, for itself
and on behalf of the holders of the Securities.
"Trustee" shall mean Marine Midland Bank in its capacity as trustee
under the Indenture, or any successor or replacement trustee that may be
appointed pursuant to the Indenture.
2. Appointment of Bankers Trust Company as Collateral Agent for the
----------------------------------------------------------------
Secured Parties.
---------------
(a) Appointment of Collateral Agent. Subject in all respects to the
-------------------------------
terms and provisions of this Agreement, the Secured Parties hereby appoint
Bankers Trust Company
C-iii
<PAGE>
to act as agent for the benefit of the Secured Parties with respect to the
liens upon and the security interests in the Collateral and the rights and
remedies granted under and pursuant to the Collateral Documents, and
Bankers Trust Company hereby accepts such appointment and agrees to act as
such agent. To the extent necessary or desirable to enable the Collateral
Agent to enforce or otherwise foreclose and realize upon any of the liens
or security interests in the Collateral in any legal proceeding which the
Collateral Agent either commences or joins as a party in accordance with
the terms hereof, each of the Secured Parties agrees to join as a party in
such proceeding and take such action therein to enforce and obtain a
judgment for the payment of the Secured Indebtedness held by it or as to
which it is the trustee, subject, in the case of the Trustee, to its right
to prior indemnity, and other provisions granting it rights not to take
action, under the Indenture.
(b) Duties of Collateral Agent. Subject to the Collateral Agent
--------------------------
having been directed to take such action in accordance with the terms of
this Agreement, each Secured Party hereby irrevocably authorizes the
Collateral Agent to take such action on its behalf under the provisions of
the Collateral Documents and any other instruments, documents and
agreements referred to therein and to exercise such powers thereunder as
are specifically delegated to the Collateral Agent by the terms thereof and
such other powers as are reasonably incidental thereto. Subject to the
provisions of Section 10 hereof, the Collateral Agent is hereby irrevocably
authorized to take all actions on behalf of the Secured Parties to enforce
the rights and remedies of the Collateral Agent and the Secured Parties
provided for in the Collateral Documents or by applicable law with respect
to the liens upon and security interests in the Collateral granted to
secure the Secured Indebtedness; provided, however, that, notwithstanding
-------- -------
any provision to the contrary herein or in any of the Collateral Documents,
(i) the Collateral Agent shall act at all times solely at and in accordance
with the written direction of the Required Secured Parties, (ii) the
Collateral Agent shall not, without the written consent of the Requisite
Lenders and the Requisite Securityholders, release or terminate by
affirmative action or consent any lien upon or security interest in any
Collateral granted under any Collateral Documents except (x) upon
dispositions of Collateral by the Company as permitted in accordance with
the terms of the Financing Agreements or the Collateral Documents prior to
the occurrence of an Event of Default (and, for this purpose, the
Collateral Agent (1) shall not be deemed to have knowledge of an Event of
Default unless the Collateral Agent has received notice thereof, and (2)
may rely, as to whether a disposition of Collateral is permitted by the
Financing Agreements or the Collateral Documents, upon a certificate signed
by the [Agent] [Lender], as to the Bank Facility, and the Trustee, as to
the Indenture, and any such certificate shall be full warranty by the
applicable Secured Party to the Collateral Agent as to the truth of the
matters certified to for any action taken by the Collateral Agent in
reasonable reliance thereon), and (y) upon disposition of such Collateral
after an Event of Default pursuant to direction given under clause (i)
hereof, and (iii) the Collateral Agent shall not accept any Secured
Indebtedness in whole or partial consideration for the disposition of any
Collateral. The Collateral Agent agrees to make such demands and give such
notices under the Collateral Documents as may be requested by, and to take
such action to enforce the Collateral Documents and to foreclose upon,
collect and dispose of the Collateral or any
C-iv
<PAGE>
portion thereof as may be directed by, the Required Secured Parties;
provided, however, that the Collateral Agent shall not be required to take
-----------------
any action (A) that is contrary to law or the terms of the Collateral
Documents, or this Agreement, or (B) if the Collateral Agent determines, in
good faith, that the potential Collateral Agent Expenses resulting from
such action are likely to exceed the amounts available for distribution to
the Collateral Agent pursuant to Section 5(a)(i) hereof, and so notifies
the Secured Parties giving the Collateral Agent the direction to take such
action, unless the Collateral Agent is provided adequate security and
indemnity against the Collateral Agent Expenses which may be incurred by it
in taking such action and complying with any such request or direction,
including such reasonable advances as may be requested by the Collateral
Agent.
(c) Requesting Instructions. The Collateral Agent may at any time
-----------------------
request directions from the Secured Parties as to any course of action or
other matter relating to the performance of its duties under this Agreement
or the Collateral Documents and the Secured Parties shall respond to such
request in a reasonably prompt manner. The Collateral Agent shall have the
right at any time to seek instructions concerning its obligations hereunder
from any court of competent jurisdiction.
(d) Emergency Actions. If the Collateral Agent has asked the Secured
-----------------
Parties for instructions following the receipt of any notice of an Event of
Default and if the Required Secured Parties have not responded to such
request within 30 days, the Collateral Agent may, but shall not be
obligated to, take such actions with regard to such Event of Default which
the Collateral Agent, in good faith, believes to be reasonably required to
protect the Collateral from damage or destruction; provided, however, that
-------- -------
once instructions have been received from the Required Secured Parties, the
actions of the Collateral Agent shall be governed thereby and the
Collateral Agent shall not take any further action which would be contrary
thereto.
(e) Document Amendments. No amendment, supplement, modification,
-------------------
restatement, or waiver of any provision of any Collateral Document or any
consent to any departure by the Company therefrom which could reasonably be
expected to adversely affect any of the Secured Parties' rights or
interests thereunder or with respect to any of the Collateral, or any of
the Collateral Agent's rights, immunities or indemnities hereunder or
thereunder or which could reasonably be expected to impose any additional
responsibilities upon any Secured Party or the Collateral Agent shall be
effective against such Person without the written consent of such Person
(in the case of any Secured Party, given in accordance with the applicable
Financing Agreements and Collateral Documents).
(f) Administrative Actions. The Collateral Agent may, but shall not
----------------------
be obligated to, take such actions hereunder and under the Collateral
Documents not inconsistent with the instructions of the Required Secured
Parties or the terms of the Collateral Documents, and this Agreement, as
the Collateral Agent deems necessary or appropriate to perfect or continue
the perfection of the liens on the Collateral for the benefit of the
Secured Parties.
C-v
<PAGE>
(g) Collateral Agent Acting Through Others. The Collateral Agent may
--------------------------------------
perform any of its duties under this Agreement and the Collateral Documents
by or through attorneys (which attorneys may be the same attorneys who
represent any Secured Party), agents or other persons reasonably deemed
appropriate by the Collateral Agent. In addition, the Collateral Agent may
act in good faith reliance upon the opinion or advice of attorneys,
accountants and other experts selected by the Collateral Agent, and any
action so taken in such good faith reliance shall be authorized and
protected. In all cases the Collateral Agent may pay customary and
reasonable compensation to all such attorneys, agents or other persons as
may be employed in connection with the performance of its duties under this
Agreement and the Collateral Documents.
(h) Resignation and Removal of Collateral Agent.
-------------------------------------------
(i) The Collateral Agent (A) may resign at any time upon
notice to the Secured Parties, (B) may be removed at any time upon the
written request of the Required Secured Parties sent to the Collateral
Agent and the other Secured Parties and (C) shall resign at any time
when it may not legally act as agent for the Secured Parties
hereunder.
(ii) If the Collateral Agent shall resign or be removed, the
Trustee shall have the right to select and appoint a replacement
Collateral Agent that meets the requirements of clause (v) below by
notice to the Collateral Agent and the other Secured Parties.
(iii) Upon any replacement of the Collateral Agent, the
Collateral Agent shall assign all of the liens upon and security
interests in all Collateral under the Collateral Documents, and all
right, title and interest of the Collateral Agent under all the
Collateral Documents, to the replacement Collateral Agent, without
recourse to the Collateral Agent or any Secured Party, and transfer
and pay over to the replacement Collateral Agent all moneys and other
properties held by the Collateral Agent hereunder, all at the expense
of the Company.
(iv) No resignation or removal of the Collateral Agent shall
become effective until a replacement Collateral Agent shall have been
selected as provided herein and shall have assumed in writing the
obligations of the Collateral Agent hereunder and under the Collateral
Documents. In the event that a replacement Collateral Agent shall not
have been selected and appointed as provided in clause (h)(ii) and
have assumed such obligations within 30 days after notice of the
resignation or removal of the Collateral Agent, then the Collateral
Agent may select and appoint for and on behalf of the Secured Parties
a replacement Collateral Agent so long as such replacement Collateral
Agent meets the requirements of clause (h)(v) or in its sole
discretion may apply to any court of competent jurisdiction to select
and appoint a successor Collateral Agent to act until such time, if
any, as a successor Collateral Agent shall have been selected and
appointed by the Trustee as provided
C-vi
<PAGE>
in clause (h)(ii). Any successor Collateral Agent appointed by the
Collateral Agent or such court as provided above shall immediately and
without further act be superseded by any successor Collateral Agent
appointed by the Trustee as provided in clause (h)(ii).
(v) Any replacement Collateral Agent shall be a bank, trust
company, or insurance company having capital, surplus and undivided
profits of at least $100 million, the replacement of the Collateral
Agent by such replacement Collateral Agent shall not violate any
provision of any applicable law or create a relationship which would
be in violation thereof, and, if such replacement Collateral Agent
shall have been selected by the Trustee pursuant to clause (ii) above
or by the Collateral Agent pursuant to clause (h)(iv), the fees
charged by such replacement Collateral Agent shall not be commercially
unreasonable.
(i) Indemnification of Collateral Agent. The Company, by its consent
-----------------------------------
hereto, hereby agrees to indemnify and hold the Collateral Agent, its
officers, directors, employees and agents (including, but not limited to,
any attorneys acting at the direction or on behalf of the Collateral Agent)
harmless against any and all costs, claims, damages, penalties,
liabilities, losses and expenses (including, but not limited to, court
costs and attorneys' fees) which may be incurred by or asserted against the
Collateral Agent or any such officers, directors, employees and agents by
reason of its status as agent hereunder or which pertain, whether directly
or indirectly, to this Agreement or the Collateral Documents, or to any
action or failure to act of the Collateral Agent as agent hereunder, except
to the extent any such action or failure to act by the Collateral Agent
constitutes gross negligence or willful misconduct. The obligations of the
Company under this Section 2(i) shall survive the payment in full of the
Secured Indebtedness and the termination of this Agreement.
(j) Liability of Collateral Agent. In the absence of gross negligence
-----------------------------
or willful misconduct, the Collateral Agent will not be liable to any
Secured Party for any action or failure to act or any error of judgment,
negligence, mistake or oversight on its part or on the part of any of its
officers, directors, employees or agents.
(k) No Reliance on Collateral Agent. Neither the Collateral
-------------------------------
Agent nor any of its officers, directors, employees or agents (including,
but not limited to, any attorneys acting at the direction or on behalf of
the Collateral Agent) shall be deemed to have made any representations or
warranties, express or implied, with respect to, nor shall the Collateral
Agent or any such officer, director, employee or agent be liable to any
Secured Party or responsible for (i) any warranties or recitals made by the
Company in the Collateral Documents or any other agreement, certificate,
instrument or document executed by the Company in connection therewith,
(ii) the due or proper execution or authorization of this Agreement or any
Collateral Document by any party other than the Collateral Agent, or the
effectiveness, enforceability, validity, genuineness or collectibility as
against the Company of any Collateral Document or any other agreement,
certificate, instrument or document executed by the Company in connection
therewith, (iii) the present or future solvency or
C-vii
<PAGE>
financial worth of the Company, or (iv) the value, condition, existence or
ownership of any of the Collateral or the existence or perfection of any
lien upon or security interest in the Collateral (whether now or hereafter
held or granted) or the sufficiency of any action, filing, notice or other
procedure taken or to be taken to perfect, attach or vest any lien or
security interest in the Collateral. The Collateral Agent shall not be
required, either initially or on a continuing basis, to (A) make any
inquiry, investigation, evaluation or appraisal respecting, or enforce
performance by the Company of, any of the covenants, agreements or
obligations of the Company under any Collateral Document, or (B) undertake
any other actions (other than actions expressly required to be taken by it
under this Agreement). Nothing in any of the Collateral Documents,
expressed or implied, is intended to or shall be so construed as to impose
upon the Collateral Agent any obligations, duties or responsibilities
except as set forth in this Agreement and therein. The Collateral Agent
shall be protected in acting upon any notice, request, consent,
certificate, order, affidavit, letter, telegram, telecopy or other paper or
document given to it by any Person reasonably and in good faith believed by
it to be genuine and correct and to have been signed or sent by such
Person. The Collateral Agent shall have no duty to inquire as to the
performance or observance of any other terms, covenants or conditions of
any Financing Agreement. The Collateral Agent will not be required to
inspect the properties or books and records of the Company for any purpose,
including to determine compliance by the Company with its covenants
respecting the perfection of security interests.
3. Lien Priorities. The parties hereto expressly agree that,
---------------
notwithstanding the relative priority or the time of grant, creation, attachment
or perfection under applicable law of any security interests and liens, if any,
of any Secured Party upon or in any of the Collateral to secure any Secured
Indebtedness, whether such security interests and liens are now existing or
hereafter acquired or arising and whether such security interests and liens are
in or upon now existing or hereafter arising Collateral, such security interests
and liens shall be security interests of and liens in favor of the Collateral
Agent to secure the Secured Indebtedness in the priorities set forth in Section
5 hereof.
4. Certain Notices. The Collateral Agent and each Secured Party
---------------
agree to use their best efforts to give to the others (a) copies of any notice
of the occurrence or existence of an Event of Default sent to the Company,
simultaneously with the sending of such notice to the Company, (b) notice of the
occurrence or existence of an Event of Default of which such party has
knowledge, promptly after obtaining knowledge thereof, and (c) notice of an
Enforcement by such party, prior to commencing such Enforcement, but the failure
to give any of the foregoing notices shall not affect the validity of such
notice of an Event of Default given to the Company or create a cause of action
against or cause of forfeiture of any rights of the party failing to give such
notice or create any claim or right on behalf of any third party. The
Collateral Agent agrees to deliver to each Secured Party a copy of each notice
or other communication received by it under any Collateral Document as soon as
reasonably practicable after receipt thereof.
C-viii
<PAGE>
5. Distribution of Proceeds of Collateral After Enforcement.
-------------------------------------------- -----------
(a) On and after the occurrence of an Enforcement, all proceeds of
Collateral held or received by the Collateral Agent or any Secured Party
(including, without limitation, (i) any amounts received or held by any
Secured Party as a consequence of the exercise of any set-off or other
appropriation of any account or any other property of the Company and (ii)
any adequate protection payments received by any Secured Party on account
of any Collateral in any bankruptcy proceeding) shall (in the case of such
proceeds received by any Secured Party) promptly be delivered to the
Collateral Agent and distributed by the Collateral Agent as follows:
(i) First, to the Collateral Agent in the amount of any unpaid
Collateral Agent Obligations;
(ii) Next, to any Secured Parties from which an Avoided Payment
has been recovered but has not been reimbursed pursuant to this clause
(ii) in the amount of any such Avoided Payments which have not been so
reimbursed, pro rata in proportion to the respective amounts thereof;
(iii) Next, to the extent proceeds remain, to the Lenders and
the Trustee (for itself and on behalf of the holders of the
Securities) in the amount of the aggregate Accreted Value of the
Securities and the principal amount of, and any unpaid interest on
loans outstanding under the Bank Facility, and (without duplication)
any unpaid premiums or payments due upon a Repurchase Offer due with
respect to or constituting a part of, the Secured Indebtedness, pro
rata in proportion to the respective amounts thereof; and
(iv) Next, to the extent proceeds remain, to the Lenders and the
Trustee in the amount of any other unpaid Secured Indebtedness, pro
rata in proportion to the respective amounts thereof.
After the Secured Indebtedness has been finally paid in full in cash,
the balance of proceeds of the Collateral, if any, shall be paid to the Company
or as otherwise required by law.
(b) For the purposes hereof, the interest or amortized original issue
discount accrued on or constituting a part of the Secured Indebtedness
shall include interest on the Secured Indebtedness at the rate specified in
the applicable Financing Agreements from the date of filing of any
proceeding under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
laws irrespective of whether or not all or any portion of any such amounts
are an allowed claim enforceable against the debtor in a case under any
such law.
C-ix
<PAGE>
6. Amendments to Agreements; Actions Related to Collateral;
-------------------------------------------- -----------
Other Liens and Security Interests.
- ----------------------------------
(a) Each Lender agrees that, without the consent in writing of the
Trustee, it will not (i) retain or obtain the primary or secondary
obligations of any other obligor or obligors with respect to all or any
part of the Secured Indebtedness, or (ii) from and after the institution of
any bankruptcy or insolvency proceeding involving the Company, as respects
the Collateral enter into any agreement with the Company with respect to
post-petition usage of cash collateral, post-petition financing
arrangements or adequate protection.
(b) The Trustee agrees that, without the consent in writing of the
Requisite Lenders, it will not (i) retain or obtain the primary or
secondary obligations of any other obligor or obligors with respect to all
or any part of the Secured Indebtedness, or (ii) from or after the
institution of any bankruptcy or insolvency proceeding, as respects the
Collateral enter into any agreement with the Company with respect to post-
petition usage of cash collateral, postpetition financing arrangements or
adequate protection.
(c) Each Secured Party agrees that it will have recourse to the
Collateral only through the Collateral Agent, that it shall have no
independent recourse thereto and that it shall refrain from exercising any
rights or remedies under the Collateral Documents which have or may have
arisen or which may arise as a result of an Event of Default or an
acceleration of the maturities of the Secured Indebtedness, except that,
upon the direction of the Required Secured Parties, any Secured Party may
(but shall not be required to) appropriate any amount of any balances held
by it for the account of the Company or any other property held or owing by
it to or for the credit or for the account of the Company provided that the
amount appropriated is delivered to the Collateral Agent for application
pursuant to Section 5 hereof. Without such direction, no Secured Party
shall set-off or appropriate any such amount.
(d) Nothing contained in this Agreement shall (i) prevent any Secured
Party from imposing a default rate of interest in accordance with the
applicable Financing Agreement, or prevent a Secured Party from raising any
defenses or counterclaims in any action in which it has been made a party
defendant or has been joined as a third party, except that the Collateral
Agent may direct and control any defense directly relating to the
Collateral or any one or more of the Collateral Documents as directed by
the Required Secured Parties, which shall be governed by the provisions of
this Agreement, or (ii) affect or impair the right any Secured Party may
have under the terms and conditions governing the Secured Indebtedness to
accelerate and demand repayment of such Secured Indebtedness. Subject only
to the express limitations set forth in this Agreement, each Secured Party
retains the right to exercise freely its rights and remedies as a creditor
of the Company in accordance with applicable law and agreements with the
Secured Parties, including, without limitation, the right to file a lawsuit
and obtain a judgment therein against the Company and to enforce such
judgment against any assets of the Company.
C-x
<PAGE>
(e) Subject to the provisions set forth in this Agreement and the
Financing Agreements, each Secured Party and its affiliates may (without
having to account therefor to any Secured Party) own, sell, acquire and
hold equity and debt securities of the Company, or any affiliate thereof,
and lend money to and generally engage in any kind of business with the
Company, and subject to the provisions of this Agreement, the Secured
Parties and their affiliates may accept dividends, interest, principal
payments, fees and other consideration from the Company for services in
connection with this Agreement or otherwise without having to account of
the same to the other Secured Parties.
7. Accounting; Adjustments.
-----------------------
(a) Each of the Collateral Agent and each Secured Party agrees to
render an accounting to any of the others of the amounts of the outstanding
Secured Indebtedness, receipts of payments from the Company or from the
Collateral and of other items relevant to the provisions of this Agreement
upon the reasonable request from one of the other Secured Parties as soon
as reasonably practicable after such request, giving effect to the
application of payments and the proceeds of Collateral as hereinbefore
provided in this Agreement.
(b) Each party hereto agrees that to the extent any payment of
Secured Indebtedness made to it hereunder is in excess of the amount due to
be paid to it hereunder, then it shall pay to the other parties hereto such
amounts so that, after giving affect thereto, the amount received by such
party is not in excess of the amount to be paid to it hereunder.
Notwithstanding the foregoing, the Trustee shall not be liable to return
any such excess amount paid to it if such excess amount has been
distributed by it if the holders of the Securities prior to the time the
Trustee received notice of the payment of such excess amount; provided,
however, that, in such event, no further distributions shall be made to the
Trustee pursuant to Section 5 hereof until distributions shall thereafter
have been made to the other Lenders pursuant to Section 5 in an aggregate
amount equal to such excess amount.
8. Notices. Except as otherwise expressly provided herein, any
-------
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
five (5) days after deposit in the United States mails, with proper postage
prepaid, one business day after delivery to a courier for next day delivery,
upon delivery by courier or upon transmission by telex, telecopy or similar
electronic medium (provided that a copy of any such notice sent by such
transmission is also sent by one of the other means provided hereunder within
one day after the date sent by such transmission) to the addresses set forth
below the signatures hereto, with a copy to any person or persons set forth
below such signature shown as to receive a copy, or to such other address as any
party designates to the others in the manner herein prescribed; provided that
--------
notices or other communications to the Collateral Agent and the Trustee shall be
effective only upon receipt. Any party giving notice to any other party
hereunder shall also give copies of such notice to all other parties.
C-xi
<PAGE>
9. Contesting Liens or Security Interests; No Partitioning or
----------------------------------------------------------
Marshalling of Collateral; Contesting Secured Indebtedness.
- ----------------------------------------------------------
(a) No Secured Party shall contest the validity, perfection, priority
or enforceability of, or seek to avoid, have declared fraudulent or have
put aside any lien or security interest granted to the Collateral Agent in
compliance with the Indenture and the Pledge Agreement and each party
hereby agrees to cooperate in the defense of any action contesting the
validity, perfection, priority or enforceability of such liens or security
interests. Each party shall also use its best efforts to notify the other
parties of any change in the location of the business operations of the
Company of any change in law which would make it necessary or advisable to
file additional financing statements in another location against the
Company with respect to the liens and security interests intended to be
created by the Collateral Documents, but the failure to do so shall not
create a cause of action against the party failing to give such notice or
create any claim or right on behalf of any other party hereto or any third
party.
(b) Notwithstanding anything to the contrary in this Agreement or in
any Collateral Document, no Secured Party shall have the right to have any
of the Collateral partitioned, or to file a complaint or institute any
proceeding at law or in equity to have any of the Collateral or any such
security interest or other property partitioned, and each Secured Party
hereby waives any such right. Each Secured Party hereby waives any and all
rights to have the Collateral, or any part thereof, marshaled upon any
foreclosure of any of the liens or security interests securing the Secured
Indebtedness.
(c) No Secured Party shall contest the validity or enforceability of
or seek to avoid, have declared fraudulent or have set aside any Secured
Indebtedness incurred in compliance with the Indenture. In the event any
such Secured Indebtedness is invalidated, avoided, declared fraudulent or
set aside for the benefit of the Company, the Secured Parties agree that
such Secured Indebtedness shall nevertheless be considered to be
outstanding for all purposes of this Agreement.
10. No Additional Rights for the Company Hereunder. The Company, by
----------------------------------------------
its consent hereto, acknowledges that it shall have no rights under this
Agreement. If the Collateral Agent or any Secured Party shall violate the terms
of this Agreement, the Company agrees, by its consent hereto, that it shall not
use such violation as a defense to any enforcement by any such party of any
obligations of the Company nor assert such violation as a counterclaim or basis
for set-off or recoupment against any such party.
11. Bankruptcy Proceedings. Except as provided in Section 6 hereof,
----------------------
nothing contained herein shall limit or restrict the independent right of any
Secured Party to initiate an action or actions in any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar proceeding in its individual capacity and
to appear or be heard on any matter before the bankruptcy or other applicable
court in any such proceeding, including, without limitation, with respect to any
question concerning the post-petition usage of
C-xii
<PAGE>
Collateral and post-petition financing arrangements. The Collateral Agent,
acting in such capacity, is not entitled to initiate such actions on behalf of
any Secured Party or to appear and be heard on any matter before the bankruptcy
or other applicable court in any such proceeding as the representative of any
Secured Party. The Collateral Agent is not authorized in any such proceeding to
enter into any agreement for, or give any authorization or consent with respect
to, the post-petition usage of Collateral, unless such agreement, authorization
or consent has been approved in writing by the Requisite Securityholders and the
Requisite Lenders. This Agreement shall survive the commencement of any such
bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar proceeding.
12. Independent Credit Investigation. Neither the Collateral Agent
--------------------------------
nor any Secured Party, nor any of their respective directors, officers, agents
or employees, shall be responsible to any of the others for the solvency or
financial condition of the Company or the ability of the Company to repay any of
the Secured Indebtedness, or for the value, sufficiency, existence or ownership
of any of the Collateral, the perfection or vesting of any lien or security
interest, or the statements of the Company, oral or written, or for the
validity, sufficiency or enforceability of any of the Secured Indebtedness, any
Financing Agreement, any Collateral Document, any document, instrument or
agreement executed or delivered in connection with or pursuant to any of the
foregoing, or the liens or security interests granted by the Company in
connection therewith. Each Secured Party has entered into its respective
financial agreements with the Company based upon its own independent
investigation, and makes no warranty or representation to the other, nor does it
rely upon any representation by any of the others, with respect to the matters
identified or referred to in this Section 12.
13. Supervision of Obligations. Except to the extent otherwise
--------------------------
expressly provided herein, each Secured Party shall be entitled to manage and
supervise the obligations of the Company to it in accordance with applicable law
and such Secured Party's practices in effect from time to time without regard to
the existence of any other Secured Party.
14. Turnover of Collateral. If any Secured Party (other than the
----------------------
Collateral Agent) acquires custody, control or possession of any Collateral or
any proceeds thereof other than pursuant to the terms of this Agreement, such
Secured Party shall promptly cause such Collateral or the proceeds thereof to be
delivered to or put in the custody, possession or control of the Collateral
Agent for disposition and distribution in accordance with the provisions of
Section 5 of this Agreement. Until such time as such Secured Party shall have
complied with the provisions of the immediately preceding sentence, such Secured
Party shall be deemed to hold such Collateral and the proceeds thereof in trust
for the parties entitled thereto under this Agreement.
15. Amendment. An amendment, supplement, modification, restatement
---------
or waiver hereof shall be effective if, and only if, consented to in writing by
the Requisite Securityholders (or the Trustee on their behalf) and the Requisite
Lenders (or any agent on their behalf); provided, however, that no such
-------- -------
amendment, supplement, modification, restatement, waiver or consent which could
reasonably be expected to adversely affect any of the Collateral Agent's rights,
immunities or indemnities hereunder or which could reasonably be expected to
impose any
C-xiii
<PAGE>
additional responsibilities upon the Collateral Agent shall be effective without
the written consent of the Collateral Agent; and provided, further, that no such
-------- -------
amendment, supplement, modification, restatement, waiver or consent shall be
effective (i) against the Trustee or any holder of Securities unless it has been
consented to in compliance with all of the terms and provisions of the Indenture
or (ii) against [the Agent or] any Lender unless it has been consented to in
compliance with all of the terms and provisions of the applicable Financing
Agreements.
16. Successors and Assigns; Refinancings.
------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of each of the parties hereof,
including subsequent holders of the Secured Indebtedness, provided that (i)
no Lender shall assign or transfer any interest in any Secured Indebtedness
under a Bank Facility unless such transfer or assignment is made subject to
this Agreement and the applicable transferee or assignee becomes a
signatory to this Agreement and assumes the obligations of the transferor
or assignor hereunder with respect to the Secured Indebtedness so assigned
from and after the time of such transfer or assignment, and (ii) the
appointment of any replacement Collateral Agent shall be subject to the
provisions of Section 2(h) hereof.
(b) In the event of any refinancing of the respective extensions of
credit provided by any Bank Facility or the Securities, then the Person or
Persons providing such refinancing or a trustee or agent therefor (the
"Refinancing Person") may succeed to the rights hereunder of the Person or
Persons whose credit extension is being refinanced (the "Refinanced
Person") with respect to the Secured Indebtedness being refinanced, and the
indebtedness being provided by such refinancing may become Secured
Indebtedness entitled to the benefits of the liens and security interests
in the Collateral pursuant to the Collateral Documents, subject to the
provisions hereof, provided that (i) the Refinancing Person becomes a
signatory to this Agreement and assumes the obligations of the Refinanced
Person with respect to the Secured Indebtedness being refinanced by
executing and delivering to the Secured Parties a counterpart of this
Agreement, (ii) the principal amount of the credit available at any time
under such refinancing shall not exceed the principal amount of the
outstanding Secured Indebtedness being refinanced at the time of such
refinancing plus the amount of any prepayment premium and expenses
reasonably incurred by the Company in connection with such refinancing
(provided, however, that nothing contained in this paragraph (b) shall
--------- -------
limit the right of the Company to incur indebtedness pursuant to a
Permitted Bank Facility in accordance with the Indenture).
17. Limitation Relative to Other Agreements. Nothing contained in
---------------------------------------
this Agreement is intended to impair, as between any Secured Party and the
Company, the rights of such Secured Party and the obligations of the Company
under the Financing Agreements between the Company and such Secured Party.
18. Counterparts . This Agreement may be executed in several
------------
counterparts and by each party on a separate counterpart, each of which, when so
executed and delivered, shall be an
C-xiv
<PAGE>
original, but all of which together shall constitute but one and the same
instrument. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
-------------
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW.
20. Indenture Trustee. Each of the other parties to this Agreement
-----------------
acknowledges that the Trustee is entering into this Agreement in its capacity as
Trustee under the Indenture and not in its individual capacity.
21. Termination. This Agreement shall terminate automatically on the
-----------
91st day following the payment in full of the Secured Indebtedness; provided,
---------
however, that Section 2(i) of this Agreement shall survive, and remain operative
- ------- ------------
and in full force and effect, regardless of the termination of this Agreement.
22. Representations and Warranties. Each of the Collateral Agent,
------------------------------
the Trustee, the Lenders and the Company represents and warrants to the other
parties hereto that (a) the execution, delivery and performance of this
Agreement (i) has been duly authorized by all requisite corporate, partnership
or other action on its part and (ii) will not contravene any provision of its
charter or bylaws or any order of any court or other governmental authority
applicable to it, and (b) this Agreement has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation.
C-xv
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
MARINE MIDLAND BANK,
as Trustee
By:_____________________________
Name:
Title:
Address for notices:
BANKERS TRUST COMPANY,
as Collateral Agent
By:_____________________________
Name:
Title:
Address for notices:
[Insert name(s) of Lender(s)
under Bank Facility]
By:_____________________________
Name:
Title:
Address for Notices:
Acknowledged and consented to:
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC.
By:_____________________________________
Name:
Title:
C-xvi
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
By:_____________________________________
Name:
Title:
C-xvii
<PAGE>
==============================================================================
EXHIBIT D
(Form of Pledge Agreement)
D-i
<PAGE>
EXHIBIT D
---------
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as
of August 15, 1996 by International Wireless Communications Holdings, Inc., a
Delaware corporation (the "Company") and International Wireless Communications,
Inc., a Delaware corporation (the "Issuer"), in favor of Bankers Trust Company,
in its capacity as collateral agent under the Indenture, as hereinafter defined,
and under any Intercreditor Agreement (as defined in the Indenture) entered into
pursuant to the Indenture (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company and Marine Midland Bank, as trustee (the
"Trustee"), have entered into that certain Indenture dated as of August 15, 1996
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Indenture"), pursuant to which the Company issued $196,720,000 in
aggregate principal amount of 14% Senior Secured Discount Notes due 2001
(together with any notes or debentures issued in replacement thereof or in
exchange or substitution therefor, the "Securities"); and
WHEREAS, pursuant to the Indenture, the Company is permitted to enter
into a Permitted Bank Facility (as defined in the Indenture), which credit
facility may be secured equally and ratably by the collateral securing amounts
owing under the Indenture and the Securities; and
WHEREAS, the Company is the legal and beneficial owner of (i) all of
the issued and outstanding shares of Capital Stock set forth on Schedule I
hereto (the "Pledged Shares") of the Issuer, a direct wholly owned subsidiary of
Company, and (ii) those certain intercompany promissory notes (if any) issued by
the Issuer or any Intermediate Holding Company (as defined in the Indenture) in
favor of the Company (the "Pledged Notes"), all of which Pledged Notes shall be
in the form of Exhibit A hereto; and
WHEREAS, the terms of the Indenture require that the Company (i)
pledge to the Collateral Agent for the ratable benefit of the Secured Parties
(as defined herein), and grant to the Collateral Agent for the ratable benefit
of the Secured Parties a security interest in, the Collateral (as defined
herein) and (ii) execute and deliver this Agreement in order to secure the
payment and performance by the Company of all of the Secured Indebtedness (as
defined herein).
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. For all purposes of this Agreement, except
-----------
as otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the meanings set forth below:
(a) The term "Secured Indebtedness" as used herein shall mean (i) any
and all obligations of the Company with respect to the payment of principal of,
and premium and Additional Interest, if any, on, the Securities, or any amounts
payable upon any Repurchase Offer (as defined in the Indenture) or otherwise
pursuant to the Indenture or the Securities, (ii) any and all obligations of the
Company under the Permitted Bank Facility, and (iii) any Collateral Agent
Obligations (as defined in any Intercreditor Agreement) and any other
obligations of the Company to the Collateral Agent under this Agreement or any
Intercreditor Agreement; provided, however, that the maximum amount of
-------- -------
indebtedness, liabilities and other monetary obligations of the Company to all
Lenders under the Permitted Bank Facility shall not exceed $20 million (or such
other amount permitted to be incurred by the Company under the Indenture).
(b) The term "Secured Parties" as used herein shall mean (i) the
Trustee under the Indenture for itself and on behalf of the holders from time to
time of the Securities, and (ii) the Lenders and any Agent for the Lenders (as
such terms are defined in any Intercreditor Agreement) and (iii) the Collateral
Agent, in respect of the Collateral Agent Obligations.
(c) Other capitalized terms not defined herein which are defined in
the Indenture shall have the meanings ascribed thereto in the Indenture.
Section 2. Pledge.
------
Section 2.1 Collateral. The Company hereby pledges to the
----------
Collateral Agent, on behalf of and for the benefit of the Secured Parties, and
grants to the Collateral Agent, on behalf of and for the benefit of the Secured
Parties, a continuing first priority security interest in all of its right,
title and interest in the following (the "Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all products and proceeds of any of the Pledged Shares,
including, without limitation, all dividends, cash, options, warrants,
rights, instruments, subscriptions and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares or any of the foregoing; and
(b) all additional shares of, and all securities convertible into and
all warrants, options or other rights to purchase, Capital Stock of, or
other Equity Interests in, the Issuer from time to time acquired by the
Company in any manner, and the certificates representing such additional
shares and Equity Interests (any such additional shares and Equity
Interests and other items shall constitute part of the Pledged Shares under
and as defined in this
2
<PAGE>
Agreement), and all products and proceeds of any of the foregoing,
including, without limitation, all dividends, cash, options, warrants,
rights, instruments, subscriptions, and other proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of the foregoing; and
(c) the Pledged Notes and the instruments representing the Pledged
Notes, and all products and proceeds of the Pledged Notes, including,
without limitation, all interest, principal and premium payments, and all
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Pledged Notes or
any of the foregoing; and
(d) all additional promissory notes of the Issuer or any Intermediate
Holding Company from time to time held by the Company in any manner (any
such additional promissory notes shall constitute part of the Pledged Notes
under and as defined in this Agreement) and all products and proceeds of
any of such additional Pledged Notes, including, without limitation, all
interest and principal payments, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional Pledged Notes or any of the
foregoing.
Section 2.2 Pledge by the Issuer. The Issuer hereby agrees that
--------------------
prior to forming or acquiring an interest in any Domestic Intermediate Holding
Company, it shall execute and deliver to the Collateral Agent a pledge
agreement, in the form of Exhibit B hereto pursuant to which it will pledge to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties,
and grant to the Collateral Agent, on behalf of and for the benefit of the
Secured Parties, a continuing first priority security interest in all of its
right, title and interest in (i) all of the issued and outstanding shares of
Capital Stock of any such Domestic Intermediate Holding Company and (ii) any
intercompany promissory notes issued by any Domestic Intermediate Holding
Company to the Issuer, all of which notes shall be substantially in the form of
Exhibit A hereto, in each case together with the products and proceeds thereof
and all certificates, instruments, rights and other interests relating thereto.
The Issuer further agrees promptly, upon request by the Collateral Agent, to
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, assignments, instruments and
other documents, all in form and substance satisfactory to the Collateral Agent,
and to take any other actions that are necessary or, in the opinion of the
Collateral Agent, desirable to perfect, continue the perfection of, or protect
the first priority of the Collateral Agent's security interest in the property
described in clauses (i) and (ii) above, to protect such property against the
rights, claims or interests of third person or otherwise to effect the purposes
of this covenant. The Issuer will pay all costs incurred in connection with any
of the foregoing.
Section 3. Security for Obligations. This Agreement secures the
------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration, by repurchase or otherwise) of all Secured
Indebtedness (including, without limitation, the obligations accruing after the
date of any filing by the Company of any petition in bankruptcy or the
3
<PAGE>
commencement of any bankruptcy, insolvency or similar proceeding with respect to
the Company).
Section 4. Delivery of Collateral. The Company hereby agrees that
----------------------
all certificates or instruments representing or evidencing the Collateral shall
be immediately delivered to and held at all times by the Collateral Agent
pursuant hereto at the Collateral Agent's office in the State of New York and
shall be in suitable form for transfer by delivery, or issued in the name of the
Company and accompanied by instruments of transfer or assignment duly executed
in blank and undated, and in either case having attached thereto all requisite
federal or state stock transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent. All securities, whether certificated,
uncertificated or book entry, if any, representing or evidencing the Collateral
shall be registered in the name of the Collateral Agent or any of its nominees
by book entry or in any other appropriate manner that is acceptable to the
Collateral Agent, so as to properly identify the interest of the Collateral
Agent therein. In addition, the Collateral Agent shall have the right, at any
time following the occurrence of an Event of Default, in its discretion, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees or agents any or all of the Collateral. The Collateral Agent shall
have the right at any time to exchange certificates or instruments representing
or evidencing all or any portion of the Collateral for certificates or
instruments of smaller or larger denominations in the same aggregate amount.
Section 5. Representations and Warranties. The Company hereby makes
------------------------------
all representations and warranties applicable to the Company contained in the
Indenture. The Company further represents and warrants that:
(a) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation
or of the certificate of incorporation or bylaws of the Company or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Company, or result in the creation or imposition of any Lien on
any assets of the Company, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable. Each Pledged Note has been duly
authorized and executed by the maker thereof and constitutes a legal, valid
and binding obligation of such maker, enforceable against such maker in
accordance with its terms.
(c) The Pledged Shares constitute all of the authorized, issued and
outstanding Equity Interests of the Issuer and constitute all of the shares
or Equity Interests of the Issuer beneficially owned by the Company.
(d) All intercompany indebtedness of the Issuer and each Intermediate
Holding Company to the Company is evidenced by promissory notes
substantially in the form of Exhibit A hereto; the Pledged Notes constitute
all of the promissory notes of the Issuer and each Intermediate Holding
Company in favor of the Company, and there are no other
4
<PAGE>
instruments, certificates, securities or other writings or chattel paper,
evidencing or representing any indebtedness of the Issuer or any
Intermediate Holding Company to the Company.
(e) The Company is the legal, record and beneficial owner of the
Collateral, free and clear of any Lien or claims of any Person except for
the security interest created by this Agreement.
(f) The Company has full power and authority to enter into this
Agreement and has the right to vote, pledge and grant a security interest
in the Collateral as provided by this Agreement.
(g) This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(h) Upon the delivery to the Collateral Agent of the Collateral and
the filing of Uniform Commercial Code (the "UCC") financing statements in
the jurisdictions listed on Exhibit C, the pledge of the Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the Secured
Indebtedness for the benefit of the Secured Parties, and is enforceable as
such against all creditors of the Company and any Persons purporting to
purchase any of the Collateral from the Company.
(i) Except as has been already obtained, no consent of any other
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the pledge by the Company of the Collateral
pursuant to this Agreement or for the execution, delivery or performance of
this Agreement by the Company or (ii) for the exercise by the Collateral
Agent of the voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement (except as
may be required in connection with such disposition by laws affecting the
offering and sale of securities).
(j) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the best knowledge
of the Company, threatened by or against the Company or against any of its
properties or revenues with respect to this Agreement or any of the
transactions contemplated hereby.
(k) The pledge of the Collateral pursuant to this Agreement is not
prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System).
5
<PAGE>
(l) All information set forth herein relating to the Collateral is
accurate and complete in all material respects.
Section 6. Further Assurance. The Company will at all times cause
-----------------
the security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Collateral, enforceable as
such against all creditors of the Company and (except as otherwise specifically
provided herein) any Persons purporting to purchase any Collateral from the
Company. The Company will, promptly upon request by the Collateral Agent,
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, tax stamps, assignments,
instruments and other documents, all in form and substance satisfactory to the
Collateral Agent, deliver any instruments to the Collateral Agent and take any
other actions that are necessary or, in the reasonable opinion of the Collateral
Agent, desirable to perfect, continue the perfection of, or protect the first
priority of the Collateral Agent's security interest in, the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, to enable the Collateral Agent to exercise or enforce its rights and
remedies hereunder, or otherwise to effect the purposes of this Agreement. The
Company also hereby authorizes the Collateral Agent to file any financing or
continuation statements with respect to the Collateral without the signature of
the Company to the extent permitted by applicable law (although the Collateral
Agent has no obligation to do so). The Company will pay all costs incurred in
connection with any of the foregoing. Promptly, upon request by the Collateral
Agent, the Company will provide the Collateral Agent with all documents,
instruments or information necessary, in the sole discretion of the Collateral
Agent, to satisfy its obligations under this Agreement.
Section 7. Voting Rights; Dividends; Etc.
-----------------------------
(a) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Pledged Shares or any part thereof for any purpose
not inconsistent with the terms of this Agreement or the Indenture;
provided, however, that the Company shall not exercise or shall refrain
from exercising any such right if such action would violate any provisions
of this Agreement or the Indenture.
(b) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to receive, and to utilize (subject to the provisions of
the Indenture) free and clear of the Lien of this Agreement, all cash
payments of principal and interest paid from time to time with respect to
any Pledged Notes.
(c) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, and subject
to the other terms and conditions of the Indenture, the Company shall be
entitled to receive, and to utilize (subject to the provisions of the
Indenture) free and clear of the Lien of this Agreement, all cash dividends
paid from time to time in respect of the Pledged Shares.
6
<PAGE>
(d) Any and all (i) dividends, other distributions, interest and
principal payments paid or payable in the form of instruments and/or other
property (other than cash payments permitted under Section 7(b) hereof and
cash dividends permitted under Section 7(c) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Collateral,
(ii) dividends and other distributions paid or payable in cash in respect
of any Pledged Shares in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus
or paid-in-surplus, and (iii) cash paid, payable or otherwise distributed
in redemption of, or in exchange for any Collateral, shall, in each case,
be forthwith delivered to the Collateral Agent to hold as Collateral and
shall be, if received by the Company, held in trust for the benefit of the
Collateral Agent and the Secured Parties, be segregated from the other
property and funds of the Company and be forthwith delivered to the
Collateral Agent as Collateral in the same form as so received (with any
necessary endorsements).
(e) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Company all such proxies and other
instruments as the Company may reasonably request for the purpose of
enabling the Company to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 7(a) through 7(c) above.
(f) Upon the occurrence and during the continuance of an Event of
Default under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), (i) all rights of the Company to exercise the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 7(a) shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which, to the extent
permitted by law, shall thereupon have the sole right to exercise such
voting and other consensual rights, and (ii) all cash interest payments and
dividends and other distributions payable in respect of the Collateral
shall be paid to the Collateral Agent and the Company's right to receive
such cash payments pursuant to Section 7(b) and 7(c) hereof shall
immediately cease.
(g) Upon the occurrence and during the continuance of an Event of
Default under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), the Company shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent all such proxies,
dividend and interest payment orders and other instruments as Collateral
Agent may reasonably request for the purpose of enabling the Collateral
Agent to exercise the voting and other rights that it is entitled to
exercise pursuant to Section 7(f) above.
(h) All payments of interest, principal or premium and all dividends
and other distributions that are received by the Company contrary to the
provisions of this Section 7 shall be received in trust for the benefit of
the Collateral Agent and the Secured Parties, shall be segregated from the
other property or funds of the Company and shall be forthwith delivered to
the Collateral Agent as Collateral in the same form as so received (with
any necessary endorsements).
7
<PAGE>
Section 8. Covenants. The Company hereby covenants and agrees with
---------
the Collateral Agent and the Secured Parties that it will comply with all of the
obligations, requirements and restrictions applicable to the Company contained
in the Indenture. The Company further covenants and agrees, from and after the
date of this Agreement and until the Secured Indebtedness has been paid in full,
as follows:
(a) The Company agrees that it will not (i) sell, assign, transfer,
convey or otherwise dispose of, or grant any option or warrant with respect
to, any of the Collateral without the prior written consent of the
Collateral Agent, (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the security interest granted
under this Agreement, and at all times will be the sole beneficial owner of
the Collateral, (iii) enter into any agreement or understanding that
purports to or that may restrict or inhibit the Collateral Agent's rights
or remedies hereunder, including, without limitation, the Collateral
Agent's right to sell or otherwise dispose of the Collateral, (iv) take any
action, or permit the taking of any action by the Issuer or any
Intermediate Holding Company, with respect to the Collateral the taking of
which would result in a violation of the Indenture or this Agreement,
including, without limitation, the issuance by the Issuer of any additional
Equity Interests or promissory notes or the incurrence by the Issuer or any
Intermediate Holding Company of any Indebtedness, in each case to Persons
other than the Company (except as permitted by the Indenture), (v) upon the
occurrence and during the continuance of an Event of Default under the
Indenture (or other "Event of Default" as defined in any Intercreditor
Agreement), enter into any agreement amending, modifying or supplementing
the interest, principal or maturity terms of the Pledged Notes in a manner
adverse to the interests of the Collateral Agent and the Secured Parties,
(vi) fail to give prompt notice to the Collateral Agent of any notice of
default given by or to the Company under or with respect to the Pledged
Notes together with a complete copy of such notice, (vii) permit the Issuer
or any Intermediate Holding Company to merge or consolidate with or into
another person or entity or sell or transfer all or substantially all of
its assets to another person or entity (except as permitted by the
Indenture), or (viii) fail to pay or discharge any tax, assessment or levy
of any nature not later than five days prior to the date of any proposed
sale under any judgment, writ or warrant of attachment with regard to the
Collateral.
(b) The Company agrees that immediately upon becoming the beneficial
owner of any additional shares of Capital Stock, promissory notes, other
securities or Equity Interests of the Issuer or any Intermediate Holding
Company (including as a result of the merger or consolidation of the Issuer
or any Intermediate Holding Company with or into another entity) it will
pledge and deliver to the Collateral Agent for its benefit and the ratable
benefit of the Secured Parties and grant to the Collateral Agent for its
benefit and the ratable benefit of the Secured Parties, a continuing first
priority security interest in such shares, promissory notes, other
securities or Equity Interests (as well as instruments of transfer or
assignment duly executed in blank and undated and any necessary stock
transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent). The Company further agrees that it will promptly (i)
cause the Issuer and any Intermediate Holding Company upon becoming
indebted to the Company to execute a promissory note in the form of Exhibit
A
8
<PAGE>
hereto evidencing such debt in order that such promissory note may be
promptly pledged as a Pledged Note pursuant hereto and (ii) deliver to the
Collateral Agent and the Trustee an Officers' Certificate in accordance
with Section 11.05 of the Indenture describing such additional promissory
notes and certifying that the same have been duly pledged and delivered to
the Collateral Agent hereunder.
Section 9. Power of Attorney. In addition to all of the powers
-----------------
granted to the Collateral Agent pursuant to the Indenture, the Company hereby
appoints and constitutes the Collateral Agent as the Company's attorney-in-fact
to exercise all of the following powers upon and at any time after the
occurrence of an Event of Default: (i) collection of proceeds of any
Collateral; (ii) conveyance of any item of Collateral to any purchaser thereof;
(iii) giving of any notices or recording of any Liens under Section 6 hereof;
(iv) making of any payments or taking any acts under Section 10 hereof; and (v)
paying or discharging taxes or Liens levied or placed upon or threatened against
the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole
discretion, and such payments made by the Collateral Agent to become the
obligations of the Company to the Collateral Agent, due and payable immediately
without demand. The Collateral Agent's authority hereunder shall include,
without limitation, the authority to endorse and negotiate, for the Collateral
Agent's own account, any checks or instruments in the name of the Company,
execute and give receipt for any certificate of ownership or any document,
transfer title to any item of Collateral, sign the Company's name on all
financing statements or any other documents deemed necessary or appropriate to
preserve, protect or perfect the security interest in the Collateral and to
file the same, prepare, file and sign the Company's name on any notice of Lien,
and prepare, file and sign the Company's name on a proof of claim in bankruptcy
or similar document against any creditor of the Company, and to take any other
actions arising from or incident to the powers granted to the Collateral Agent
in this Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Company.
Section 10. Collateral Agent May Perform. If the Company fails to
----------------------------
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause the performance of, such agreement, and the reasonable expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Company under Section 15 hereof; provided, however, that the Collateral Agent
-------- -------
shall not be obligated to take any action under this Section 10 unless it is
instructed to do so by the Trustee and it is indemnified against any liability
or loss in connection with taking such action by the Trustee or the Lenders.
Section 11. No Assumption of Duties; Reasonable Care. The right and
----------------------------------------
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the Collateral Agent's and the Secured Parties' security
interest in and to the Collateral granted hereby and shall not be interpreted
to, and shall not, impose any duties on the Collateral Agent in connection
therewith. The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any
9
<PAGE>
Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral.
Section 12. Subsequent Changes Affecting Collateral. The Company
---------------------------------------
represents to the Collateral Agent and the Secured Parties that the Company has
made its own arrangements for keeping informed of changes or potential changes
affecting the Collateral (including, but not limited to, rights to convert,
rights to subscribe, payment of dividends, payments of interest and/or
principal, reorganization or other exchanges, tender offers and voting rights),
and the Company agrees that the Collateral Agent and the Secured Parties shall
have no responsibility or liability for informing the Company of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto. The Company covenants that it will not, without
the prior written consent of the Collateral Agent, vote to enable, or take any
other action to permit, the Issuer to issue any capital stock or other
securities or to sell or otherwise dispose of, or grant any option with respect
to, any of the Collateral, except for the security interests granted under this
Agreement. The Company will defend the right, title and interest of the
Collateral Agent and the Secured Parties in and to the Collateral against the
claims and demands of all Persons.
Section 13. Remedies Upon Default
---------------------
(a) If any Event of Default (or other "Event of Default" as defined
in any Intercreditor Agreement) shall have occurred and be continuing under
the Indenture, the Collateral Agent and the Secured Parties shall have, in
addition to all other rights given by law or by this Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral of
a secured party under the UCC as in effect in the State of New York at that
time. The Collateral Agent may, without notice and at its option, transfer
or register, and the Company shall register or cause to be registered upon
request therefor by the Collateral Agent, the Collateral or any part
thereof on the books of the Issuer or any Intermediate Holding Company, as
the case may be, into the name of the Collateral Agent or the Collateral
Agent's nominee(s) or agent(s), with or without any indication that such
Collateral is subject to the security interest hereunder. In addition, with
respect to any Collateral that shall then be in or shall thereafter come
into the possession or custody of the Collateral Agent, the Collateral
Agent may sell or cause the same to be sold at any broker's board or at a
public or private sale, in one or more sales or lots, at such price or
prices as the Collateral Agent may deem best, for cash or on credit or for
future delivery, without assumption of any credit risk. The purchaser of
any or all Collateral so sold shall thereafter hold the same absolutely,
free from any claim, encumbrance or right of any kind whatsoever. Unless
any of the Collateral threatens to decline speedily in value or is or
becomes of a type sold on a recognized market, the Collateral Agent will
give the Company reasonable notice of the time and place of any public sale
thereof, or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Collateral conducted in
conformity with reasonable commercial practices of banks, insurance
companies, commercial finance companies, or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met
if such notice is mailed to the Company as provided below
10
<PAGE>
in Section 19.1, at least ten days before the time of the sale or
disposition. Any other requirement of notice, demand or advertisement for
sale is, to the extent permitted by law, waived. The Collateral Agent or
any Secured Party may, in its own name or in the name of a designee or
nominee, buy any of the Collateral at any public sale and, if permitted by
applicable law, at any private sale. All expenses (including court costs
and reasonable attorneys' fees and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Collateral.
(b) If the Collateral Agent shall determine to exercise its right to
sell any or all of the Pledged Shares pursuant to Section 13(a) above, and
if in the opinion of counsel for the Collateral Agent it is necessary, or
if in the opinion of the Collateral Agent it is advisable, to have the
Pledged Shares or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Company will cause the Issuer to (i) execute and deliver, and
cause its directors and officers to execute and deliver, all at the
Issuer's expense, all such instruments and documents, and to do or cause to
be done all such other acts and things as may be necessary or, in the
opinion of the Collateral Agent, advisable to register such Pledged Shares
under the provisions of the Securities Act, (ii) use its best efforts to
cause the registration statement relating thereto to become effective and
to remain effective for a period of 180 days from the date of the first
public offering of such Pledged Shares, or that portion thereof to be sold
and (iii) make all amendments thereto and/or to the related prospectus
that, in the opinion of the Collateral Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission applicable
thereto. The Company agrees to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any jurisdiction that
the Collateral Agent shall designate for the sale of the Pledged Shares and
to make available to the Issuer's security holders, as soon as practicable,
an earnings statement (which need not be audited) that will satisfy the
provisions of Section 11(a) of the Securities Act. The Company will cause
the Issuer to furnish to the Collateral Agent such number of copies as the
Collateral Agent may reasonably request of each preliminary and final
prospectus, to notify the Collateral Agent promptly of the happening of any
event as a result of which any then effective prospectus includes an untrue
statement of a material fact or omits to state material fact required to be
stated therein or necessary to make the statements therein not misleading
in the light of then existing circumstances, and to cause the Collateral
Agent to be furnished with such number of copies as the Collateral Agent
may reasonably request of such supplement to or amendment of such
prospectus. The Company will cause the Issuer, to the extent permitted by
law, to indemnify, defend and hold harmless the Collateral Agent and the
Secured Parties from and against all losses, liabilities, expenses or
claims (including reasonable legal expenses and the reasonable costs of
investigation) that the Collateral Agent or the Secured Parties may incur
under the Securities Act or otherwise, insofar as such losses, liabilities,
expenses or claims arise out of or are based upon any alleged untrue
statement of a material fact contained in such registration statement (or
any amendment thereto) or in any preliminary or final prospectus (or any
amendment or supplement thereto), or arise out of
11
<PAGE>
or are based upon any alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except to the extent that any such losses, liabilities,
expenses or claims arise solely out of or are based upon any such alleged
untrue statement made or such alleged omission to state a material fact
included or excluded on the written direction of the Collateral Agent. The
Company will cause the Issuer to bear all reasonable costs and expenses of
carrying out its obligations hereunder.
(c) 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
may be effected after an Event of Default, the Company agrees that upon the
occurrence or existence of any Event of Default, the Collateral Agent may,
from time to time, attempt to sell all or any part of the Collateral by
means of a private placement, restricting the prospective purchasers to
those who will represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Collateral Agent may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of investors who might be interested in purchasing the
Collateral. The Company acknowledges and agrees that any such private sale
may result in prices and terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner. The Collateral Agent shall be under no obligation to
delay a sale of any of the Collateral for the period of time necessary to
permit the Issuer to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the
Issuer agrees to do so.
(d) The Company further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Collateral pursuant to this Section 13
valid and binding and in compliance with any and all other applicable
requirements of law. The Company further agrees that a breach of any of
the covenants contained in this Section 13 will cause irreparable injury to
the Collateral Agent and the Secured Parties, that the Collateral Agent and
the Secured Parties have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in
this Section 13 shall be specifically enforceable against the Company, and
the Company hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that
no Event of Default has occurred under the Indenture.
(e) If the Collateral Agent deems it appropriate, the Collateral
Agent shall retain an investment bank or any other agent to perform or to
assist it in performing the obligations set forth in Section 13(b) and
13(c) hereof, whose usual and customary fees and expenses shall be paid by
the Company in accordance with Section 15 hereof.
Section 14. Irrevocable Authorization and Instruction to the Issuer.
-------------------------------------------------------
The Company hereby authorizes and instructs the Issuer and each Intermediate
Holding Company to comply with any instruction received by the Issuer or such
Intermediate Holding Company from the Collateral Agent that (i) states that an
Event of Default has occurred and (ii) is otherwise in accordance with
12
<PAGE>
the terms of this Agreement, without any other or further instructions from the
Company, and the Company agrees that the Issuer and each Intermediate Holding
Company shall be fully protected in so complying.
Section 15. Fees and Expenses. The Company will upon demand pay to
-----------------
the Collateral Agent the amount of any and all reasonable fees and expenses
(including, without limitation, the reasonable fees and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent and the Secured Parties
hereunder or (iv) the failure by the Company to perform or observe any of the
provisions hereof.
Section 16. Interest Absolute. All rights of the Collateral Agent
-----------------
and the Secured Parties and the security interests created hereunder, and all
obligations of the Company hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument evidencing or governing the Permitted Bank
Facility or any other Secured Indebtedness;
(b) any change in the time, manner or place or payment of, or in any
other term of, all or any of the Secured Indebtedness, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Secured Indebtedness;
or
(d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, the Company in respect of the Secured
Indebtedness or of this Agreement.
Section 17. Application of Proceeds. Upon the occurrence and during
-----------------------
the continuance of an Event of Default under the Indenture, the proceeds of any
sale of, or other realization upon, all or any part of the Collateral and any
cash held shall be applied by the Collateral Agent in the following order of
priorities:
first, to payment of the expenses of such sale or other realization,
-----
including reasonable compensation to agents and counsel for the Collateral
Agent, and all reasonable expenses, liabilities and advances incurred or made by
the Collateral Agent in connection therewith, and any other unreimbursed fees
and expenses for which the Collateral Agent is to be reimbursed pursuant to
Section 15 hereof.
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second, (i) if the Company has not entered into the Permitted Bank
------
Facility, to the Trustee for the payment of any and all obligations of the
Company with respect to the payment or principal of, and premium and Additional
Interest, if any, on, the Securities or any amounts payable upon any Repurchase
Offer or otherwise pursuant to the Indenture or the Securities or (ii) if the
Company has entered into the Permitted Bank Facility, pursuant to the terms of
the Intercreditor Agreement(s) relating thereto; and
finally, to payment to the Company or its successors or assigns, or as
-------
a court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
Section 18. Uncertificated Securities. Notwithstanding anything to
-------------------------
the contrary contained herein, if any Collateral (whether now owned or hereafter
acquired) is in the form of an uncertificated security, the Company shall
promptly notify the Collateral Agent, and shall promptly take all actions
required to perfect the security interest of the Collateral Agent under
applicable law (including, in any event, under Section 8-313 and 8-321 of the
New York Uniform Commercial Code) and shall certify to the Collateral Agent that
such security interest is perfected. The Company further agrees to take such
actions as the Collateral Agent deems necessary or desirable to effect the
foregoing and to permit the Collateral Agent to exercise any of its rights and
remedies hereunder, and agrees to provide an Opinion of Counsel satisfactory to
the Collateral Agent with respect to any such pledge of uncertificated
Collateral promptly upon request of the Collateral Agent.
Section 19. Miscellaneous Provisions.
------------------------
Section 19.1 Notices. All notices, approvals, consents or other
-------
communications required or desired to be given hereunder shall be in the form
and manner as set forth in Section 11.02 of the Indenture or in the relevant
Section of the Permitted Bank Facility, and delivered to the addresses set forth
in such Sections, or, in the case of the Collateral Agent, to: Bankers Trust
Company, 4 Albany Street, New York, New York Attention: Corporate Trust
Agency.
Section 19.2 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Collateral Agent to take
any action or omit to take any action under this Agreement, the Company shall
deliver to the Collateral Agent and the Trustee an Officers' Certificate and/or
Opinion of Counsel in accordance with the requirements of Section 11.04 of the
Indenture.
Section 19.3 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Agreement may not be used to interpret another pledge, security or debt
agreement of the Company, the Issuer or any subsidiary thereof. No such pledge,
security or debt agreement may be used to interpret this Agreement.
Section 19.4 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision,
14
<PAGE>
or part thereof, and shall not in any manner affect such clause or provision in
any other jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
Section 19.5 No Recourse Against Others. No director, officer,
--------------------------
employee, stockholder or affiliate, as such, of the Company or the Issuer shall
have any liability for any obligations of the Company under this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Secured Party hereby waives and releases all such liability.
Section 19.6 Headings. The headings of the Articles and Sections of
--------
this Agreement have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 19.7 Counterpart Originals. This Agreement may be signed in
---------------------
two or more counterparts. Each signed copy shall be an original, but all of
them together represent one and the same agreement. Each counterpart may be
executed and delivered by telecopy, if such delivery is promptly followed by the
original manually signed copy sent by overnight courier.
Section 19.8 Benefits of Agreement. Nothing in this Agreement,
---------------------
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Secured Parties, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 19.9 Amendments, Waivers and Consents. Any amendment or
--------------------------------
waiver of any provision of this Agreement and any consent to any departure by
the Company from any provision of this Agreement shall be effective only if made
or given in compliance with all of the terms and provisions of the Indenture
necessary for amendments or waivers of, or consents to any departure by the
Company from a provision of the Indenture, as applicable, and neither the
Collateral Agent nor any Secured Party shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default or in any breach of any
of the terms and conditions hereof. Failure of the Collateral Agent or any
Secured Party to exercise, or delay in exercising, any right, power or privilege
hereunder shall not operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Collateral Agent or any Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Collateral Agent or such Secured Party would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
Section 19.10 Interpretation of Agreement. Time is of the essence in
---------------------------
each provision of this Agreement of which time is an element. To the extent a
term or provision of this Agreement conflicts with the Indenture and is not
dealt with herein with more specificity, the Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence
15
<PAGE>
in a course of performance rendered under this Agreement shall not be relevant
to determine the meaning of this Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
Section 19.11 Continuing Security Interest; Transfer of Securities.
----------------------------------------------------
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of all the
Secured Indebtedness, (ii) be binding upon the Company, its successors and
assigns, and (iii) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent, the Secured
Parties and their respective successors, transferees and assigns.
Section 19.12 Reinstatement. This Agreement shall continue to be
-------------
effective or be reinstated if at any time any amount received by the Collateral
Agent or any Secured Party in respect of the Secured Indebtedness is rescinded
or must otherwise be restored or returned by the Collateral Agent or any Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Company or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
Section 19.13 Survival of Provisions. All representations,
----------------------
warranties and covenants of the Company contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Company of the Secured Indebtedness.
Section 19.14 Waivers. The Company waives presentment and demand for
-------
payment of any of the Secured Indebtedness, protest and notice of dishonor or
default with respect to any of the Secured Indebtedness, and all other notices
to which the Company might otherwise be entitled, except as otherwise expressly
provided herein or in the Indenture.
Section 19.15 Authority of the Collateral Agent.
---------------------------------
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by
the terms hereof, together with such powers as are reasonably incident
thereto. The Collateral Agent may perform any of its duties hereunder or
in connection with the Collateral by or through agents or employees and
shall be entitled to retain counsel and to act in reliance upon the advice
of counsel concerning all such matters. Neither the Collateral Agent nor
any director, officer, employee, attorney or agent of the Collateral Agent
shall be responsible for the validity, effectiveness or sufficiency hereof
or of any document or security furnished pursuant hereto. The Collateral
Agent and its directors, officers, employees, attorneys and agents shall be
entitled to rely on any communication, instrument or document believed by
it or them to be genuine and correct and to have been signed or sent by the
proper person or persons. The Company agrees to indemnify and hold
harmless the Collateral Agent, the Secured Parties and any other Person
specified above from and against any and all costs, expenses (including
16
<PAGE>
the reasonable fees and disbursements of counsel (including, the allocated
costs of counsel)), claims and liabilities incurred by the Collateral
Agent, the Secured Parties or any such Person hereunder, unless such claim
or liability shall be due to willful misconduct or gross negligence on the
part of the Collateral Agent, the Secured Parties or such Person.
(b) The Company acknowledges that the rights and responsibilities of
the Collateral Agent under this Agreement with respect to any action taken
by the Collateral Agent or the exercise or non-exercise by the Collateral
Agent of any option, right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Collateral Agent and the Secured Parties, be governed by the
Indenture, any Intercreditor Agreement and by such other agreements with
respect thereto as may exist form time to time among them, but, as between
the Collateral Agent and the Company, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with
full and valid authority so to act or refrain from acting, and the Company
shall not be obligated or entitled to make any inquiry respecting such
authority.
Section 19.16 Resignation or Removal of the Collateral Agent. Until
----------------------------------------------
such time as the Secured Indebtedness shall have been paid in full, the
Collateral Agent may at any time, by giving written notice to the Company and
Secured Parties, resign and be discharged of the responsibilities hereby
created, such resignation to become effective upon (i) the appointment of a
successor Collateral Agent and (ii) the acceptance of such appointment by such
successor Collateral Agent. As promptly as practicable after the giving of any
such notice, the Secured Parties shall appoint a successor Collateral Agent,
which successor Collateral Agent shall be reasonably acceptable to the Company.
If no successor Collateral Agent shall be appointed and shall have accepted such
appointment within 90 days after the Collateral Agent gives the aforesaid notice
of resignation, the Collateral Agent may apply to any court of competent
jurisdiction to appoint a successor Collateral Agent to act until such time, if
any, as a successor shall have been appointed as provided in this Section 19.16.
Any successor so appointed by such court shall immediately and without further
act be superseded by any successor Collateral Agent appointed by the Secured
Parties, as provided in this Section 19.16. Simultaneously with its replacement
as Collateral Agent hereunder, the Collateral Agent so replaced shall deliver to
its successor all documents, instruments, certificates and other items of
whatever kind (including, without limitation, the certificates and instruments
evidencing the Collateral and all instruments of transfer or assignment) held by
it pursuant to the terms hereof. The Collateral Agent that has resigned shall
be entitled to fees, costs and expenses to the extent incurred or arising, or
relating to events occurring, before its resignation or removal.
Section 19.17 Release of Collateral; Termination of Agreement.
-----------------------------------------------
(a) Subject to the provisions of Section 19.12 hereof and Section
10.03 of the Indenture, this Agreement shall terminate upon the full and
final payment and performance of the Secured Indebtedness (and upon receipt
by the Collateral Agent of the Company's written certification that all
such Secured Indebtedness has been satisfied) and payment in full of all
fees and expenses owing by the Company to the Collateral Agent. At such
time,
17
<PAGE>
the Collateral Agent shall, at the request of the Company, reassign and
redeliver to the Company all of the Collateral hereunder that has not been
sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof. Such reassignment and redelivery shall
be without warranty by or recourse to the Collateral Agent, except as to
the absence of any prior assignments by the Collateral Agent of its
interest in the Collateral, and shall be at the expense of the Company.
(b) The Company agrees that it will not, except as permitted by the
Indenture, sell or dispose of, or grant any option or warrant with respect
to, any of the Collateral.
Section 19.18 Final Expression. This Agreement, together with any
----------------
other agreement executed in connection herewith, is intended by the parties as a
final expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
Section 19.19 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
----------------------------------------------------
JURY TRIAL; WAIVER OF DAMAGES.
- -----------------------------
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE COLLATERAL AGENT AND THE SECURED PARTIES IN CONNECTION WITH THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi)
BELOW, THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES AGREE THAT ALL
DISPUTES BETWEEN OR AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK. THE
COMPANY WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT CONSIDERING THE DISPUTE INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iii) THE COMPANY AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN
NAME OR IN THE NAME AND ON BEHALF OF ANY SECURED PARTY, HAVE THE RIGHT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE COMPANY OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT
18
<PAGE>
ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE COMPANY WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL
AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS.
(iv) THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
(v) THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS SET FORTH IN SECTION 11.02 OF THE INDENTURE, SUCH SERVICE
TO BECOME EFFECTIVE FIVE (5) BUSINESS DAYS AFTER SUCH MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT
OR ANY SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
(vii) THE COMPANY HEREBY AGREES THAT NEITHER THE COLLATERAL AGENT NOR
ANY SECURED PARTY SHALL HAVE ANY LIABILITY TO THE COMPANY (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE COMPANY IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR
SUCH SECURED PARTY, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS
OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH SECURED PARTY, AS THE
CASE MAY BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(viii) THE COMPANY WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY SECURED PARTY OF ITS
RIGHTS DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL
WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER
SECURITY FOR THE OBLIGATIONS.
19
<PAGE>
THE COMPANY WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL
AGENT OR ANY SECURED PARTY DURING THE CONTINUANCE OF AN EVENT OF DEFAULT IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF,
REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS,
TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL
AGENT OR ANY SECURED PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN THE COMPANY, THE COLLATERAL AGENT AND THE
SECURED PARTIES.
Section 19.20 Acknowledgments of Company. The Company hereby
--------------------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement;
(b) neither the Collateral Agent nor any Secured Party has any
fiduciary relationship to the Company, and the relationship between the
Collateral Agent and the Secured Parties, on the one hand, and the Company,
on the other hand, is solely that of a secured party and a creditor; and
(c) no joint venture exists among the Secured Parties or among the
Company and the Secured Parties.
Section 19.21 Acknowledgments of the Issuer. The Issuer hereby
-----------------------------
acknowledges and agrees to be bound by this Agreement and to comply with the
terms thereof insofar as such terms are applicable to it. The Issuer further
agrees (i) to notify the Collateral Agent promptly in writing of the occurrence
of any of the events described in Section 8(b) of this Agreement and (ii) that
the terms of Section 13(b) of this Agreement shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it under or
pursuant to or arising out of such section.
20
<PAGE>
[Pledge Agreement Signature Page]
IN WITNESS WHEREOF, the Company, the Issuer and the Collateral Agent have
each caused this Agreement to be duly executed and delivered as of the date
first above written.
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC., a Delaware corporation
By: ____________________________________________
Name:
Title:
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.,
a Delaware corporation
By: ____________________________________________
Name:
Title:
COLLATERAL AGENT:
BANKERS TRUST COMPANY
as Collateral Agent
By: ______________________________________
Name:
Title:
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
Number of Share Percentage
Issuer Pledged Shares Certificate Number of Outstanding
- ------ -------------- ------------------ --------------
<S> <C> <C> <C>
International Wireless 1,000 Shares 9 100%
Communications, Inc.
</TABLE>
<PAGE>
================================================================================
EXHIBIT A
(Form of Intercompany Note)
<PAGE>
EXHIBIT A
---------
FORM OF INTERCOMPANY NOTE
____________, 199_
San Mateo, California
NOTE
----
FOR VALUE RECEIVED, International Wireless Communications, Inc., a Delaware
corporation (the "Maker"), promises to pay to International Wireless
Communications Holdings, Inc., a Delaware corporation (the "Company"), or order,
the amount of principal advanced from time to time by the Company to such Maker
as reflected on the books and records of the Company, together with interest on
the unpaid principal amount at a rate per annum equal to ___%, from the date of
advance to the date of payment. All principal and accrued interest under this
Note shall be due and payable on demand.
This Note may be paid in whole or in part at any time without penalty or
premium.
The right to plead any and all statutes of limitations as a defense to
demand hereunder is hereby waived to the extent permitted by law. The Maker,
for itself and its successors and assigns, waives presentment, demand, protest
and notice thereof or of dishonor, and waives the right to be released by reason
of any extension of time or change in the terms of payment or any change,
alteration or release of any security given for the payment hereof. The Maker
hereby acknowledges that this Note may be pledged by the Company to the
Collateral Agent named below.
This Note shall be governed by and construed in accordance with the laws of
the State of _______________.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
[or Intermediate Holding Company]
By: _______________________________
Name:
Title:
Pay to the Order of:
BANKERS TRUST COMPANY,
as Collateral Agent
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By: _________________________
Name:
Title:
<PAGE>
===============================================================================
EXHIBIT B
(Form of Pledge Agreement)
<PAGE>
EXHIBIT B
FORM OF
INTERMEDIATE HOLDING COMPANY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as
of ______ ____, 199__ by International Wireless communications Inc., a Delaware
corporation (the "Company"), in favour of Bankers Trust Company, in its capacity
as collateral agent under the indenture, as hereinafter defined, and under any
Intercreditor Agreement (as defined in the Indenture) entered into pursuant to
the Indenture (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, International Wireless Communications Holdings, Inc., the
owner of all the issued and outstanding capital stock of the Company (the
"Parent"), and Marine Midland Bank, as trustee (the "Trustee"), have entered
into that certain Indenture dated as of August __,1996 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Parent issued $196,720,000 in aggregate
principal amount of 14% Senior Secured Discount Notes due 2001 (together with
any notes or debentures issued in replacement thereof or in exchange or
substitution therefor, the "Securities"): and
WHEREAS, the Company is the legal and beneficial owner of (i) all of
the issued and outstanding shares of Capital Stock set forth on Schedule I
hereto (the "Pledged Shares") of the ______ (the "Issuer"), a direct wholly
owned subsidiary of the Company, and (ii) those certain intercompany promissory
notes (if any) issued by the Issuer in favour of the Company (the "Pledged
Notes"), all of which Pledged Notes shall be substantially in the form of
Exhibit A hereto; and
WHEREAS, the terms of the Indenture require that the Company (i)
pledge to the Collateral Agent for the ratable benefit of the Secured Parties
(as defined herein), and grant to the Collateral Agent for the ratable benefit
of the Secured Parties a security interest in, the Collateral (as defined
herein) and (ii) execute and deliver this Agreement in order to secure the
Payment and performance by the Parent of all of the Secured Indebtedness (as
defined herein).
<PAGE>
NOW. THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge, the parties hereto agree as
follows:
Section 1. Definitions. for all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the meaning set forth below:
(a) The term "Secured Indebtedness" as used herein shall mean (i) any
and all obligations of the Parent with respect to the payment of principal of,
and premium and Additional Interest, if any, on, the Securities, of any amounts
payable upon any Repurchase Offer (as defined in the Indenture) or otherwise
pursuant to the Indenture or the Securities, (ii) any and all obligations of the
Parent under the Permitted Bank Facility, and (iii) any Collateral Agent
Obligation (as defined in any Intercreditor Agreement; provide, however, that
the maximum amount of indebtedness, liabilities and other monetary obligations
of the Parent to all Lenders under the Permitted to be incurred by the Parent
under the Indenture).
(b) The term "Secured Parties" as used herein shall mean (i) the
Trustee under the Indenture for itself and on behalf of the holders from time to
time of the securities, and (ii) the Lenders and any Agent for the Lenders (as
such terms are defined in any Intercreditor Agreement) and (iii) the Collateral
Agent Obligations.
(c) Other capitalized terms not defined herein which are defined in
the Indenture shall have the meanings ascribed thereto in the Indenture.
Section 2. Pledge. The Company hereby pledges to the Collateral Agent,
------
on behalf of and for the benefit of the Secured Parties, and grants to the
Collateral Agent, on behalf of and for the benefit of Secured Parties Parties, a
continuing first priority security interest in all of its right, title and
interest in the following (the "Collateral"):
(a) the pledged Shares and the certificates representing the Pledged
Shares, and all products and proceeds of any of the Pledged Shares including,
without limitation, all dividends, cash, options, warrants, rights, instruments,
subscriptions and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for or of the
Pledged Shares or any of the foregoing; and
(b) all additional shares of, and all securities convertible into all
warrants, options or other rights to purchase, Capital Stock of, or other Equity
Interest in, the Issuer from time to time acquired by the Company in any manner,
and the certificated representing such additional shares and Equity Interests
(any such additional shares and Equity Interests and other items shall
constitute part of the Pledged Shares under and as defined in this Agreement),
and all products and proceeds of any of the foregoing; and
<PAGE>
(c) the Pledged Notes and the instruments representing the Pledged
Notes, and all products and proceeds of the Pledged Notes, including,
without limitation, all interest, principal and premium payments, and all
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Pledged Notes or
any of the foregoing; and
(d) all additional promissory notes of the Issuer from time to time
held by the Company in any manner (any such additional promissory notes
shall constitute part of the Pledged Notes under and as defined in this
Agreement) and all products and proceeds of any of such additional Pledged
Notes, including, without limitation, all interest and principal payments,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
additional Pledged Notes or any of the foregoing.
Section 3. Security for Obligations. This Agreement secures the
------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration, by repurchase or otherwise) of all Secured
Indebtedness (including, without limitation, the obligations accruing after the
date of any filing by the Parent of any petition in bankruptcy of the
commencement of any bankruptcy, insolvency or similar proceeding with respect to
the Parent).
Section 4. Delivery of Collateral. The Company hereby agrees that
----------------------
all certificates or instruments representing or evidencing the Collateral shall
be immediately delivered to and held at all times by the Collateral Agent
pursuant hereto at the Collateral Agent's office in the State of New York and
shall be in suitable form for transfer by delivery, or issued in the name of the
Company and accompanied by instruments of transfer or assignment duly executed
in blank and undated, and in either case having attached thereto all requisite
federal or state stock transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent. All securities, whether certificated,
uncertificated or book entry, if any, representing or evidencing the Collateral
shall be registered in the name of the Collateral Agent or any of its nominees
by book entry or in any other appropriate manner that is acceptable to the
Collateral Agent, so as to properly identify the interest of the Collateral
Agent therein. In addition, the Collateral Agent shall have the right, at any
time following the occurrence of an Event of Default, in its discretion, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees or agents any or all of the Collateral. The Collateral Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing all or any portion of the Collateral for certificates or instruments
of smaller or larger denominations in the same aggregate amount.
Section 5. Representations and Warranties. The Company represents
------------------------------
and warrants that:
(a) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation
or of the certificate of incorporation or bylaws of the Company or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon
<PAGE>
the Company, or result in the creation or imposition of any Lien on any assets
of the Company, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued and
are fully paid and non-assessable. Each Pledge Note has been duly authorized and
executed by the maker thereof and constitutes a legal, valid and binding
obligation of such maker, enforceable against such maker in accordance with its
terms.
(c) The Pledged Shares constitute all of the authorized, issued and
outstanding Equity Interests of the Issuer and constitute all of the shares or
Equity Interests of the Issuer beneficially owned by the Company.
(d) All intercompany indebtedness of the Issuer to the Company is
evidenced by promissory notes substantially in the form of Exhibit A hereto; the
Pledged Notes constitute all of the promissory notes of the Issuer in favor of
the Company, and there are no other instruments, certificates, securities or
other writings or chattel paper, evidencing or representing any indebtedness of
the Issuer to the Company.
(e) The Company is the legal, record and beneficial owner of the
Collateral, free and clear of any Lien or claims of any Person except for the
security interest created by this Agreement.
(f) The Company has full power and authority to enter into this Agreement
and has the right to vote, pledge and grant a security interest in the
Collateral as provided by this Agreement.
(g) This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(h) Upon the delivery to the Collateral Agent of the Collateral and the
filing of Uniform Commercial Code (the "UCC") financing statements in the
jurisdictions listed on Exhibit B, the pledge of the Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in the
Collateral, securing the payment of the Secured Indebtedness for the benefit of
the Secured Parties, and is enforceable as such against all creditors of the
Company and any Persons purporting to purchase any of the Collateral from the
Company.
(i) Except as has been already obtained no consent of any other Person and
no consent, authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by the Company of the Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the Company
or (ii) for the exercise by the Collateral Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities).
<PAGE>
(j) No litigation, investigation or proceeding of or before any
arbitrator governmental authority is pending or, to the best knowledge of
the Company, threatened by or against the Company or against any of its
properties or revenues with respect to this agreement or any of the
transactions contemplated hereby.
(k) The pledge of the Collateral pursuant to this Agreement is not
prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation,
Regulations G, T, U, and X of the Board of Governors of the Federal Reserve
System).
(l) All information set forth herein relating to the Collateral is
accurate and complete in all material respects.
Section 6. Further Assurance. The Company will at times cause the
-----------------
security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Collateral, enforceable as
such against all creditors of the Company and (except as otherwise specifically
provided herein) any Persons purporting to purchase any Collateral from the
Company. The Company will, promptly upon request by the Collateral Agent,
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, tax stamps, assignments,
instruments and other documents, all in form and substance satisfactory to the
Collateral Agent, deliver any instruments to the Collateral Agent and take any
other actions that are necessary or, in the reasonable opinion of the Collateral
Agent, desirable to perfect, continue the perfection of, or protect the first
priority of the Collateral Agent's security interest in, the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, to enable the Collateral Agent to exercise or enforce its rights and
remedies hereunder, or otherwise to effect the purposes of this Agreement. The
Company also hereby authorizes the Collateral Agent to file any financing or
continuation statements with respect to the Collateral without the signature of
the Company to the extent permitted by applicable law (although the Collateral
Agent has no obligation to do so). The Company will pay all costs incurred in
connection with any of the foregoing. Promptly, upon request by the Collateral
Agent, the Company will provide the Collateral Agent with all documents,
instruments or information necessary, in the sole discretion of the Collateral
Agent, to satisfy its obligations under this Agreement.
<PAGE>
Section 7. Voting Rights; Dividends; Etc.
-----------------------------
(a) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Pledged Shares or any part thereof for any purpose
not inconsistent with the terms of this Agreement or the Indenture;
provided, however, that the Company shall not exercise or shall refrain
-------- -------
from exercising any such right if such action would violate any provisions
of this Agreement or the Indenture.
(b) So long as no Event of Default have occurred and be continuing
under the Indenture or any Intercreditor Agreement, the Company shall be
entitled to receive, and to utilize (subject to the provisions of the
Indenture) free and clear of the Lien of this Agreement, all cash payments
of principal and interest paid from time to time with respect to any
Pledged Notes.
(c) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, and subject
to the other terms and conditions of the Indenture, the Company shall be
entitled to receive, and to utilize (subject to provisions of the
Indenture) free and clear of the lien of this Agreement, all cash dividends
paid from time to time in respect of the Pledged Shares.
(d) Any and all (i) dividends, other distributions, interest and
principal payments paid or payable in the form of instruments and/or other
property (other than cash payments permitted under Section 7(b) hereof and
cash dividends permitted under Section 7(c) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Collateral,
(ii) dividends and other distributions paid or payable in cash in respect
of any Pledged Shares in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus
or paid-in-surplus, and (iii) cash paid, payable or otherwise distributed
in redemption of, or in exchange for any Collateral, shall, in each case,
be forthwith delivered to the Collateral Agent to hold as Collateral and
shall be, if received by the Company, held in trust for the benefit of the
Collateral Agent and the Secured Parties, be segregated from the other
property and funds of the Company and be forthwith delivered to the
Collateral Agent as Collateral in the same as so received (with any
necessary endorsements).
(e) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Company all such proxies and other
instruments as the Company may reasonably request for the purpose of
enabling the Company to exercise the voting and other rights that it is
entitled to exercise to Section 7(a) through 7(c) above.
(f) Upon the occurrence and during the continuance of an Event of
Default under the Indenture or any Intercreditor Agreement, (i) all rights
of the Company to exercise the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 7(a) shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent, which, to the extent permitted by law, shall thereupon have the sole
right to exercise such voting and other consensual rights, and (ii) all
cash interest payments and
<PAGE>
dividends and other distributions payable in respect of the Collateral
shall be paid to the Collateral Agent and the Company's right to receive
such cash payments pursuant to Section 7(b) and 7(c) hereof shall
immediately cease.
(g) Upon the occurrence and during the continuance of an Event of
Default under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), the Company shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent all such proxies,
dividend and interest payment orders and other instruments as Collateral
Agent may reasonably request for the purpose of enabling the Collateral
Agent to exercise the voting and other rights that it is entitled to
exercise pursuant to Section 7(f) above.
(h) All payments of interest, principal or premium and all dividends
and other distributions that are received by the Company contrary to the
provisions of this Section 7 shall be received in trust for the benefit of
the Collateral Agent and the Secured Parties, shall be segregated from the
other property or funds of the Company and shall be forthwith delivered to
the Collateral Agent as Collateral in the same form as so received (with
any necessary endorsements).
Section 8. Covenants. The Company hereby covenants and agrees with the
---------
Collateral Agent and the Secured Parties that it will comply with all of the
obligations, requirements and restrictions applicable to the Company contained
in the Indenture. The Company further covenants and agrees, from and after the
date of this Agreement and until the Secured Indebtedness has been paid in full,
as follows:
(a) The Company agrees that it will not (i) sell, assign, transfer,
convey or otherwise dispose of, or grant any option or warrant with respect
to, any of the Collateral without the prior written consent of the
Collateral Agent, (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the security interest granted
under this Agreement, and at all times will be the sole beneficial owner of
the Collateral, (iii) enter into any agreement or understanding that
purports to or that may restrict or inhibit the Collateral Agent's rights
or remedies hereunder, including, without limitation, the Collateral
Agent's right to sell or otherwise dispose of the Collateral, (iv) take any
action, or permit the taking of any action by the Issuer, with respect to
the Collateral the taking of which would result in a violation of the
Indenture or this Agreement, including, without limitation, the issuance by
the Issuer of any additional Equity Interests or promissory notes or the
incurrence by the Issuer of any Indebtedness, in each case to Persons other
than the Company (except as permitted by the Indenture), (v) upon the
occurrence and during the continuance of an Event of Default under the
Indenture (or other "Event of Default" as defined any Intercreditor
Agreement), enter into any agreement amending, modifying or supplementing
the interest, principal or maturity terms of the Pledged Notes in a manner
adverse to the interests of the Collateral Agent and the Secured Parties,
(vi) fail to give prompt notice to the Collateral Agent of any notice of
default given by or to the Company under or with respect to the Pledged
Notes together with a complete copy of such notice, (vii) permit the Issuer
to merge or consolidate with or into another person or entity or sell or
transfer all or substantially all or its assets to another person or entity
(except as permitted
<PAGE>
by the Indenture), or (viii) fail to pay or discharge any tax, assessment
or levy of any nature not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment with regard
to the Collateral.
(b) The Company agrees that immediately upon becoming the beneficial
of any additional shares of Capital Stock, promissory notes, other
securities or Equity Interest of the Issuer (including as a result of the
merger or consolidation of the Issuer with or into another entity) it will
pledge and deliver to the Collateral Agent for its benefit and the ratable
benefit of the Secured Parties and grant to the Collateral Agent for its
benefit and ratable benefit of the Secured Parties, a continuing first
priority security interest in such shares, promissory notes, other
securities or Equity Interests (as well as instruments of transfer or
assignment duly executed in blank and undated and any necessary stock
transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent). The Company further agrees that it will promptly (i)
cause the Issuer upon becoming indebted to the Company to executed a
promissory note in the form of Exhibit A hereto evidencing such debt in
order that such promissory note may be promptly pledged as a Pledged Note
pursuant hereto and (ii) deliver to the Collateral Agent and the Trustee an
Officers' Certificate in accordance with Section 11.05 of the Indenture
describing such additional promissory notes and certifying that the same
have been duly pledged and delivered to the Collateral Agent hereunder.
Section 9. Power of Attorney. The Company hereby appoints and
-----------------
constitutes the Collateral Agent as the Company's attorney-in-fact to exercise
all of the following powers upon and at any time after the occurrence of an
Event of Default: (i) collection of proceeds of any Collateral; (ii) conveyance
of any item of Collateral to any purchaser thereof; (iii) giving of any notices
or recording of any Liens under Section 6 hereof; (iv) making of any payments or
taking any acts under Section 10 hereof; and (v) paying or discharging taxes or
Liens levied or placed upon or threatened against the Collateral, the legality
or validity thereof and the amounts necessary to discharge the same to
determined by the Collateral Agent in its sole discretion, and such payments
made by the Collateral Agent to become the obligations of the Company to the
Collateral Agent, due and payable immediately without demand. The Collateral
Agent's authority hereunder shall include, without limitation, the authority to
endorse and negotiate, for the Collateral Agent's own account, any checks or
instruments in the name of the Company, execute and give receipt for any
certificate of ownership or any document, transfer title to any item of
Collateral, sign the Company's name on all financing statements or any other
documents deemed necessary or appropriate to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Company's name on any notice of Lien, and prepare, file and sign the
Company's name on a proof of claim in bankruptcy or similar document against any
creditor of the Company, and to take any other actions arising from or incident
to the powers granted to the Collateral Agent in this Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Company.
Section 10. Collateral Agents May Perform. If the Company fails to
-----------------------------
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause the performance of, such agreement and the reasonable expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Company under Section 15 hereof; provided, however, that the Collateral Agent
-------- -------
shall not be obligated to take any action under this Section 10 unless it is
instructed
<PAGE>
to do so by the Trustee and it is indemnified against any liability or loss in
connection with taking such action by the Trustee or the Lenders.
Section 11. No Assumption of Duties; Reasonable Care. The right and
----------------------------------------
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the Collateral Agent's and the Secured Parties' security
interest in and to the Collateral granted hereby and shall not be interpreted
to, and shall not, impose any duties on the Collateral Agent in connection
therewith. The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Collateral, whether or not the Collateral Agent
has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 12. Subsequent Changes Affecting Collateral. The Company
---------------------------------------
represents to the Collateral Agent and the Secured Parties that the Company has
made its own arrangements for keeping informed of changes or potential changes
affecting the Collateral (including, but not limited to, rights to convert,
rights to subscribe, payment of dividends, payments of interest and/or
principal, reorganization or other exchanges, tender offers and voting rights),
and the Company agrees that the Collateral Agent and the Secured Parties shall
have no responsibility or liability for informing the Company of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto. The Company covenants that it will not, without the
prior written consent of the Collateral Agent, vote to enable, or take any other
action to permit, the Issuer to issue any capital stock or other securities or
to sell or otherwise dispose of, or grant any option with respect to, any of the
Collateral, except for the security interests granted under this Agreement. The
Company will defend the right, title and interest of the Collateral Agent and
the Secured Parties in and to the Collateral against the claims and demands of
all Persons.
Section 13. Remedies Upon Default
---------------------
(a) If any Event of Default shall have occurred and be
continuing under the Indenture (or other "Event of Default" as defined in
any Intercreditor Agreement), the Collateral Agent and the Secured Parties
shall have, in addition to all other rights given by law or by this
Agreement or the Indenture, all of the rights and remedies with respect to
the Collateral of a secured party under the UCC as in effect in the State
of New York at that time. The Collateral Agent may, without notice and at
its option, transfer or register, and the Company shall register or cause
to be registered upon request therefor by the Collateral Agent, the
Collateral or any part thereof on the books of the Issuer, into the name of
the Collateral Agent or the Collateral Agent's nominee(s), or agent(s) with
or without any indication that such Collateral is subject to the security
interest hereunder. In addition, with respect to any Collateral that shall
then be in or shall thereafter come into the possession or custody of the
Collateral Agent, the Collateral Agent may sell or cause the same to be
sold at any broker's board or at a public or private sale, in one or more
sales or lots, at such price or prices as the Collateral Agent may deem
best, for cash or on credit or for future delivery, without assumption of
any credit risk. The purchaser of any or all Collateral so sold shall
<PAGE>
thereafter hold the same absolutely, free from any claim, encumbrance or right
of any kind whatsoever. Unless any of the Collateral threatens to decline in
value or is or becomes of a type sold on a recognized market, the Collateral
Agent will give the Company reasonable notice of the time and place of any
public sale therof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Collateral conducted in
conformity with reasonable commercial practices of banks, insurance companies,
commercial finance companies, or other financial institutions disposing of
property similar to the Collateral shall be deemed to be commercially
reasonable. Any requirements of reasonable notice shall be met if such notice is
mailed to the Company as provided below on Section 19.1, at least ten days
before the time of the sale or disposition. Any other requirement of notice,
demand or advertisement for sale is, to the extent permitted by law, waived. The
Collateral Agent or any Secured Party may, in its own name or in the name of a
designee or nominee, buy any of the Collateral at any public sale and, if
permitted by applicable law, at any private sale. Any expenses (including court
costs and reasonable attorneys' fees and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Collateral.
(b) If the Collateral Agent shall determine to exercise its right to sell
any or all of the Pledged Shares pursuant to Section 13(a) above, and if it in
the opinion of counsel for the Collateral Agent it is necessary, or if in the
opinion of the Collateral Agent it is advisable, to have the Pledged Shares or
that portion therof to be sold, registered under the provisions of the
Securities Act of 1933, as amended (the "Securities Act") the Company will cause
the Issuer to (i) execute and deliver, and cause its directors and officers to
execute and deliver, all at the Issuers' expense, all such instruments, and to
do or cause to be done all such other acts and things as may necessary or, in
the opinion of the Collateral Agent, advisable to register such Pledge Shares
under the provision of the Securities Acts, (ii) use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of 180 days from the date of the first public offering of
such Pledge Shares, or that portion thereof to be sold and (iii) make all
amendments thereto and/or to the related prospectus that, in the opinion of the
Collateral Agent, are necessary or advisable, all in conformity with the
requirement of the Securities Act and the rules and regulation of the Securities
and Exchange Commission applicable therof. The Company agrees to cause the
Issuer to comply with the provision of the securities or "Blue sky" laws of any
jurisdiction that the Collateral Agent shall designate for the sale of the
Pledge Shares and to make available to the Issuer's security holders, as soon as
practicable, an earning statement (which need not be audited) that will satisfy
the provision of Section 11(a) of the Securities Act. The Company will cause the
Issuer to furnish to the Collateral Agent such number off copies as the
Collateral Agent may reasonably request of each preliminary and final
prospectus, to notify the Collateral Agent promptly of the happening of any
event as a result of which any then effective prospectus includes an untrue
statement of aa material fact or omits to state material fact required of then
existing circumstances, and to cause the e Collateral Agent to be furnished with
such number of copies as the Collateral Agent may reasonably request of such
supplement to or amendment of such prospectus. The Company will cause the
Issuer, to extent permitted
<PAGE>
by law, to indemnify, defend and hold harmless the Collateral Agent and the
Secured Parties from and against all losses, liabilities, expenses or claims
(including reasonable legal expenses and the reasonable costs of investigation)
that the Collateral Agent or the Secured Parties may incur under the Securities
Act or otherwise, insofar as such losses, liabilities, expenses or claims arise
out of or are based upon any alleged untrue statement of a material fact
contained in such registration statement (or any amendment thereto) or in any
preliminary or final prospectus (or any amendment or supplement thereto), or
arise out of or are based upon any alleged omission to state a material fact
required to be state therein or necessary to make the statements therein not
misleading, except to the extent that any such losses, liabilities, expenses or
claims arise solely out of or are based upon any such alleged untrue statement
made or such alleged omission to state a material fact included or excluded on
the written direction of the Collateral Agent. The Company will cause the Issuer
to bear all reasonable costs and expenses of carrying out its obligation
hereunder.
(c) In view of the fact that federal and securities laws may impose
certain restrictions on the method by which a sale of the Collateral may be
effected after an Event of Default, the Company agrees that upon the occurrence
or existence of any Event of Default, the Collateral Agent may, from time to
time, attempt to sell or any of the Collateral by means of a private placement,
restricting the prospective purchasers to those who will represent and agree
that they are purchasing for investment only and not for distribution. In so
doing, the Collateral Agent may solicit offers to buy the Collateral, or any
part of it, for cash, from a limited number of investors who might be interested
in purchasing the Collateral. The Company acknowledges and agrees that any such
private sale may result in prices and terms less favorable than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Collateral Agent shall be under no obligation to delay a sale of any
of the Collateral for the period of time necessary to permit the Issuer to
register such securities for public sale under Securities Act, or under
applicable state securities laws, even if the Issuer agrees to do so.
(d) The Company further agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Section 13 valid and
binding and in compliance with any and all other applicable requirements of law.
The Company further agrees that a breach of any of the covenants contained in
this Section 13 will cause irreparable injury to the Collateral Agent and the
Secured Parties, that the Collateral Agent and the Secured Parties have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 13 shall be specifically
enforceable against the Company, and the Company hereby waives and agrees not to
assert any defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred under the Indenture.
(e) If the Collateral Agent deems it appropriate, the Collateral Agent
shall retain an investment bank or any other agent to perform or to assist it in
performing the obligations set forth in Section 13(b) and 13(c) hereof, whose
usual and customary fees and expenses shall be paid by the Company in accordance
with Section 15 hereof.
<PAGE>
Section 14. Irrevocable Authorization and Instruction to the Issuer.
-------------------------------------------------------
The Company hereby authorizes and instructs the Issuer to comply with any
instruction received by the Issuer from the Collateral Agent that (i) states
that an Event of Default has occurred and (ii) is otherwise in accordance with
the terms of this Agreement, without any other or further instructions from the
Company, and the Company agrees that the Issuer shall be fully protected in so
complying.
Section 15. Fees and Expenses. The Company will upon demand pay to
-----------------
the Collateral Agent the amount of any and all reasonable fees and expenses
(including, without limitation, the reasonable fees and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent and the Secured Parties
hereunder or (iv) the failure by the Company to perform or observe any of the
provisions hereof:
Section 16. Interest Absolute. All rights of the Collateral Agent
-----------------
and the Secured Parties and the security interests created hereunder, and all
obligations of the Company hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument evidencing or governing the Permitted Bank
Facility or any other Secured Indebtedness;
(b) any change in the time, manner or place or payment of, or in any
other term of, all or any of the Secured Indebtedness, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Secured Indebtedness;
or
(d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, the Parent of the Company in respect of
the Secured Indebtedness or of this Agreement.
Section 17. Application of Proceeds. Upon the occurrence and during
-----------------------
the continuance of an Event of Default under the Indenture, the proceeds of any
sale of, or tother realization upon, all or any part of the Collateral and any
cash held shall be applied by the Collateral Agent in the following order of
priorities:
first, to payment of the expenses of such sale of other realization,
-----
including reasonable compensation to agents and counsel for the Collateral
Agent, and all reasonable expenses, liabilities and advances incurred or made by
the Collateral Agent in connection therewith, and any other unreimbursed fees
and expenses for which the Collateral Agent is to be reimbursed pursuant to
Section 15 hereof.
<PAGE>
second, (i) if the Company has not entered into the Permitted Bank
------
Facility, to the Trustee for the payment of any and all obligations of the
Company with respect to the payment or principal of, and premium and Additional
Interest, if any, on, the Securities or any amounts payable upon any Repurchase
Offer or otherwise pursuant to the Indenture of the Securities or (ii) if the
Company has entered into the Permitted Bank Facility, pursuant to the terms of
the Intercreditor Agreement(s) relating thereto; and
finally, to payment to the Company or its successors or assigns, or as
-------
a court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
Section 18. Uncertificated Securities. Notwithstanding anything to
-------------------------
the contrary contained herein, if any Collateral (whether now owned or hereafter
acquired) is in the form of an uncertificated security, the Company shall
promptly notify the Collateral Agent, and shall promptly take all actions
required to perfect the security interest of the Collateral Agent under
applicable law (including, in any event, under Section 8-313 and 8-321 of the
New York Uniform Commercial Code) and shall certify to the Collateral Agent that
such security interest is perfected. The Company further agrees to take such
actions as the Collateral Agent deems necessary or desirable to effect the
foregoing and to permit the Collateral Agent to exercise any of its rights and
remedies hereunder, and agrees to provide an Opinion of Counsel satisfactory to
the Collateral Agent with respect to any such pledge of uncertificated
Collateral promptly upon request of the Collateral Agent.
Section 19. Miscellaneous Provisions.
------------------------
Section 19.1 Notices. All notices, approvals, consents or other
-------
communications required or desired to be given hereunder shall be, in the case
of the Company, delivered to [Name], [Address], [Attention:], [Telecopy No.] or,
in the case of any Lender, as provided in the relevant Section of the Permitted
Bank Facility, or, in the case of the Collateral Agent, to: Bankers Trust
Company, 4 Albany Street, New York, New York, Attention: Corporate Trust Agency.
Section 19.2 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Collateral Agent to take
any action or omit to take any action under this Agreement, the Parent shall
deliver to the Collateral Agent and the Trustee and Officers' Certificate and/or
Opinion of Counsel in accordance with the requirements of Section 11.04 of the
Indenture.
Section 19.3 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Agreement may not be used to interpret another pledge, security or debt
agreement of the Company, the Issuer or any subsidiary thereof. No such pledge,
security or debt agreement may be used to interpret this Agreement.
Section 19.4 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
<PAGE>
Section 19.5 No Recourse Against Others. No director, officer,
--------------------------
employee, stockholder or affiliate, as such, of the Company or the Issuer shall
have any liability for any obligations of the Company under this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Secured Party hereby waives and releases all such liability.
Section 19.6 Headings. The headings of the Articles and Sections of
--------
this Agreement have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 19.7 Counterpart Originals. This Agreement may be signed in
---------------------
two or more counterparts. Each signed copy shall be an original, but all of them
together represent one and the same agreement. Each counterpart may be executed
and delivered by telecopy, if such delivery is promptly followed by the original
manually signed copy sent by overnight courier.
Section 19.8 Benefits of Agreement. Nothing in this Agreement,
---------------------
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Secured Parties, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 19.9 Amendments, Waivers and Consents. Any amendment or
--------------------------------
waiver of any provision of this Agreement and any consent to any departure by
the Company from any provision of this Agreement shall be effective only if made
or given in compliance with all of the terms and provisions of the Indenture
necessary for amendments or waivers of, or consents to any departure by the
Parent from a provision of the Indenture, as applicable, and neither the
Collateral Agent nor any Secured Party shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. Failure of the Collateral
Agent or any Secured Party to exercise, or delay in exercising, any right, power
or privilege hereunder shall not operate as a waiver thereof. No single or
partial exercise or any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Collateral Agent or any Secured Party of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that the Collateral Agent or such Secured Party would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
Section 19.10 Interpretation of Agreement. Time is of the essence in
---------------------------
each provision of this Agreement of which time is an element. To the extent a
term or provision of this Agreement conflicts with the Indenture and is not
dealt with herein with more specificity, the Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant to determine the meaning of this Agreement even though the accepting
or acquiescing party had knowledge of the nature of the performance and
opportunity for objection.
<PAGE>
Section 19.11 Continuing Security Interest; Transfer of Securities.
----------------------------------------------------
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of all the
Secured Indebtedness, (ii) be binding upon the Company, its successors and
assigns, and (iii) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent, the Secured
Parties and their respective successors, transferees and assigns.
Section 19.12 Reinstatement. This Agreement shall continue to be
-------------
effective or be reinstated if at any time any amount received by the Collateral
Agent or any Secured Party in respect of the Secured Indebtedness is rescinded
or must otherwise be restored or returned by the Collateral Agent or any Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or upon the appointment or any receiver,
intervenor, conservator, trustee or similar official for the Company or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
Section 19.13 Survival of Provisions. All representations,
----------------------
warranties and covenants of the Company contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the company of the Secured Indebtedness.
Section 19.14 Waivers. The Company waives presentment and demand for
-------
payment of any of the Secured Indebtedness, protest and notice of dishonor or
default with respect to any of the Secured Indebtedness, and all other notices
to which the Company might otherwise be entitled, expect as otherwise expressly
provided herein or in the Indenture.
Section 19.15 Authority of the Collateral Agent.
---------------------------------
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by
the terms hereof, together with such powers as are reasonably incident
thereto. The Collateral Agent may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of
counsel concerning all such matters. Neither the Collateral Agent nor any
director, officer, employee, attorney or agent of the Collateral Agent
shall be responsible for the validity, effectiveness or sufficiency hereof
or of any document or security furnished pursuant hereto. The Collateral
Agent and its directors, officers, employees, attorneys and agents shall be
entitled to rely on any communication, instrument or document believed by
it or them to be genuine and correct and to have been signed or sent by the
proper person or persons. The Company, and the Parent, jointly and
severally, each agrees to indemnify and hold harmless the Collateral Agent,
the Secured Parties and any other Person from and against any and all
costs, expenses (including the reasonable fees and disbursements of counsel
(including, the allocated costs of counsel)), claims and liabilities
incurred by the Collateral Agent, the Secured Parties or such Person
hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of the Collateral Agent, the
Secured Parties or such Person.
<PAGE>
(b) The Company acknowledges that the rights and responsibilities of
the Collateral Agent under this Agreement with respect to any action taken
by the Collateral Agent or the exercise or non-exercise by the Collateral
Agent of any option, right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Collateral Agent and the Secured Parties, be governed by the
Indenture, any Intercreditor Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between
the Collateral Agent and the Company, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with
full and valid authority so to act or refrain from acting, and the Company
shall not be obligated or entitled to make any inquiry respecting such
authority.
Section 19.16 Release of Collateral; Termination of Agreement.
-----------------------------------------------
(a) Subject to the provisions of Section 19.12 hereof and Section
10.03 of the Indenture, this Agreement shall terminate upon the full and
final payment and performance of the Secured Indebtedness (and upon receipt
by the Collateral Agent of the Parent's written certification that all such
Secured Indebtedness has been satisfied) and payment in full of all fees
and expenses owing by the Company to the Collateral Agent. At such time,
the Collateral Agent shall, at the request of the Company, reassign and
redeliver to the Company all of the Collateral hereunder that has not been
sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof. Such reassignment and redelivery shall be
without warranty by or recourse to the Collateral Agent, except as to the
absence of any prior assignments by the Collateral Agent of its interest in
the Collateral, and shall be at the expense of the Company.
(b) The Company agrees that it will not, except as permitted by the
Indenture, sell or dispose of, or grant any option or warrant with respect
to, any of the Collateral.
Section 19.17 Final Expression. This Agreement, together with any
----------------
other agreement executed in connection herewith, is intended by the parties as a
final expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
Section 19.18 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
----------------------------------------------------
JURY TRIAL; WAIVER OF DAMAGES.
- -----------------------------
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE COLLATERAL AGENT AND THE SECURED PARTIES IN CONNECTION WITH THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi)
BELOW, THE COMPANY, THE COLLATERAL AGENT AND THE
<PAGE>
SECURED PARTIES AGREE THAT ALL DISPUTES BETWEEN OR AMONG THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS
LOCATED IN NEW YORK, NEW YORK. THE COMPANY WAIVES IN ALL DISPUTES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS.
(iii) THE COMPANY AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN
NAME OR IN THE NAME AND ON BEHALF OF ANY SECURED PARTY, HAVE THE RIGHT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE COMPANY OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE COMPANY WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
COLLATERAL AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(iv) THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED
IN A BENCH TRIAL WITHOUT A JURY.
(v) THE COMPANY HERBY IRREVOCABLY DESIGNATES CT CORPORATION AS THE
DESIGNEE, APPOINTEE AND AGENT OF THE COMPANY TO RECEIVE, FOR AND ON BEHALF OF
THE COMPANY, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT. IT IS UNDERSTOOD THAT NOTICE AND A COPY OF SUCH PROCESS
SERVED ON SUCH AGENT, WILL BE FORWARDED PROMPTLY TO THE COMPANY, BUT THE FAILURE
OF THE COMPANY TO RECEIVE SUCH NOTICE AND COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH IN SECTION 11.02 OF THE
INDENTURE, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) BUSINESS DAYS AFTER SUCH
MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT
OR ANY SECURED PARTY TO SERVE PROCESS IN ANY OTHER
<PAGE>
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(vii) THE COMPANY HEREBY AGREES THAT NEITHER THE COLLATERAL AGENT
NOR ANY SECURED PARTY SHALL HAVE ANY LIABILITY TO THE COMPANY (WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE COMPANY IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR
SUCH SECURED PARTY, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS
OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH SECURED PARTY, AS THE
CASE MAY BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(viii) THE COMPANY WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY SECURED PARTY OF ITS
RIGHTS DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL
WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR
OTHER SECURITY FOR THE OBLIGATIONS. THE COMPANY WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY SECURED PARTY DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR
OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE COLLATERAL AGENT OR ANY SECURED PARTY, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN THE
COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES.
Section 19.19 Acknowledgements of Company. The Company hereby
---------------------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement;
(b) neither the Collateral Agent nor any Secured Party has any
fudiciary relationship to the Company, and the relationship between the
Collateral Agent and the Secured Parties, on the one hand, and the Company,
on the other hand, is solely that of a secured party and a creditor; and
(c) no joint venture exists among the Secured Parties or among the
Company and the Secured Parties.
<PAGE>
Section 19.20 Acknowledgments of the Issuer. The Issuer hereby
-----------------------------
acknowledges and agrees to be bound by this Agreement and to comply with the
terms thereof insofar as such terms are applicable to it. The Issuer further
agrees (i) to notify the Collateral Agent promptly in writing of the occurrence
of any of the events described in Section 8(b) of this Agreement and (ii) that
the terms of Section 13(b) of this Agreement shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it under or
pursuant to or arising out of such section.
[Signature Page Follows]
<PAGE>
[Pledge Agreement Signature Page]
IN WITNESS WHEREOF, the Company and the Collateral Agent have each caused
this Agreement to be duly executed and delivered as of the date first above
written.
COMPANY:
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.,
a Delaware corporation
By: _________________________________________
Name:
Title:
COLLATERAL AGENT:
BANKERS TRUST COMPANY
as Collateral Agent
By: _________________________________________
Name:
Title:
ACKNOWLEDGES AND AGREED TO:
[ISSUER]
<PAGE>
SCHEDULE 1
----------
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
Number of Share Percentage
Issuer Pledged Shares Certificate Number of Outstanding
- ------ -------------- ------------------ --------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
---------
FORM OF INTERCOMPANY NOTE
___________, 199_
NOTE
----
FOR VALUE RECEIVED, _______________________, a ________ corporation (the
"Maker"), promises to pay to International Wireless Communications, Inc., a
Delaware corporation (the "Company"), or order, the amount of principal advanced
from time to time by the Company to such Maker as reflected on the books and
records of the Company, together with interest on the unpaid principal amount at
a rate per annum equal to ___%, from the date of advance to the date of payment.
All principal and accrued interest under this Note shall be due and payable on
demand.
This Note may be paid in whole or in part at any time without penalty or
premium.
The right to plead any and all statutes of limitations as a defense to
demand hereunder is hereby waived to the extent permitted by law. The Maker, for
itself and its successors and assigns, waives presentment, demand, protest and
notice thereof or of dishonor, and waives the right to be released by reason of
any extension of time or change in the terms of payment or any change,
alteration or release of any security given for the payment hereof. The Maker
hereby acknowledges that this Note may be pledged by the Company to the
Collateral Agent named below.
This Note shall be governed by and construed in accordance with the laws of
the State of __________________.
__________________________
By: __________________________
Name:
Title:
Pay to the Order of:
Bankers Trust Company,
as Collateral Agent
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
By: ______________________
Name:
Title:
<PAGE>
================================================================================
EXHIBIT B
(UCC Jurisdictions)
[to be provided]
================================================================================
<PAGE>
================================================================================
EXHIBIT E
(TRANSFERS TO NON-QIB ACCREDITED INVESTORS)
E-i
<PAGE>
EXHIBIT E
(Transfers to Non-QIB Accredited Investors)
______________, ____
BANKERS TRUST COMPANY, as Registrar
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
14% Senior Secured Discount Notes due 2001
------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 14% Senior Secured Notes
due 2001 (the "Securities") of International Wireless Communications Holdings,
Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated August 9, 1996, relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to matters stated on pages 3 and 4 of
the Offering Memorandum and in the section entitled "Transfer Restrictions" of
the Offering Memorandum, including the restrictions on duplication and
circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which
E-ii
<PAGE>
we are acting as hereinafter stated, that if we should sell any Securities, we
will do so only (i) to the Company or any of its subsidiaries, (ii) for so long
as the Securities are eligible for resale pursuant to Rule 144A under the
Securities Act ("Rule 144A"), in accordance with Rule 144A to a "qualified
institutional buyer" (as defined in Rule 144A), (iii) to non-U.S. Persons
outside the United States in accordance with Regulation S under the Securities
Act, (iv) to an institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee and the Registrar (each as defined in the
Indenture relating to the Securities), a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Securities (the form of which letter can be obtained from the Trustee and the
Registrar), (v) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will
not transfer the Securities to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974 as amended),
except as permitted in the section entitled "Transfer Restrictions" of the
Offering Memorandum.
5. We understand that, on any proposed resale of any Securities, we will
be required to furnish to the Trustee, the Registrar and the Company, such
certifications, legal opinions and other information as the Trustee, the
Registrar and the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We acknowledge that the Trustee,
the Registrar and the Company will rely upon the truth and accuracy of such
information. We further understand that the Securities purchased by us will bear
a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule 501
(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Securities, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion. We are not acquiring
the Securities with a view toward distribution thereof in a transaction that
would violate the Securities Act or the securities laws of any State of the
United States or any other applicable jurisdiction.
E-iii
<PAGE>
You, the Company and the Trustee (as defined in the Indenture relating
to the Securities) are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any administrative or
legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
by:______________________________
Name:
Title:
E-iv
<PAGE>
================================================================================
EXHIBIT F
(FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S)
__________________, _____
Bankers Trust Company, as Registrar
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: International Wireless Communication Holdings, Inc.
(the "Company") 14% Senior Secured Discount Notes
Due 2001 (the "Securities")
-------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $_______ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1993,
as amended (the "Securities Act"), and, accordingly, we represent that:
1. The offer of the Securities was not made to a person in the United
States or to a U.S. Person;
2. Either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States and a
non-U.S. Person, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
3. No directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
F-i
<PAGE>
4. The transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
5. We have advised the transferee of the transfer restrictions applicable
to the Securities.
You, the Trustee (as defined in the Indenture relating to the
Securities) and the Company are entitled to reply upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meaning set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By_________________________________
Authorized Signature
F-ii
<PAGE>
EXHIBIT 4.2
-----------
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as
of August 15, 1996 by International Wireless Communications Holdings, Inc., a
Delaware corporation (the "Company") and International Wireless Communications,
Inc., a Delaware corporation (the "Issuer"), in favor of Bankers Trust Company,
in its capacity as collateral agent under the Indenture, as hereinafter defined,
and under any Intercreditor Agreement (as defined in the Indenture) entered into
pursuant to the Indenture (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company and Marine Midland Bank, as trustee (the
"Trustee"), have entered into that certain Indenture dated as of August 15, 1996
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Indenture"), pursuant to which the Company issued $196,720,000 in
aggregate principal amount of 14% Senior Secured Discount Notes due 2001
(together with any notes or debentures issued in replacement thereof or in
exchange or substitution therefor, the "Securities"); and
WHEREAS, pursuant to the Indenture, the Company is permitted to enter
into a Permitted Bank Facility (as defined in the Indenture), which credit
facility may be secured equally and ratably by the collateral securing amounts
owing under the Indenture and the Securities; and
WHEREAS, the Company is the legal and beneficial owner of (i) all of
the issued and outstanding shares of Capital Stock set forth on Schedule I
hereto (the "Pledged Shares") of the Issuer, a direct wholly owned subsidiary of
Company, and (ii) those certain intercompany promissory notes (if any) issued by
the Issuer or any Intermediate Holding Company (as defined in the Indenture) in
favor of the Company (the "Pledged Notes"), all of which Pledged Notes shall be
in the form of Exhibit A hereto; and
WHEREAS, the terms of the Indenture require that the Company (i)
pledge to the Collateral Agent for the ratable benefit of the Secured Parties
(as defined herein), and grant to the Collateral Agent for the ratable benefit
of the Secured Parties a security interest in, the Collateral (as defined
herein) and (ii) execute and deliver this Agreement in order to secure the
payment and performance by the Company of all of the Secured Indebtedness (as
defined herein).
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. For all purposes of this Agreement, except
-----------
as otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the meanings set forth below:
(a) The term "Secured Indebtedness" as used herein shall mean (i)
any and all obligations of the Company with respect to the payment of principal
of, and premium and Additional Interest, if any, on, the Securities, or any
amounts payable upon any Repurchase Offer (as defined in the Indenture) or
otherwise pursuant to the Indenture or the Securities, (ii) any and all
obligations of the Company under the Permitted Bank Facility, and (iii) any
Collateral Agent Obligations (as defined in any Intercreditor Agreement) and any
other obligations of the Company to the Collateral Agent under this Agreement or
any Intercreditor Agreement; provided, however, that the maximum amount of
-------- -------
indebtedness, liabilities and other monetary obligations of the Company to all
Lenders under the Permitted Bank Facility shall not exceed $20 million (or such
other amount permitted to be incurred by the Company under the Indenture).
(b) The term "Secured Parties" as used herein shall mean (i) the
Trustee under the Indenture for itself and on behalf of the holders from time to
time of the Securities, and (ii) the Lenders and any Agent for the Lenders (as
such terms are defined in any Intercreditor Agreement) and (iii) the Collateral
Agent, in respect of the Collateral Agent Obligations.
(c) Other capitalized terms not defined herein which are defined in
the Indenture shall have the meanings ascribed thereto in the Indenture.
Section 2. Pledge.
------
Section 2.1 Collateral. The Company hereby pledges to the Collateral
----------
Agent, on behalf of and for the benefit of the Secured Parties, and grants to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties, a
continuing first priority security interest in all of its right, title and
interest in the following (the "Collateral"):
(a) the Pledged Shares and the certificates representing the
Pledged Shares, and all products and proceeds of any of the Pledged Shares,
including, without limitation, all dividends, cash, options, warrants,
rights, instruments, subscriptions and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares or any of the foregoing; and
(b) all additional shares of, and all securities convertible into
and all warrants, options or other rights to purchase, Capital Stock of, or
other Equity Interests in, the Issuer from time to time acquired by the
Company in any manner, and the certificates representing such additional
shares and Equity Interests (any such additional shares and Equity
Interests
2
<PAGE>
and other items shall constitute part of the Pledged Shares under and as
defined in this Agreement), and all products and proceeds of any of the
foregoing, including, without limitation, all dividends, cash, options,
warrants, rights, instruments, subscriptions, and other proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing; and
(c) the Pledged Notes and the instruments representing the Pledged
Notes, and all products and proceeds of the Pledged Notes, including,
without limitation, all interest, principal and premium payments, and all
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Pledged Notes or
any of the foregoing; and
(d) all additional promissory notes of the Issuer or any
Intermediate Holding Company from time to time held by the Company in any
manner (any such additional promissory notes shall constitute part of the
Pledged Notes under and as defined in this Agreement) and all products and
proceeds of any of such additional Pledged Notes, including, without
limitation, all interest and principal payments, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such additional Pledged Notes
or any of the foregoing.
Section 2.2 Pledge by the Issuer. The Issuer hereby agrees that
--------------------
prior to forming or acquiring an interest in any Domestic Intermediate Holding
Company, it shall execute and deliver to the Collateral Agent a pledge
agreement, in the form of Exhibit B hereto pursuant to which it will pledge to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties,
and grant to the Collateral Agent, on behalf of and for the benefit of the
Secured Parties, a continuing first priority security interest in all of its
right, title and interest in (i) all of the issued and outstanding shares of
Capital Stock of any such Domestic Intermediate Holding Company and (ii) any
intercompany promissory notes issued by any Domestic Intermediate Holding
Company to the Issuer, all of which notes shall be substantially in the form of
Exhibit A hereto, in each case together with the products and proceeds thereof
and all certificates, instruments, rights and other interests relating thereto.
The Issuer further agrees promptly, upon request by the Collateral Agent, to
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, assignments, instruments and
other documents, all in form and substance satisfactory to the Collateral Agent,
and to take any other actions that are necessary or, in the opinion of the
Collateral Agent, desirable to perfect, continue the perfection of, or protect
the first priority of the Collateral Agent's security interest in the property
described in clauses (i) and (ii) above, to protect such property against the
rights, claims or interests of third person or otherwise to effect the purposes
of this covenant. The Issuer will pay all costs incurred in connection with any
of the foregoing.
Section 3. Security for Obligations. This Agreement secures the
------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration, by repurchase or otherwise) of all Secured
Indebtedness (including, without limitation, the obligations accruing after the
date of any filing by the Company of any petition in bankruptcy or the
3
<PAGE>
commencement of any bankruptcy, insolvency or similar proceeding with respect to
the Company).
Section 4. Delivery of Collateral. The Company hereby agrees that
----------------------
all certificates or instruments representing or evidencing the Collateral shall
be immediately delivered to and held at all times by the Collateral Agent
pursuant hereto at the Collateral Agent's office in the State of New York and
shall be in suitable form for transfer by delivery, or issued in the name of the
Company and accompanied by instruments of transfer or assignment duly executed
in blank and undated, and in either case having attached thereto all requisite
federal or state stock transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent. All securities, whether certificated,
uncertificated or book entry, if any, representing or evidencing the Collateral
shall be registered in the name of the Collateral Agent or any of its nominees
by book entry or in any other appropriate manner that is acceptable to the
Collateral Agent, so as to properly identify the interest of the Collateral
Agent therein. In addition, the Collateral Agent shall have the right, at any
time following the occurrence of an Event of Default, in its discretion, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees or agents any or all of the Collateral. The Collateral Agent shall
have the right at any time to exchange certificates or instruments representing
or evidencing all or any portion of the Collateral for certificates or
instruments of smaller or larger denominations in the same aggregate amount.
Section 5. Representations and Warranties. The Company hereby makes
------------------------------
all representations and warranties applicable to the Company contained in the
Indenture. The Company further represents and warrants that:
(a) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation
or of the certificate of incorporation or bylaws of the Company or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Company, or result in the creation or imposition of any Lien on
any assets of the Company, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable. Each Pledged Note has been duly
authorized and executed by the maker thereof and constitutes a legal, valid
and binding obligation of such maker, enforceable against such maker in
accordance with its terms.
(c) The Pledged Shares constitute all of the authorized, issued and
outstanding Equity Interests of the Issuer and constitute all of the shares
or Equity Interests of the Issuer beneficially owned by the Company.
(d) All intercompany indebtedness of the Issuer and each
Intermediate Holding Company to the Company is evidenced by promissory
notes substantially in the form of Exhibit A hereto; the Pledged Notes
constitute all of the promissory notes of the Issuer and
4
<PAGE>
each Intermediate Holding Company in favor of the Company, and there are no
other instruments, certificates, securities or other writings or chattel
paper, evidencing or representing any indebtedness of the Issuer or any
Intermediate Holding Company to the Company.
(e) The Company is the legal, record and beneficial owner of the
Collateral, free and clear of any Lien or claims of any Person except for
the security interest created by this Agreement.
(f) The Company has full power and authority to enter into this
Agreement and has the right to vote, pledge and grant a security interest
in the Collateral as provided by this Agreement.
(g) This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(h) Upon the delivery to the Collateral Agent of the Collateral and
the filing of Uniform Commercial Code (the "UCC") financing statements in
the jurisdictions listed on Exhibit C, the pledge of the Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the Secured
Indebtedness for the benefit of the Secured Parties, and is enforceable as
such against all creditors of the Company and any Persons purporting to
purchase any of the Collateral from the Company.
(i) Except as has been already obtained, no consent of any other
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the pledge by the Company of the Collateral
pursuant to this Agreement or for the execution, delivery or performance of
this Agreement by the Company or (ii) for the exercise by the Collateral
Agent of the voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement (except as
may be required in connection with such disposition by laws affecting the
offering and sale of securities).
(j) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the best knowledge
of the Company, threatened by or against the Company or against any of its
properties or revenues with respect to this Agreement or any of the
transactions contemplated hereby.
(k) The pledge of the Collateral pursuant to this Agreement is not
prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without
5
<PAGE>
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System).
(l) All information set forth herein relating to the Collateral is
accurate and complete in all material respects.
Section 6. Further Assurance. The Company will at all times cause
-----------------
the security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Collateral, enforceable as
such against all creditors of the Company and (except as otherwise specifically
provided herein) any Persons purporting to purchase any Collateral from the
Company. The Company will, promptly upon request by the Collateral Agent,
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, tax stamps, assignments,
instruments and other documents, all in form and substance satisfactory to the
Collateral Agent, deliver any instruments to the Collateral Agent and take any
other actions that are necessary or, in the reasonable opinion of the Collateral
Agent, desirable to perfect, continue the perfection of, or protect the first
priority of the Collateral Agent's security interest in, the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, to enable the Collateral Agent to exercise or enforce its rights and
remedies hereunder, or otherwise to effect the purposes of this Agreement. The
Company also hereby authorizes the Collateral Agent to file any financing or
continuation statements with respect to the Collateral without the signature of
the Company to the extent permitted by applicable law (although the Collateral
Agent has no obligation to do so). The Company will pay all costs incurred in
connection with any of the foregoing. Promptly, upon request by the Collateral
Agent, the Company will provide the Collateral Agent with all documents,
instruments or information necessary, in the sole discretion of the Collateral
Agent, to satisfy its obligations under this Agreement.
Section 7. Voting Rights; Dividends; Etc.
-----------------------------
(a) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Pledged Shares or any part thereof for any purpose
not inconsistent with the terms of this Agreement or the Indenture;
provided, however, that the Company shall not exercise or shall refrain
from exercising any such right if such action would violate any provisions
of this Agreement or the Indenture.
(b) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to receive, and to utilize (subject to the provisions of
the Indenture) free and clear of the Lien of this Agreement, all cash
payments of principal and interest paid from time to time with respect to
any Pledged Notes.
(c) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, and subject
to the other terms and conditions
6
<PAGE>
of the Indenture, the Company shall be entitled to receive, and to utilize
(subject to the provisions of the Indenture) free and clear of the Lien of
this Agreement, all cash dividends paid from time to time in respect of the
Pledged Shares.
(d) Any and all (i) dividends, other distributions, interest and
principal payments paid or payable in the form of instruments and/or other
property (other than cash payments permitted under Section 7(b) hereof and
cash dividends permitted under Section 7(c) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Collateral,
(ii) dividends and other distributions paid or payable in cash in respect
of any Pledged Shares in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus
or paid-in-surplus, and (iii) cash paid, payable or otherwise distributed
in redemption of, or in exchange for any Collateral, shall, in each case,
be forthwith delivered to the Collateral Agent to hold as Collateral and
shall be, if received by the Company, held in trust for the benefit of the
Collateral Agent and the Secured Parties, be segregated from the other
property and funds of the Company and be forthwith delivered to the
Collateral Agent as Collateral in the same form as so received (with any
necessary endorsements).
(e) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Company all such proxies and other
instruments as the Company may reasonably request for the purpose of
enabling the Company to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 7(a) through 7(c) above.
(f) Upon the occurrence and during the continuance of an Event of
Default under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), (i) all rights of the Company to exercise the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 7(a) shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which, to the extent
permitted by law, shall thereupon have the sole right to exercise such
voting and other consensual rights, and (ii) all cash interest payments and
dividends and other distributions payable in respect of the Collateral
shall be paid to the Collateral Agent and the Company's right to receive
such cash payments pursuant to Section 7(b) and 7(c) hereof shall
immediately cease.
(g) Upon the occurrence and during the continuance of an Event of
Default under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), the Company shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent all such proxies,
dividend and interest payment orders and other instruments as Collateral
Agent may reasonably request for the purpose of enabling the Collateral
Agent to exercise the voting and other rights that it is entitled to
exercise pursuant to Section 7(f) above.
(h) All payments of interest, principal or premium and all
dividends and other distributions that are received by the Company contrary
to the provisions of this Section 7
7
<PAGE>
shall be received in trust for the benefit of the Collateral Agent and the
Secured Parties, shall be segregated from the other property or funds of
the Company and shall be forthwith delivered to the Collateral Agent as
Collateral in the same form as so received (with any necessary
endorsements).
Section 8. Covenants. The Company hereby covenants and agrees with
---------
the Collateral Agent and the Secured Parties that it will comply with all of the
obligations, requirements and restrictions applicable to the Company contained
in the Indenture. The Company further covenants and agrees, from and after the
date of this Agreement and until the Secured Indebtedness has been paid in full,
as follows:
(a) The Company agrees that it will not (i) sell, assign, transfer,
convey or otherwise dispose of, or grant any option or warrant with respect
to, any of the Collateral without the prior written consent of the
Collateral Agent, (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the security interest granted
under this Agreement, and at all times will be the sole beneficial owner of
the Collateral, (iii) enter into any agreement or understanding that
purports to or that may restrict or inhibit the Collateral Agent's rights
or remedies hereunder, including, without limitation, the Collateral
Agent's right to sell or otherwise dispose of the Collateral, (iv) take any
action, or permit the taking of any action by the Issuer or any
Intermediate Holding Company, with respect to the Collateral the taking of
which would result in a violation of the Indenture or this Agreement,
including, without limitation, the issuance by the Issuer of any additional
Equity Interests or promissory notes or the incurrence by the Issuer or any
Intermediate Holding Company of any Indebtedness, in each case to Persons
other than the Company (except as permitted by the Indenture), (v) upon the
occurrence and during the continuance of an Event of Default under the
Indenture (or other "Event of Default" as defined in any Intercreditor
Agreement), enter into any agreement amending, modifying or supplementing
the interest, principal or maturity terms of the Pledged Notes in a manner
adverse to the interests of the Collateral Agent and the Secured Parties,
(vi) fail to give prompt notice to the Collateral Agent of any notice of
default given by or to the Company under or with respect to the Pledged
Notes together with a complete copy of such notice, (vii) permit the Issuer
or any Intermediate Holding Company to merge or consolidate with or into
another person or entity or sell or transfer all or substantially all of
its assets to another person or entity (except as permitted by the
Indenture), or (viii) fail to pay or discharge any tax, assessment or levy
of any nature not later than five days prior to the date of any proposed
sale under any judgment, writ or warrant of attachment with regard to the
Collateral.
(b) The Company agrees that immediately upon becoming the
beneficial owner of any additional shares of Capital Stock, promissory
notes, other securities or Equity Interests of the Issuer or any
Intermediate Holding Company (including as a result of the merger or
consolidation of the Issuer or any Intermediate Holding Company with or
into another entity) it will pledge and deliver to the Collateral Agent for
its benefit and the ratable benefit of the Secured Parties and grant to the
Collateral Agent for its benefit and the ratable
8
<PAGE>
benefit of the Secured Parties, a continuing first priority security
interest in such shares, promissory notes, other securities or Equity
Interests (as well as instruments of transfer or assignment duly executed
in blank and undated and any necessary stock transfer tax stamps, all in
form and substance satisfactory to the Collateral Agent). The Company
further agrees that it will promptly (i) cause the Issuer and any
Intermediate Holding Company upon becoming indebted to the Company to
execute a promissory note in the form of Exhibit A hereto evidencing such
debt in order that such promissory note may be promptly pledged as a
Pledged Note pursuant hereto and (ii) deliver to the Collateral Agent and
the Trustee an Officers' Certificate in accordance with Section 11.05 of
the Indenture describing such additional promissory notes and certifying
that the same have been duly pledged and delivered to the Collateral Agent
hereunder.
Section 9. Power of Attorney. In addition to all of the powers
-----------------
granted to the Collateral Agent pursuant to the Indenture, the Company hereby
appoints and constitutes the Collateral Agent as the Company's attorney-in-fact
to exercise all of the following powers upon and at any time after the
occurrence of an Event of Default: (i) collection of proceeds of any
Collateral; (ii) conveyance of any item of Collateral to any purchaser thereof;
(iii) giving of any notices or recording of any Liens under Section 6 hereof;
(iv) making of any payments or taking any acts under Section 10 hereof; and (v)
paying or discharging taxes or Liens levied or placed upon or threatened against
the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole
discretion, and such payments made by the Collateral Agent to become the
obligations of the Company to the Collateral Agent, due and payable immediately
without demand. The Collateral Agent's authority hereunder shall include,
without limitation, the authority to endorse and negotiate, for the Collateral
Agent's own account, any checks or instruments in the name of the Company,
execute and give receipt for any certificate of ownership or any document,
transfer title to any item of Collateral, sign the Company's name on all
financing statements or any other documents deemed necessary or appropriate to
preserve, protect or perfect the security interest in the Collateral and to
file the same, prepare, file and sign the Company's name on any notice of Lien,
and prepare, file and sign the Company's name on a proof of claim in bankruptcy
or similar document against any creditor of the Company, and to take any other
actions arising from or incident to the powers granted to the Collateral Agent
in this Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Company.
Section 10. Collateral Agent May Perform. If the Company fails to
----------------------------
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause the performance of, such agreement, and the reasonable expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Company under Section 15 hereof; provided, however, that the Collateral Agent
-------- -------
shall not be obligated to take any action under this Section 10 unless it is
instructed to do so by the Trustee and it is indemnified against any liability
or loss in connection with taking such action by the Trustee or the Lenders.
Section 11. No Assumption of Duties; Reasonable Care. The right and
----------------------------------------
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the
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<PAGE>
Collateral Agent's and the Secured Parties' security interest in and to the
Collateral granted hereby and shall not be interpreted to, and shall not, impose
any duties on the Collateral Agent in connection therewith. The Collateral Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Collateral Agent accords its own
property, it being understood that the Collateral Agent shall not have any
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral.
Section 12. Subsequent Changes Affecting Collateral. The Company
---------------------------------------
represents to the Collateral Agent and the Secured Parties that the Company has
made its own arrangements for keeping informed of changes or potential changes
affecting the Collateral (including, but not limited to, rights to convert,
rights to subscribe, payment of dividends, payments of interest and/or
principal, reorganization or other exchanges, tender offers and voting rights),
and the Company agrees that the Collateral Agent and the Secured Parties shall
have no responsibility or liability for informing the Company of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto. The Company covenants that it will not, without
the prior written consent of the Collateral Agent, vote to enable, or take any
other action to permit, the Issuer to issue any capital stock or other
securities or to sell or otherwise dispose of, or grant any option with respect
to, any of the Collateral, except for the security interests granted under this
Agreement. The Company will defend the right, title and interest of the
Collateral Agent and the Secured Parties in and to the Collateral against the
claims and demands of all Persons.
Section 13. Remedies Upon Default
---------------------
(a) If any Event of Default (or other "Event of Default" as defined
in any Intercreditor Agreement) shall have occurred and be continuing under
the Indenture, the Collateral Agent and the Secured Parties shall have, in
addition to all other rights given by law or by this Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral of
a secured party under the UCC as in effect in the State of New York at that
time. The Collateral Agent may, without notice and at its option, transfer
or register, and the Company shall register or cause to be registered upon
request therefor by the Collateral Agent, the Collateral or any part
thereof on the books of the Issuer or any Intermediate Holding Company, as
the case may be, into the name of the Collateral Agent or the Collateral
Agent's nominee(s) or agent(s), with or without any indication that such
Collateral is subject to the security interest hereunder. In addition, with
respect to any Collateral that shall then be in or shall thereafter come
into the possession or custody of the Collateral Agent, the Collateral
Agent may sell or cause the same to be sold at any broker's board or at a
public or private sale, in one or more sales or lots, at such price or
prices as the Collateral Agent may deem best, for cash or on credit or for
future delivery, without assumption of any credit risk. The purchaser of
any or all Collateral so sold shall thereafter hold the same absolutely,
free from any claim, encumbrance or right of any kind whatsoever. Unless
any
10
<PAGE>
of the Collateral threatens to decline speedily in value or is or becomes
of a type sold on a recognized market, the Collateral Agent will give the
Company reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended disposition
is to be made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of banks, insurance companies, commercial
finance companies, or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially reasonable.
Any requirements of reasonable notice shall be met if such notice is mailed
to the Company as provided below in Section 19.1, at least ten days before
the time of the sale or disposition. Any other requirement of notice,
demand or advertisement for sale is, to the extent permitted by law,
waived. The Collateral Agent or any Secured Party may, in its own name or
in the name of a designee or nominee, buy any of the Collateral at any
public sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other
disposition of the Collateral.
(b) If the Collateral Agent shall determine to exercise its right
to sell any or all of the Pledged Shares pursuant to Section 13(a) above,
and if in the opinion of counsel for the Collateral Agent it is necessary,
or if in the opinion of the Collateral Agent it is advisable, to have the
Pledged Shares or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Company will cause the Issuer to (i) execute and deliver, and
cause its directors and officers to execute and deliver, all at the
Issuer's expense, all such instruments and documents, and to do or cause to
be done all such other acts and things as may be necessary or, in the
opinion of the Collateral Agent, advisable to register such Pledged Shares
under the provisions of the Securities Act, (ii) use its best efforts to
cause the registration statement relating thereto to become effective and
to remain effective for a period of 180 days from the date of the first
public offering of such Pledged Shares, or that portion thereof to be sold
and (iii) make all amendments thereto and/or to the related prospectus
that, in the opinion of the Collateral Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission applicable
thereto. The Company agrees to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any jurisdiction that
the Collateral Agent shall designate for the sale of the Pledged Shares and
to make available to the Issuer's security holders, as soon as practicable,
an earnings statement (which need not be audited) that will satisfy the
provisions of Section 11(a) of the Securities Act. The Company will cause
the Issuer to furnish to the Collateral Agent such number of copies as the
Collateral Agent may reasonably request of each preliminary and final
prospectus, to notify the Collateral Agent promptly of the happening of any
event as a result of which any then effective prospectus includes an untrue
statement of a material fact or omits to state material fact required to be
stated therein or necessary to make the statements therein not misleading
in the light of then existing circumstances, and to cause the Collateral
Agent to be furnished with such number of copies as the Collateral Agent
may reasonably request of such supplement to or amendment of such
prospectus. The Company
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<PAGE>
will cause the Issuer, to the extent permitted by law, to indemnify, defend
and hold harmless the Collateral Agent and the Secured Parties from and
against all losses, liabilities, expenses or claims (including reasonable
legal expenses and the reasonable costs of investigation) that the
Collateral Agent or the Secured Parties may incur under the Securities Act
or otherwise, insofar as such losses, liabilities, expenses or claims arise
out of or are based upon any alleged untrue statement of a material fact
contained in such registration statement (or any amendment thereto) or in
any preliminary or final prospectus (or any amendment or supplement
thereto), or arise out of or are based upon any alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except to the extent that any such
losses, liabilities, expenses or claims arise solely out of or are based
upon any such alleged untrue statement made or such alleged omission to
state a material fact included or excluded on the written direction of the
Collateral Agent. The Company will cause the Issuer to bear all reasonable
costs and expenses of carrying out its obligations hereunder.
(c) 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
may be effected after an Event of Default, the Company agrees that upon the
occurrence or existence of any Event of Default, the Collateral Agent may,
from time to time, attempt to sell all or any part of the Collateral by
means of a private placement, restricting the prospective purchasers to
those who will represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Collateral Agent may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of investors who might be interested in purchasing the
Collateral. The Company acknowledges and agrees that any such private sale
may result in prices and terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner. The Collateral Agent shall be under no obligation to
delay a sale of any of the Collateral for the period of time necessary to
permit the Issuer to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the
Issuer agrees to do so.
(d) The Company further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale
or sales of all or any portion of the Collateral pursuant to this Section
13 valid and binding and in compliance with any and all other applicable
requirements of law. The Company further agrees that a breach of any of the
covenants contained in this Section 13 will cause irreparable injury to the
Collateral Agent and the Secured Parties, that the Collateral Agent and the
Secured Parties have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this
Section 13 shall be specifically enforceable against the Company, and the
Company hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that
no Event of Default has occurred under the Indenture.
12
<PAGE>
(e) If the Collateral Agent deems it appropriate, the Collateral
Agent shall retain an investment bank or any other agent to perform or to
assist it in performing the obligations set forth in Section 13(b) and
13(c) hereof, whose usual and customary fees and expenses shall be paid by
the Company in accordance with Section 15 hereof.
Section 14. Irrevocable Authorization and Instruction to the Issuer.
-------------------------------------------------------
The Company hereby authorizes and instructs the Issuer and each Intermediate
Holding Company to comply with any instruction received by the Issuer or such
Intermediate Holding Company from the Collateral Agent that (i) states that an
Event of Default has occurred and (ii) is otherwise in accordance with the terms
of this Agreement, without any other or further instructions from the Company,
and the Company agrees that the Issuer and each Intermediate Holding Company
shall be fully protected in so complying.
Section 15. Fees and Expenses. The Company will upon demand pay to
-----------------
the Collateral Agent the amount of any and all reasonable fees and expenses
(including, without limitation, the reasonable fees and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent and the Secured Parties
hereunder or (iv) the failure by the Company to perform or observe any of the
provisions hereof.
Section 16. Interest Absolute. All rights of the Collateral Agent
-----------------
and the Secured Parties and the security interests created hereunder, and all
obligations of the Company hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument evidencing or governing the Permitted Bank
Facility or any other Secured Indebtedness;
(b) any change in the time, manner or place or payment of, or in
any other term of, all or any of the Secured Indebtedness, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Secured Indebtedness;
or
(d) any other circumstances that might otherwise constitute a
defense available to, or a discharge of, the Company in respect of the
Secured Indebtedness or of this Agreement.
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<PAGE>
Section 17. Application of Proceeds. Upon the occurrence and during
-----------------------
the continuance of an Event of Default under the Indenture, the proceeds of any
sale of, or other realization upon, all or any part of the Collateral and any
cash held shall be applied by the Collateral Agent in the following order of
priorities:
first, to payment of the expenses of such sale or other realization,
-----
including reasonable compensation to agents and counsel for the Collateral
Agent, and all reasonable expenses, liabilities and advances incurred or made by
the Collateral Agent in connection therewith, and any other unreimbursed fees
and expenses for which the Collateral Agent is to be reimbursed pursuant to
Section 15 hereof.
second, (i) if the Company has not entered into the Permitted Bank
------
Facility, to the Trustee for the payment of any and all obligations of the
Company with respect to the payment or principal of, and premium and Additional
Interest, if any, on, the Securities or any amounts payable upon any Repurchase
Offer or otherwise pursuant to the Indenture or the Securities or (ii) if the
Company has entered into the Permitted Bank Facility, pursuant to the terms of
the Intercreditor Agreement(s) relating thereto; and
finally, to payment to the Company or its successors or assigns, or as
-------
a court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
Section 18. Uncertificated Securities. Notwithstanding anything to
-------------------------
the contrary contained herein, if any Collateral (whether now owned or hereafter
acquired) is in the form of an uncertificated security, the Company shall
promptly notify the Collateral Agent, and shall promptly take all actions
required to perfect the security interest of the Collateral Agent under
applicable law (including, in any event, under Section 8-313 and 8-321 of the
New York Uniform Commercial Code) and shall certify to the Collateral Agent that
such security interest is perfected. The Company further agrees to take such
actions as the Collateral Agent deems necessary or desirable to effect the
foregoing and to permit the Collateral Agent to exercise any of its rights and
remedies hereunder, and agrees to provide an Opinion of Counsel satisfactory to
the Collateral Agent with respect to any such pledge of uncertificated
Collateral promptly upon request of the Collateral Agent.
Section 19. Miscellaneous Provisions.
------------------------
Section 19.1 Notices. All notices, approvals, consents or other
-------
communications required or desired to be given hereunder shall be in the form
and manner as set forth in Section 11.02 of the Indenture or in the relevant
Section of the Permitted Bank Facility, and delivered to the addresses set forth
in such Sections, or, in the case of the Collateral Agent, to: Bankers Trust
Company, 4 Albany Street, New York, New York Attention: Corporate Trust
Agency.
Section 19.2 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Collateral Agent to take
any action or omit to take any action under this Agreement, the Company shall
deliver to the Collateral Agent and the Trustee an Officers'
14
<PAGE>
Certificate and/or Opinion of Counsel in accordance with the requirements of
Section 11.04 of the Indenture.
Section 19.3 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Agreement may not be used to interpret another pledge, security or debt
agreement of the Company, the Issuer or any subsidiary thereof. No such pledge,
security or debt agreement may be used to interpret this Agreement.
Section 19.4 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
Section 19.5 No Recourse Against Others. No director, officer,
--------------------------
employee, stockholder or affiliate, as such, of the Company or the Issuer shall
have any liability for any obligations of the Company under this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Secured Party hereby waives and releases all such liability.
Section 19.6 Headings. The headings of the Articles and Sections of
--------
this Agreement have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 19.7 Counterpart Originals. This Agreement may be signed in
---------------------
two or more counterparts. Each signed copy shall be an original, but all of
them together represent one and the same agreement. Each counterpart may be
executed and delivered by telecopy, if such delivery is promptly followed by the
original manually signed copy sent by overnight courier.
Section 19.8 Benefits of Agreement. Nothing in this Agreement,
---------------------
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Secured Parties, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 19.9 Amendments, Waivers and Consents. Any amendment or
--------------------------------
waiver of any provision of this Agreement and any consent to any departure by
the Company from any provision of this Agreement shall be effective only if made
or given in compliance with all of the terms and provisions of the Indenture
necessary for amendments or waivers of, or consents to any departure by the
Company from a provision of the Indenture, as applicable, and neither the
Collateral Agent nor any Secured Party shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default or in any breach of any
of the terms and conditions hereof. Failure of the Collateral Agent or any
Secured Party to exercise, or delay in exercising, any right, power or privilege
hereunder shall
15
<PAGE>
not operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Collateral Agent or any Secured Party of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy that the
Collateral Agent or such Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
Section 19.10 Interpretation of Agreement. Time is of the essence in
---------------------------
each provision of this Agreement of which time is an element. To the extent a
term or provision of this Agreement conflicts with the Indenture and is not
dealt with herein with more specificity, the Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant to determine the meaning of this Agreement even though the accepting
or acquiescing party had knowledge of the nature of the performance and
opportunity for objection.
Section 19.11 Continuing Security Interest; Transfer of Securities.
----------------------------------------------------
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of all the
Secured Indebtedness, (ii) be binding upon the Company, its successors and
assigns, and (iii) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent, the Secured
Parties and their respective successors, transferees and assigns.
Section 19.12 Reinstatement. This Agreement shall continue to be
-------------
effective or be reinstated if at any time any amount received by the Collateral
Agent or any Secured Party in respect of the Secured Indebtedness is rescinded
or must otherwise be restored or returned by the Collateral Agent or any Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Company or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
Section 19.13 Survival of Provisions. All representations,
----------------------
warranties and covenants of the Company contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Company of the Secured Indebtedness.
Section 19.14 Waivers. The Company waives presentment and demand for
-------
payment of any of the Secured Indebtedness, protest and notice of dishonor or
default with respect to any of the Secured Indebtedness, and all other notices
to which the Company might otherwise be entitled, except as otherwise expressly
provided herein or in the Indenture.
Section 19.15 Authority of the Collateral Agent.
---------------------------------
16
<PAGE>
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by
the terms hereof, together with such powers as are reasonably incident
thereto. The Collateral Agent may perform any of its duties hereunder or
in connection with the Collateral by or through agents or employees and
shall be entitled to retain counsel and to act in reliance upon the advice
of counsel concerning all such matters. Neither the Collateral Agent nor
any director, officer, employee, attorney or agent of the Collateral Agent
shall be responsible for the validity, effectiveness or sufficiency hereof
or of any document or security furnished pursuant hereto. The Collateral
Agent and its directors, officers, employees, attorneys and agents shall be
entitled to rely on any communication, instrument or document believed by
it or them to be genuine and correct and to have been signed or sent by the
proper person or persons. The Company agrees to indemnify and hold
harmless the Collateral Agent, the Secured Parties and any other Person
specified above from and against any and all costs, expenses (including the
reasonable fees and disbursements of counsel (including, the allocated
costs of counsel)), claims and liabilities incurred by the Collateral
Agent, the Secured Parties or any such Person hereunder, unless such claim
or liability shall be due to willful misconduct or gross negligence on the
part of the Collateral Agent, the Secured Parties or such Person.
(b) The Company acknowledges that the rights and responsibilities
of the Collateral Agent under this Agreement with respect to any action
taken by the Collateral Agent or the exercise or non-exercise by the
Collateral Agent of any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Agreement
shall, as between the Collateral Agent and the Secured Parties, be governed
by the Indenture, any Intercreditor Agreement and by such other agreements
with respect thereto as may exist form time to time among them, but, as
between the Collateral Agent and the Company, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with
full and valid authority so to act or refrain from acting, and the Company
shall not be obligated or entitled to make any inquiry respecting such
authority.
Section 19.16 Resignation or Removal of the Collateral Agent. Until
----------------------------------------------
such time as the Secured Indebtedness shall have been paid in full, the
Collateral Agent may at any time, by giving written notice to the Company and
Secured Parties, resign and be discharged of the responsibilities hereby
created, such resignation to become effective upon (i) the appointment of a
successor Collateral Agent and (ii) the acceptance of such appointment by such
successor Collateral Agent. As promptly as practicable after the giving of any
such notice, the Secured Parties shall appoint a successor Collateral Agent,
which successor Collateral Agent shall be reasonably acceptable to the Company.
If no successor Collateral Agent shall be appointed and shall have accepted such
appointment within 90 days after the Collateral Agent gives the aforesaid notice
of resignation, the Collateral Agent may apply to any court of competent
jurisdiction to appoint a successor Collateral Agent to act until such time, if
any, as a successor shall have been appointed as provided in this Section 19.16.
Any successor so appointed by such court shall immediately and without further
act be superseded by any successor Collateral Agent appointed by the Secured
Parties, as provided in this Section 19.16. Simultaneously with its replacement
as Collateral Agent
17
<PAGE>
hereunder, the Collateral Agent so replaced shall deliver to its successor all
documents, instruments, certificates and other items of whatever kind
(including, without limitation, the certificates and instruments evidencing the
Collateral and all instruments of transfer or assignment) held by it pursuant to
the terms hereof. The Collateral Agent that has resigned shall be entitled to
fees, costs and expenses to the extent incurred or arising, or relating to
events occurring, before its resignation or removal.
Section 19.17 Release of Collateral; Termination of Agreement.
-----------------------------------------------
(a) Subject to the provisions of Section 19.12 hereof and Section
10.03 of the Indenture, this Agreement shall terminate upon the full and
final payment and performance of the Secured Indebtedness (and upon receipt
by the Collateral Agent of the Company's written certification that all
such Secured Indebtedness has been satisfied) and payment in full of all
fees and expenses owing by the Company to the Collateral Agent. At such
time, the Collateral Agent shall, at the request of the Company, reassign
and redeliver to the Company all of the Collateral hereunder that has not
been sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof. Such reassignment and redelivery shall be
without warranty by or recourse to the Collateral Agent, except as to the
absence of any prior assignments by the Collateral Agent of its interest in
the Collateral, and shall be at the expense of the Company.
(b) The Company agrees that it will not, except as permitted by the
Indenture, sell or dispose of, or grant any option or warrant with respect
to, any of the Collateral.
Section 19.18 Final Expression. This Agreement, together with any
----------------
other agreement executed in connection herewith, is intended by the parties as a
final expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
Section 19.19 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
----------------------------------------------------
JURY TRIAL; WAIVER OF DAMAGES.
- -----------------------------
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE COLLATERAL AGENT AND THE SECURED PARTIES IN CONNECTION WITH THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi)
BELOW, THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES AGREE THAT ALL
DISPUTES BETWEEN OR AMONG THEM
18
<PAGE>
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING
IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR
FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK. THE COMPANY WAIVES IN ALL DISPUTES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE
DISPUTE INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iii) THE COMPANY AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN
NAME OR IN THE NAME AND ON BEHALF OF ANY SECURED PARTY, HAVE THE RIGHT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE COMPANY OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE COMPANY WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
COLLATERAL AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(iv) THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
(v) THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS SET FORTH IN SECTION 11.02 OF THE INDENTURE, SUCH SERVICE
TO BECOME EFFECTIVE FIVE (5) BUSINESS DAYS AFTER SUCH MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT
OR ANY SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
(vii) THE COMPANY HEREBY AGREES THAT NEITHER THE COLLATERAL AGENT NOR
ANY SECURED PARTY SHALL HAVE ANY LIABILITY TO THE COMPANY
19
<PAGE>
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
COMPANY IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON
THE COLLATERAL AGENT OR SUCH SECURED PARTY, AS THE CASE MAY BE, THAT SUCH LOSSES
WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH
SECURED PARTY, AS THE CASE MAY BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
(viii) THE COMPANY WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY SECURED PARTY OF ITS RIGHTS
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL WITH
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER
SECURITY FOR THE OBLIGATIONS. THE COMPANY WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY SECURED PARTY DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR
OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE COLLATERAL AGENT OR ANY SECURED PARTY, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN THE
COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES.
Section 19.20 Acknowledgments of Company. The Company hereby
--------------------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement;
(b) neither the Collateral Agent nor any Secured Party has any
fiduciary relationship to the Company, and the relationship between the
Collateral Agent and the Secured Parties, on the one hand, and the Company,
on the other hand, is solely that of a secured party and a creditor; and
(c) no joint venture exists among the Secured Parties or among the
Company and the Secured Parties.
Section 19.21 Acknowledgments of the Issuer. The Issuer hereby
-----------------------------
acknowledges and agrees to be bound by this Agreement and to comply with the
terms thereof insofar as such terms
20
<PAGE>
are applicable to it. The Issuer further agrees (i) to notify the Collateral
Agent promptly in writing of the occurrence of any of the events described in
Section 8(b) of this Agreement and (ii) that the terms of Section 13(b) of this
Agreement shall apply to it, mutatis mutandis, with respect to all actions that
may be required of it under or pursuant to or arising out of such section.
21
<PAGE>
[Pledge Agreement Signature Page]
IN WITNESS WHEREOF, the Company, the Issuer and the Collateral Agent have
each caused this Agreement to be duly executed and delivered as of the date
first above written.
INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC., a Delaware corporation
By: /s/ Douglas S. Sinclair
--------------------------------------------
Name: Douglas S. sinclair
Title: Executive Vice President and
Chief Financial Officer
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Douglas S. Sinclair
--------------------------------------------
Name: Douglas s. sinclair
Title: Executive Vice President and
Chief Financial Officer
COLLATERAL AGENT:
BANKERS TRUST COMPANY
as Collateral Agent
By: /s/ Kevin Weeks
--------------------------------------------
Name: Kevin Weeks
Title: Assistant Treasurer
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
Number of Share Percentage
Issuer Pledged Shares Certificate Number of Outstanding
- ------ -------------- ------------------ --------------
<S> <C> <C> <C>
International Wireless 1,000 Shares 9 100%
Communications, Inc.
</TABLE>
<PAGE>
================================================================================
EXHIBIT A
(Form of Intercompany Note)
<PAGE>
EXHIBIT A
---------
FORM OF INTERCOMPANY NOTE
____________, 199_
San Mateo, California
NOTE
----
FOR VALUE RECEIVED, International Wireless Communications, Inc., a Delaware
corporation (the "Maker"), promises to pay to International Wireless
Communications Holdings, Inc., a Delaware corporation (the "Company"), or order,
the amount of principal advanced from time to time by the Company to such Maker
as reflected on the books and records of the Company, together with interest on
the unpaid principal amount at a rate per annum equal to ___%, from the date of
advance to the date of payment. All principal and accrued interest under this
Note shall be due and payable on demand.
This Note may be paid in whole or in part at any time without penalty or
premium.
The right to plead any and all statutes of limitations as a defense to
demand hereunder is hereby waived to the extent permitted by law. The Maker,
for itself and its successors and assigns, waives presentment, demand, protest
and notice thereof or of dishonor, and waives the right to be released by reason
of any extension of time or change in the terms of payment or any change,
alteration or release of any security given for the payment hereof. The Maker
hereby acknowledges that this Note may be pledged by the Company to the
Collateral Agent named below.
This Note shall be governed by and construed in accordance with the laws of
the State of _______________.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
[or Intermediate Holding Company]
By: _______________________________
Name:
Title:
Pay to the Order of:
BANKERS TRUST COMPANY,
as Collateral Agent
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By: ______________________________
Name:
Title:
<PAGE>
================================================================================
EXHIBIT B
(Form of Pledge Agreement)
<PAGE>
EXHIBIT B
FORM OF
INTERMEDIATE HOLDING COMPANY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as
of ______ ___, 199__ by International Wireless Communications Inc., a Delaware
corporation (the "Company"), in favor of Bankers Trust Company, in its capacity
as collateral agent under the Indenture, as hereinafter defined, and under any
Intercreditor Agreement (as defined in the Indenture) entered into pursuant to
the Indenture (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, International Wireless Communications Holdings, Inc., the
owner of all the issued and outstanding capital stock of the Company (the
"Parent"), and Marine Midland Bank, as trustee (the "Trustee"), have entered
into that certain Indenture dated as of August __, 1996 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Parent issued $196,720,000 in aggregate
principal amount of 14% Senior Secured Discount Notes due 2001 (together with
any notes or debentures issued in replacement thereof or in exchange or
substitution therefor, the "Securities"); and
WHEREAS, the Company is the legal and beneficial owner of (i) all of
the issued and outstanding shares of Capital Stock set forth on Schedule I
hereto (the "Pledged Shares") of the _______ (the "Issuer"), a direct wholly
owned subsidiary of the Company, and (ii) those certain intercompany promissory
notes (if any) issued by the Issuer in favor of the Company (the "Pledged
Notes"), all of which Pledged Notes shall be substantially in the form of
Exhibit A hereto; and
WHEREAS, the terms of the Indenture require that the Company (i)
pledge to the Collateral Agent for the ratable benefit of the Secured Parties
(as defined herein), and grant to the Collateral Agent for the ratable benefit
of the Secured Parties a security interest in, the Collateral (as defined
herein) and (ii) execute and deliver this Agreement in order to secure the
payment and performance by the Parent of all of the Secured Indebtedness (as
defined herein).
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. For all purposes of this Agreement, except
-----------
as otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the meanings set forth below:
(a) The term "Secured Indebtedness" as used herein shall mean (i)
any and all obligations of the Parent with respect to the payment of principal
of, and premium and Additional Interest, if any, on, the Securities, or any
amounts payable upon any Repurchase Offer (as defined in the Indenture) or
otherwise pursuant to the Indenture or the Securities, (ii) any and all
obligations of the Parent under the Permitted Bank Facility, and (iii) any
Collateral Agent Obligations (as defined in any Intercreditor Agreement) and any
other obligations of the Parent to the Collateral Agent under this Agreement or
the Intercreditor Agreement; provided, however, that the maximum amount of
-------- -------
indebtedness, liabilities and other monetary obligations of the Parent to all
Lenders under the Permitted Bank Facility shall not exceed $20 million (or such
other amount permitted to be incurred by the Parent under the Indenture).
(b) The term "Secured Parties" as used herein shall mean (i) the
Trustee under the Indenture for itself and on behalf of the holders from time to
time of the Securities, and (ii) the Lenders and any Agent for the Lenders (as
such terms are defined in any Intercreditor Agreement) and (iii) the Collateral
Agent, in respect of the Collateral Agent Obligations.
(c) Other capitalized terms not defined herein which are defined in
the Indenture shall have the meanings ascribed thereto in the Indenture.
Section 2. Pledge. The Company hereby pledges to the Collateral
------
Agent, on behalf of and for the benefit of the Secured Parties, and grants to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties, a
continuing first priority security interest in all of its right, title and
interest in the following (the "Collateral"):
(a) the Pledged Shares and the certificates representing the
Pledged Shares, and all products and proceeds of any of the Pledged Shares,
including, without limitation, all dividends, cash, options, warrants,
rights, instruments, subscriptions and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares or any of the foregoing; and
(b) all additional shares of, and all securities convertible into
and all warrants, options or other rights to purchase, Capital Stock of, or
other Equity Interests in, the Issuer from time to time acquired by the
Company in any manner, and the certificates representing such additional
shares and Equity Interests (any such additional shares and Equity
Interests and other items shall constitute part of the Pledged Shares under
and as defined in this Agreement), and all products and proceeds of any of
the foregoing, including, without limitation, all dividends, cash, options,
warrants, rights, instruments, subscriptions, and other
<PAGE>
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the foregoing; and
(c) the Pledged Notes and the instruments representing the Pledged
Notes, and all products and proceeds of the Pledged Notes, including,
without limitation, all interest, principal and premium payments, and all
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Pledged Notes or
any of the foregoing; and
(d) all additional promissory notes of the Issuer from time to time
held by the Company in any manner (any such additional promissory notes
shall constitute part of the Pledged Notes under and as defined in this
Agreement) and all products and proceeds of any of such additional Pledged
Notes, including, without limitation, all interest and principal payments,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
additional Pledged Notes or any of the foregoing.
Section 3. Security for Obligations. This Agreement secures the
------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration, by repurchase or otherwise) of all Secured
Indebtedness (including, without limitation, the obligations accruing after the
date of any filing by the Parent of any petition in bankruptcy or the
commencement of any bankruptcy, insolvency or similar proceeding with respect to
the Parent).
Section 4. Delivery of Collateral. The Company hereby agrees that
----------------------
all certificates or instruments representing or evidencing the Collateral shall
be immediately delivered to and held at all times by the Collateral Agent
pursuant hereto at the Collateral Agent's office in the State of New York and
shall be in suitable form for transfer by delivery, or issued in the name of the
Company and accompanied by instruments of transfer or assignment duly executed
in blank and undated, and in either case having attached thereto all requisite
federal or state stock transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent. All securities, whether certificated,
uncertificated or book entry, if any, representing or evidencing the Collateral
shall be registered in the name of the Collateral Agent or any of its nominees
by book entry or in any other appropriate manner that is acceptable to the
Collateral Agent, so as to properly identify the interest of the Collateral
Agent therein. In addition, the Collateral Agent shall have the right, at any
time following the occurrence of an Event of Default, in its discretion, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees or agents any or all of the Collateral. The Collateral Agent shall
have the right at any time to exchange certificates or instruments representing
or evidencing all or any portion of the Collateral for certificates or
instruments of smaller or larger denominations in the same aggregate amount.
Section 5. Representations and Warranties. The Company represents
------------------------------
and warrants that:
(a) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly
authorized by all necessary
<PAGE>
corporate action, and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of
incorporation or bylaws of the Company or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company, or
result in the creation or imposition of any Lien on any assets of the
Company, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable. Each Pledged Note has been duly
authorized and executed by the maker thereof and constitutes a legal, valid
and binding obligation of such maker, enforceable against such maker in
accordance with its terms.
(c) The Pledged Shares constitute all of the authorized, issued and
outstanding Equity Interests of the Issuer and constitute all of the shares
or Equity Interests of the Issuer beneficially owned by the Company.
(d) All intercompany indebtedness of the Issuer to the Company is
evidenced by promissory notes substantially in the form of Exhibit A
hereto; the Pledged Notes constitute all of the promissory notes of the
Issuer in favor of the Company, and there are no other instruments,
certificates, securities or other writings or chattel paper, evidencing or
representing any indebtedness of the Issuer to the Company.
(e) The Company is the legal, record and beneficial owner of the
Collateral, free and clear of any Lien or claims of any Person except for
the security interest created by this Agreement.
(f) The Company has full power and authority to enter into this
Agreement and has the right to vote, pledge and grant a security interest
in the Collateral as provided by this Agreement.
(g) This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(h) Upon the delivery to the Collateral Agent of the Collateral and
the filing of Uniform Commercial Code (the "UCC") financing statements in
the jurisdictions listed on Exhibit B, the pledge of the Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the Secured
Indebtedness for the benefit of the Secured Parties, and is enforceable as
such against all creditors of the Company and any Persons purporting to
purchase any of the Collateral from the Company.
(i) Except as has been already obtained, no consent of any other
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the pledge by the Company of the Collateral
pursuant to this Agreement or for the execution, delivery or
<PAGE>
performance of this Agreement by the Company or (ii) for the exercise by
the Collateral Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement (except as may be required in connection with such disposition by
laws affecting the offering and sale of securities).
(j) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the best knowledge
of the Company, threatened by or against the Company or against any of its
properties or revenues with respect to this Agreement or any of the
transactions contemplated hereby.
(k) The pledge of the Collateral pursuant to this Agreement is not
prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System).
(l) All information set forth herein relating to the Collateral is
accurate and complete in all material respects.
Section 6. Further Assurance. The Company will at all times cause
-----------------
the security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Collateral, enforceable as
such against all creditors of the Company and (except as otherwise specifically
provided herein) any Persons purporting to purchase any Collateral from the
Company. The Company will, promptly upon request by the Collateral Agent,
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, tax stamps, assignments,
instruments and other documents, all in form and substance satisfactory to the
Collateral Agent, deliver any instruments to the Collateral Agent and take any
other actions that are necessary or, in the reasonable opinion of the Collateral
Agent, desirable to perfect, continue the perfection of, or protect the first
priority of the Collateral Agent's security interest in, the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, to enable the Collateral Agent to exercise or enforce its rights and
remedies hereunder, or otherwise to effect the purposes of this Agreement. The
Company also hereby authorizes the Collateral Agent to file any financing or
continuation statements with respect to the Collateral without the signature of
the Company to the extent permitted by applicable law (although the Collateral
Agent has no obligation to do so). The Company will pay all costs incurred in
connection with any of the foregoing. Promptly, upon request by the Collateral
Agent, the Company will provide the Collateral Agent with all documents,
instruments or information necessary, in the sole discretion of the Collateral
Agent, to satisfy its obligations under this Agreement.
<PAGE>
Section 7. Voting Rights; Dividends; Etc.
-----------------------------
(a) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Pledged Shares or any part thereof for any purpose
not inconsistent with the terms of this Agreement or the Indenture;
provided, however, that the Company shall not exercise or shall refrain
-------- -------
from exercising any such right if such action would violate any provisions
of this Agreement or the Indenture.
(b) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, the Company
shall be entitled to receive, and to utilize (subject to the provisions of
the Indenture) free and clear of the Lien of this Agreement, all cash
payments of principal and interest paid from time to time with respect to
any Pledged Notes.
(c) So long as no Event of Default shall have occurred and be
continuing under the Indenture or any Intercreditor Agreement, and subject
to the other terms and conditions of the Indenture, the Company shall be
entitled to receive, and to utilize (subject to the provisions of the
Indenture) free and clear of the Lien of this Agreement, all cash dividends
paid from time to time in respect of the Pledged Shares.
(d) Any and all (i) dividends, other distributions, interest and
principal payments paid or payable in the form of instruments and/or other
property (other than cash payments permitted under Section 7(b) hereof and
cash dividends permitted under Section 7(c) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Collateral,
(ii) dividends and other distributions paid or payable in cash in respect
of any Pledged Shares in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus
or paid-in-surplus, and (iii) cash paid, payable or otherwise distributed
in redemption of, or in exchange for any Collateral, shall, in each case,
be forthwith delivered to the Collateral Agent to hold as Collateral and
shall be, if received by the Company, held in trust for the benefit of the
Collateral Agent and the Secured Parties, be segregated from the other
property and funds of the Company and be forthwith delivered to the
Collateral Agent as Collateral in the same form as so received (with any
necessary endorsements).
(e) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Company all such proxies and other
instruments as the Company may reasonably request for the purpose of
enabling the Company to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 7(a) through 7(c) above.
(f) Upon the occurrence and during the continuance of an Event of
Default under the Indenture or any Intercreditor Agreement, (i) all rights
of the Company to exercise the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 7(a) shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent, which, to the extent permitted by law, shall thereupon have the sole
right
<PAGE>
to exercise such voting and other consensual rights, and (ii) all cash
interest payments and dividends and other distributions payable in respect
of the Collateral shall be paid to the Collateral Agent and the Company's
right to receive such cash payments pursuant to Section 7(b) and 7(c)
hereof shall immediately cease.
(g) Upon the occurrence and during the continuance of an Event of
Default under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), the Company shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent all such proxies,
dividend and interest payment orders and other instruments as Collateral
Agent may reasonably request for the purpose of enabling the Collateral
Agent to exercise the voting and other rights that it is entitled to
exercise pursuant to Section 7(f) above.
(h) All payments of interest, principal or premium and all
dividends and other distributions that are received by the Company contrary
to the provisions of this Section 7 shall be received in trust for the
benefit of the Collateral Agent and the Secured Parties, shall be
segregated from the other property or funds of the Company and shall be
forthwith delivered to the Collateral Agent as Collateral in the same form
as so received (with any necessary endorsements).
Section 8. Covenants. The Company hereby covenants and agrees with
---------
the Collateral Agent and the Secured Parties that it will comply with all of the
obligations, requirements and restrictions applicable to the Company contained
in the Indenture. The Company further covenants and agrees, from and after the
date of this Agreement and until the Secured Indebtedness has been paid in full,
as follows:
(a) The Company agrees that it will not (i) sell, assign, transfer,
convey or otherwise dispose of, or grant any option or warrant with respect
to, any of the Collateral without the prior written consent of the
Collateral Agent, (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the security interest granted
under this Agreement, and at all times will be the sole beneficial owner of
the Collateral, (iii) enter into any agreement or understanding that
purports to or that may restrict or inhibit the Collateral Agent's rights
or remedies hereunder, including, without limitation, the Collateral
Agent's right to sell or otherwise dispose of the Collateral, (iv) take any
action, or permit the taking of any action by the Issuer, with respect to
the Collateral the taking of which would result in a violation of the
Indenture or this Agreement, including, without limitation, the issuance by
the Issuer of any additional Equity Interests or promissory notes or the
incurrence by the Issuer of any Indebtedness, in each case to Persons other
than the Company (except as permitted by the Indenture), (v) upon the
occurrence and during the continuance of an Event of Default under the
Indenture (or other "Event of Default" as defined any Intercreditor
Agreement), enter into any agreement amending, modifying or supplementing
the interest, principal or maturity terms of the Pledged Notes in a manner
adverse to the interests of the Collateral Agent and the Secured Parties,
(vi) fail to give prompt notice to the Collateral Agent of any notice of
default given by or to the Company under or with respect to the Pledged
Notes together with a complete copy of such notice,
<PAGE>
(vii) permit the Issuer to merge or consolidate with or into another person
or entity or sell or transfer all or substantially all of its assets to
another person or entity (except as permitted by the Indenture), or (viii)
fail to pay or discharge any tax, assessment or levy of any nature not
later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment with regard to the Collateral.
(b) The Company agrees that immediately upon becoming the
beneficial owner of any additional shares of Capital Stock, promissory
notes, other securities or Equity Interests of the Issuer (including as a
result of the merger or consolidation of the Issuer with or into another
entity) it will pledge and deliver to the Collateral Agent for its benefit
and the ratable benefit of the Secured Parties and grant to the Collateral
Agent for its benefit and the ratable benefit of the Secured Parties, a
continuing first priority security interest in such shares, promissory
notes, other securities or Equity Interests (as well as instruments of
transfer or assignment duly executed in blank and undated and any necessary
stock transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent). The Company further agrees that it will promptly (i)
cause the Issuer upon becoming indebted to the Company to execute a
promissory note in the form of Exhibit A hereto evidencing such debt in
order that such promissory note may be promptly pledged as a Pledged Note
pursuant hereto and (ii) deliver to the Collateral Agent and the Trustee an
Officers' Certificate in accordance with Section 11.05 of the Indenture
describing such additional promissory notes and certifying that the same
have been duly pledged and delivered to the Collateral Agent hereunder.
Section 9. Power of Attorney. The Company hereby appoints and
-----------------
constitutes the Collateral Agent as the Company's attorney-in-fact to exercise
all of the following powers upon and at any time after the occurrence of an
Event of Default: (i) collection of proceeds of any Collateral; (ii) conveyance
of any item of Collateral to any purchaser thereof; (iii) giving of any notices
or recording of any Liens under Section 6 hereof; (iv) making of any payments or
taking any acts under Section 10 hereof; and (v) paying or discharging taxes or
Liens levied or placed upon or threatened against the Collateral, the legality
or validity thereof and the amounts necessary to discharge the same to be
determined by the Collateral Agent in its sole discretion, and such payments
made by the Collateral Agent to become the obligations of the Company to the
Collateral Agent, due and payable immediately without demand. The Collateral
Agent's authority hereunder shall include, without limitation, the authority to
endorse and negotiate, for the Collateral Agent's own account, any checks or
instruments in the name of the Company, execute and give receipt for any
certificate of ownership or any document, transfer title to any item of
Collateral, sign the Company's name on all financing statements or any other
documents deemed necessary or appropriate to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and
sign the Company's name on any notice of Lien, and prepare, file and sign the
Company's name on a proof of claim in bankruptcy or similar document against any
creditor of the Company, and to take any other actions arising from or incident
to the powers granted to the Collateral Agent in this Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Company.
Section 10. Collateral Agent May Perform. If the Company fails to
----------------------------
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause the performance of,
<PAGE>
such agreement, and the reasonable expenses of the Collateral Agent incurred in
connection therewith shall be payable by the Company under Section 15 hereof;
provided, however, that the Collateral Agent shall not be obligated to take any
- -------- -------
action under this Section 10 unless it is instructed to do so by the Trustee and
it is indemnified against any liability or loss in connection with taking such
action by the Trustee or the Lenders.
Section 11. No Assumption of Duties; Reasonable Care. The right and
----------------------------------------
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the Collateral Agent's and the Secured Parties' security
interest in and to the Collateral granted hereby and shall not be interpreted
to, and shall not, impose any duties on the Collateral Agent in connection
therewith. The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Collateral, whether or not the Collateral Agent
has or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Collateral.
Section 12. Subsequent Changes Affecting Collateral. The Company
---------------------------------------
represents to the Collateral Agent and the Secured Parties that the Company has
made its own arrangements for keeping informed of changes or potential changes
affecting the Collateral (including, but not limited to, rights to convert,
rights to subscribe, payment of dividends, payments of interest and/or
principal, reorganization or other exchanges, tender offers and voting rights),
and the Company agrees that the Collateral Agent and the Secured Parties shall
have no responsibility or liability for informing the Company of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto. The Company covenants that it will not, without
the prior written consent of the Collateral Agent, vote to enable, or take any
other action to permit, the Issuer to issue any capital stock or other
securities or to sell or otherwise dispose of, or grant any option with respect
to, any of the Collateral, except for the security interests granted under this
Agreement. The Company will defend the right, title and interest of the
Collateral Agent and the Secured Parties in and to the Collateral against the
claims and demands of all Persons.
Section 13. Remedies Upon Default
---------------------
(a) If any Event of Default shall have occurred and be continuing
under the Indenture (or other "Event of Default" as defined in any
Intercreditor Agreement), the Collateral Agent and the Secured Parties
shall have, in addition to all other rights given by law or by this
Agreement or the Indenture, all of the rights and remedies with respect to
the Collateral of a secured party under the UCC as in effect in the State
of New York at that time. The Collateral Agent may, without notice and at
its option, transfer or register, and the Company shall register or cause
to be registered upon request therefor by the Collateral Agent, the
Collateral or any part thereof on the books of the Issuer, into the name of
the Collateral Agent or the Collateral Agent's nominee(s), or agent(s) with
or without any indication that such Collateral is subject to the security
interest hereunder. In addition, with respect to any Collateral that shall
then be in or shall thereafter come into the possession or
<PAGE>
custody of the Collateral Agent, the Collateral Agent may sell or cause the
same to be sold at any broker's board or at a public or private sale, in
one or more sales or lots, at such price or prices as the Collateral Agent
may deem best, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all Collateral so
sold shall thereafter hold the same absolutely, free from any claim,
encumbrance or right of any kind whatsoever. Unless any of the Collateral
threatens to decline speedily in value or is or becomes of a type sold on a
recognized market, the Collateral Agent will give the Company reasonable
notice of the time and place of any public sale thereof, or of the time
after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property similar to
the Collateral shall be deemed to be commercially reasonable. Any
requirements of reasonable notice shall be met if such notice is mailed to
the Company as provided below in Section 19.1, at least ten days before the
time of the sale or disposition. Any other requirement of notice, demand or
advertisement for sale is, to the extent permitted by law, waived. The
Collateral Agent or any Secured Party may, in its own name or in the name
of a designee or nominee, buy any of the Collateral at any public sale and,
if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable attorneys' fees and disbursements)
of, or incident to, the enforcement of any of the provisions hereof shall
be recoverable from the proceeds of the sale or other disposition of the
Collateral.
(b) If the Collateral Agent shall determine to exercise its right
to sell any or all of the Pledged Shares pursuant to Section 13(a) above,
and if in the opinion of counsel for the Collateral Agent it is necessary,
or if in the opinion of the Collateral Agent it is advisable, to have the
Pledged Shares or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Company will cause the Issuer to (i) execute and deliver, and
cause its directors and officers to execute and deliver, all at the
Issuer's expense, all such instruments and documents, and to do or cause to
be done all such other acts and things as may be necessary or, in the
opinion of the Collateral Agent, advisable to register such Pledged Shares
under the provisions of the Securities Act, (ii) use its best efforts to
cause the registration statement relating thereto to become effective and
to remain effective for a period of 180 days from the date of the first
public offering of such Pledged Shares, or that portion thereof to be sold
and (iii) make all amendments thereto and/or to the related prospectus
that, in the opinion of the Collateral Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission applicable
thereto. The Company agrees to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any jurisdiction that
the Collateral Agent shall designate for the sale of the Pledged Shares and
to make available to the Issuer's security holders, as soon as practicable,
an earnings statement (which need not be audited) that will satisfy the
provisions of Section 11(a) of the Securities Act. The Company will cause
the Issuer to furnish to the Collateral Agent such number of copies as the
Collateral Agent may reasonably request of each preliminary and final
prospectus, to notify the Collateral Agent promptly of the happening of any
event as a result of which any then effective prospectus includes an untrue
statement of a material fact
<PAGE>
or omits to state material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of then existing
circumstances, and to cause the Collateral Agent to be furnished with such
number of copies as the Collateral Agent may reasonably request of such
supplement to or amendment of such prospectus. The Company will cause the
Issuer, to the extent permitted by law, to indemnify, defend and hold
harmless the Collateral Agent and the Secured Parties from and against all
losses, liabilities, expenses or claims (including reasonable legal
expenses and the reasonable costs of investigation) that the Collateral
Agent or the Secured Parties may incur under the Securities Act or
otherwise, insofar as such losses, liabilities, expenses or claims arise
out of or are based upon any alleged untrue statement of a material fact
contained in such registration statement (or any amendment thereto) or in
any preliminary or final prospectus (or any amendment or supplement
thereto), or arise out of or are based upon any alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except to the extent that any such
losses, liabilities, expenses or claims arise solely out of or are based
upon any such alleged untrue statement made or such alleged omission to
state a material fact included or excluded on the written direction of the
Collateral Agent. The Company will cause the Issuer to bear all reasonable
costs and expenses of carrying out its obligations hereunder.
(c) 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
may be effected after an Event of Default, the Company agrees that upon the
occurrence or existence of any Event of Default, the Collateral Agent may,
from time to time, attempt to sell all or any part of the Collateral by
means of a private placement, restricting the prospective purchasers to
those who will represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Collateral Agent may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of investors who might be interested in purchasing the
Collateral. The Company acknowledges and agrees that any such private sale
may result in prices and terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Collateral Agent shall be under no obligation to delay a sale
of any of the Collateral for the period of time necessary to permit the
Issuer to register such securities for public sale under the Securities
Act, or under applicable state securities laws, even if the Issuer agrees
to do so.
(d) The Company further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale
or sales of all or any portion of the Collateral pursuant to this Section
13 valid and binding and in compliance with any and all other applicable
requirements of law. The Company further agrees that a breach of any of the
covenants contained in this Section 13 will cause irreparable injury to the
Collateral Agent and the Secured Parties, that the Collateral Agent and the
Secured Parties have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this
Section 13 shall be specifically enforceable against the Company, and the
Company hereby waives and agrees not to assert any defenses against an
action for
<PAGE>
specific performance of such covenants except for a defense that no Event
of Default has occurred under the Indenture.
(e) If the Collateral Agent deems it appropriate, the Collateral
Agent shall retain an investment bank or any other agent to perform or to
assist it in performing the obligations set forth in Section 13(b) and
13(c) hereof, whose usual and customary fees and expenses shall be paid by
the Company in accordance with Section 15 hereof.
Section 14. Irrevocable Authorization and Instruction to the Issuer.
-------------------------------------------------------
The Company hereby authorizes and instructs the Issuer to comply with any
instruction received by the Issuer from the Collateral Agent that (i) states
that an Event of Default has occurred and (ii) is otherwise in accordance with
the terms of this Agreement, without any other or further instructions from the
Company, and the Company agrees that the Issuer shall be fully protected in so
complying.
Section 15. Fees and Expenses. The Company will upon demand pay to
-----------------
the Collateral Agent the amount of any and all reasonable fees and expenses
(including, without limitation, the reasonable fees and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent and the Secured Parties
hereunder or (iv) the failure by the Company to perform or observe any of the
provisions hereof.
Section 16. Interest Absolute. All rights of the Collateral Agent
-----------------
and the Secured Parties and the security interests created hereunder, and all
obligations of the Company hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument evidencing or governing the Permitted Bank
Facility or any other Secured Indebtedness;
(b) any change in the time, manner or place or payment of, or in
any other term of, all or any of the Secured Indebtedness, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Secured Indebtedness;
or
(d) any other circumstances that might otherwise constitute a
defense available to, or a discharge of, the Parent or the Company in
respect of the Secured Indebtedness or of this Agreement.
<PAGE>
Section 17. Application of Proceeds. Upon the occurrence and during
-----------------------
the continuance of an Event of Default under the Indenture, the proceeds of any
sale of, or other realization upon, all or any part of the Collateral and any
cash held shall be applied by the Collateral Agent in the following order of
priorities:
first, to payment of the expenses of such sale or other realization,
-----
including reasonable compensation to agents and counsel for the Collateral
Agent, and all reasonable expenses, liabilities and advances incurred or made by
the Collateral Agent in connection therewith, and any other unreimbursed fees
and expenses for which the Collateral Agent is to be reimbursed pursuant to
Section 15 hereof.
second, (i) if the Company has not entered into the Permitted Bank
------
Facility, to the Trustee for the payment of any and all obligations of the
Company with respect to the payment or principal of, and premium and Additional
Interest, if any, on, the Securities or any amounts payable upon any Repurchase
Offer or otherwise pursuant to the Indenture or the Securities or (ii) if the
Company has entered into the Permitted Bank Facility, pursuant to the terms of
the Intercreditor Agreement(s) relating thereto; and
finally, to payment to the Company or its successors or assigns, or as
-------
a court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
Section 18. Uncertificated Securities. Notwithstanding anything to
-------------------------
the contrary contained herein, if any Collateral (whether now owned or hereafter
acquired) is in the form of an uncertificated security, the Company shall
promptly notify the Collateral Agent, and shall promptly take all actions
required to perfect the security interest of the Collateral Agent under
applicable law (including, in any event, under Section 8-313 and 8-321 of the
New York Uniform Commercial Code) and shall certify to the Collateral Agent that
such security interest is perfected. The Company further agrees to take such
actions as the Collateral Agent deems necessary or desirable to effect the
foregoing and to permit the Collateral Agent to exercise any of its rights and
remedies hereunder, and agrees to provide an Opinion of Counsel satisfactory to
the Collateral Agent with respect to any such pledge of uncertificated
Collateral promptly upon request of the Collateral Agent.
Section 19. Miscellaneous Provisions.
------------------------
Section 19.1 Notices. All notices, approvals, consents or other
-------
communications required or desired to be given hereunder shall be, in the case
of the Company, delivered to [Name], [Address], [Attention:], [Telecopy No.] or,
in the case of any Lender, as provided in the relevant Section of the Permitted
Bank Facility, or, in the case of the Collateral Agent, to: Bankers Trust
Company, 4 Albany Street, New York, New York, Attention: Corporate Trust Agency.
Section 19.2 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Collateral Agent to take
any action or omit to take any action under this Agreement, the Parent shall
deliver to the Collateral Agent and the Trustee an Officers' Certificate and/or
Opinion of Counsel in accordance with the requirements of Section 11.04 of the
Indenture.
<PAGE>
Section 19.3 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Agreement may not be used to interpret another pledge, security or debt
agreement of the Company, the Issuer or any subsidiary thereof. No such pledge,
security or debt agreement may be used to interpret this Agreement.
Section 19.4 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
Section 19.5 No Recourse Against Others. No director, officer,
--------------------------
employee, stockholder or affiliate, as such, of the Company or the Issuer shall
have any liability for any obligations of the Company under this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Secured Party hereby waives and releases all such liability.
Section 19.6 Headings. The headings of the Articles and Sections of
--------
this Agreement have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 19.7 Counterpart Originals. This Agreement may be signed in
---------------------
two or more counterparts. Each signed copy shall be an original, but all of them
together represent one and the same agreement. Each counterpart may be executed
and delivered by telecopy, if such delivery is promptly followed by the original
manually signed copy sent by overnight courier.
Section 19.8 Benefits of Agreement. Nothing in this Agreement,
---------------------
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Secured Parties, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 19.9 Amendments, Waivers and Consents. Any amendment or
--------------------------------
waiver of any provision of this Agreement and any consent to any departure by
the Company from any provision of this Agreement shall be effective only if made
or given in compliance with all of the terms and provisions of the Indenture
necessary for amendments or waivers of, or consents to any departure by the
Parent from a provision of the Indenture, as applicable, and neither the
Collateral Agent nor any Secured Party shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default or in any breach of any
of the terms and conditions hereof. Failure of the Collateral Agent or any
Secured Party to exercise, or delay in exercising, any right, power or privilege
hereunder shall not operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Collateral Agent or any Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Collateral Agent or such Secured Party would otherwise have on
any future occasion. The rights
<PAGE>
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
Section 19.10 Interpretation of Agreement. Time is of the essence in
---------------------------
each provision of this Agreement of which time is an element. To the extent a
term or provision of this Agreement conflicts with the Indenture and is not
dealt with herein with more specificity, the Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant to determine the meaning of this Agreement even though the accepting
or acquiescing party had knowledge of the nature of the performance and
opportunity for objection.
Section 19.11 Continuing Security Interest; Transfer of Securities.
----------------------------------------------------
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of all the
Secured Indebtedness, (ii) be binding upon the Company, its successors and
assigns, and (iii) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent, the Secured
Parties and their respective successors, transferees and assigns.
Section 19.12 Reinstatement. This Agreement shall continue to be
-------------
effective or be reinstated if at any time any amount received by the Collateral
Agent or any Secured Party in respect of the Secured Indebtedness is rescinded
or must otherwise be restored or returned by the Collateral Agent or any Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Company or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
Section 19.13 Survival of Provisions. All representations,
----------------------
warranties and covenants of the Company contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Company of the Secured Indebtedness.
Section 19.14 Waivers. The Company waives presentment and demand for
-------
payment of any of the Secured Indebtedness, protest and notice of dishonor or
default with respect to any of the Secured Indebtedness, and all other notices
to which the Company might otherwise be entitled, except as otherwise expressly
provided herein or in the Indenture.
Section 19.15 Authority of the Collateral Agent.
---------------------------------
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by
the terms hereof, together with such powers as are reasonably incident
thereto. The Collateral Agent may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of
counsel concerning all such matters. Neither the Collateral Agent nor any
director, officer, employee, attorney or agent of the Collateral Agent
shall be responsible for the validity,
<PAGE>
effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Collateral Agent and its directors,
officers, employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document believed by it or them to be genuine
and correct and to have been signed or sent by the proper person or
persons. The Company, and the Parent, jointly and severally, each agrees to
indemnify and hold harmless the Collateral Agent, the Secured Parties and
any other Person from and against any and all costs, expenses (including
the reasonable fees and disbursements of counsel (including, the allocated
costs of counsel)), claims and liabilities incurred by the Collateral
Agent, the Secured Parties or such Person hereunder, unless such claim or
liability shall be due to willful misconduct or gross negligence on the
part of the Collateral Agent, the Secured Parties or such Person.
(b) The Company acknowledges that the rights and responsibilities
of the Collateral Agent under this Agreement with respect to any action
taken by the Collateral Agent or the exercise or non-exercise by the
Collateral Agent of any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Agreement
shall, as between the Collateral Agent and the Secured Parties, be governed
by the Indenture, any Intercreditor Agreement and by such other agreements
with respect thereto as may exist form time to time among them, but, as
between the Collateral Agent and the Company, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with
full and valid authority so to act or refrain from acting, and the Company
shall not be obligated or entitled to make any inquiry respecting such
authority.
Section 19.16 Release of Collateral; Termination of Agreement.
-----------------------------------------------
(a) Subject to the provisions of Section 19.12 hereof and Section
10.03 of the Indenture, this Agreement shall terminate upon the full and
final payment and performance of the Secured Indebtedness (and upon receipt
by the Collateral Agent of the Parent's written certification that all such
Secured Indebtedness has been satisfied) and payment in full of all fees
and expenses owing by the Company to the Collateral Agent. At such time,
the Collateral Agent shall, at the request of the Company, reassign and
redeliver to the Company all of the Collateral hereunder that has not been
sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof. Such reassignment and redelivery shall be
without warranty by or recourse to the Collateral Agent, except as to the
absence of any prior assignments by the Collateral Agent of its interest in
the Collateral, and shall be at the expense of the Company.
(b) The Company agrees that it will not, except as permitted by the
Indenture, sell or dispose of, or grant any option or warrant with respect
to, any of the Collateral.
Section 19.17 Final Expression. This Agreement, together with any
----------------
other agreement executed in connection herewith, is intended by the parties as a
final expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
<PAGE>
Section 19.18 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
----------------------------------------------------
JURY TRIAL; WAIVER OF DAMAGES.
- -----------------------------
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE COLLATERAL AGENT AND THE SECURED PARTIES IN CONNECTION WITH THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi)
BELOW, THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES AGREE THAT ALL
DISPUTES BETWEEN OR AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK. THE
COMPANY WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT CONSIDERING THE DISPUTE INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iii) THE COMPANY AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN
NAME OR IN THE NAME AND ON BEHALF OF ANY SECURED PARTY, HAVE THE RIGHT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE COMPANY OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE COMPANY WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
COLLATERAL AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(iv) THE COMPANY, THE COLLATERAL AGENT AND THE SECURED PARTIES EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
<PAGE>
(v) THE COMPANY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION AS THE
DESIGNEE, APPOINTEE AND AGENT OF THE COMPANY TO RECEIVE, FOR AND ON BEHALF OF
THE COMPANY, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT. IT IS UNDERSTOOD THAT NOTICE AND A COPY OF SUCH PROCESS
SERVED ON SUCH AGENT, WILL BE FORWARDED PROMPTLY TO THE COMPANY, BUT THE FAILURE
OF THE COMPANY TO RECEIVE SUCH NOTICE AND COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH IN SECTION 11.02 OF THE
INDENTURE, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) BUSINESS DAYS AFTER SUCH
MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT
OR ANY SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
(vii) THE COMPANY HEREBY AGREES THAT NEITHER THE COLLATERAL AGENT NOR
ANY SECURED PARTY SHALL HAVE ANY LIABILITY TO THE COMPANY (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE COMPANY IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR
SUCH SECURED PARTY, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS
OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH SECURED PARTY, AS THE
CASE MAY BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(viii) THE COMPANY WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY SECURED PARTY OF ITS RIGHTS
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL WITH
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER
SECURITY FOR THE OBLIGATIONS. THE COMPANY WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY SECURED PARTY DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR
OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE COLLATERAL AGENT OR ANY SECURED PARTY, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION THIS AGREEMENT OR ANY
<PAGE>
OTHER AGREEMENT OR DOCUMENT BETWEEN THE COMPANY, THE COLLATERAL AGENT AND THE
SECURED PARTIES.
Section 19.19 Acknowledgments of Company. The Company hereby
--------------------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement;
(b) neither the Collateral Agent nor any Secured Party has any
fiduciary relationship to the Company, and the relationship between the
Collateral Agent and the Secured Parties, on the one hand, and the Company,
on the other hand, is solely that of a secured party and a creditor; and
(c) no joint venture exists among the Secured Parties or among the
Company and the Secured Parties.
Section 19.20 Acknowledgments of the Issuer. The Issuer hereby
-----------------------------
acknowledges and agrees to be bound by this Agreement and to comply with the
terms thereof insofar as such terms are applicable to it. The Issuer further
agrees (i) to notify the Collateral Agent promptly in writing of the occurrence
of any of the events described in Section 8(b) of this Agreement and (ii) that
the terms of Section 13(b) of this Agreement shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it under or
pursuant to or arising out of such section.
[Signature Page Follows]
<PAGE>
[Pledge Agreement Signature Page]
IN WITNESS WHEREOF, the Company and the Collateral Agent have each caused
this Agreement to be duly executed and delivered as of the date first above
written.
COMPANY:
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.,
a Delaware corporation
By: ____________________________________________
Name:
Title:
COLLATERAL AGENT:
BANKERS TRUST COMPANY
as Collateral Agent
By: ___________________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED TO:
[ISSUER]
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
Number of Share Percentage
Issuer Pledged Shares Certificate Number of Outstanding
- ------ -------------- ------------------ --------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
---------
FORM OF INTERCOMPANY NOTE
____________, 199_
NOTE
----
FOR VALUE RECEIVED, _______________________________, a ________ corporation
(the "Maker"), promises to pay to International Wireless Communications, Inc., a
Delaware corporation (the "Company"), or order, the amount of principal advanced
from time to time by the Company to such Maker as reflected on the books and
records of the Company, together with interest on the unpaid principal amount at
a rate per annum equal to ___%, from the date of advance to the date of payment.
All principal and accrued interest under this Note shall be due and payable on
demand.
This Note may be paid in whole or in part at any time without penalty or
premium.
The right to plead any and all statutes of limitations as a defense to
demand hereunder is hereby waived to the extent permitted by law. The Maker, for
itself and its successors and assigns, waives presentment, demand, protest and
notice thereof or of dishonor, and waives the right to be released by reason of
any extension of time or change in the terms of payment or any change,
alteration or release of any security given for the payment hereof. The Maker
hereby acknowledges that this Note may be pledged by the Company to the
Collateral Agent named below.
This Note shall be governed by and construed in accordance with the laws of
the State of _______________.
_______________________________
By: _______________________________
Name:
Title:
Pay to the Order of:
Bankers Trust Company,
as Collateral Agent
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
<PAGE>
===============================================================================
EXHIBIT B
(UCC Jurisdictions)
[to be provided]
<PAGE>
===============================================================================
EXHIBIT C
(UCC Jurisdictions)
STATE OF CALIFORNIA
<PAGE>
EXHIBIT 4.3
________________________________________________________________________________
UNIT AGREEMENT
Among
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.,
BANKERS TRUST COMPANY,
as Unit Agent and Warrant Agent
and
MARINE MIDLAND BANK,
as Trustee
Dated as of August 15, 1996
________________________________________________________________________________
<PAGE>
Index of Defined Terms
----------------------
<TABLE>
<CAPTION>
Defined Term Location
------------ --------
<S> <C>
Agent Members (S) 5(c)
Agreement Recitals
Common Stock Recitals
Company Recitals
Definitive Units (S) 2
Global Units (S) 2
Indenture Recitals
Notes Recitals
Officers' Certificate (S) 5(c)
Private Placement Legend (S) 5(c)
Related Parties (S) 8(f)
Securities Act Recitals
Separation Date Recitals
Transfer Amount (S) 5(d)
Trustee Recitals
Unit Agent Recitals
Unit Certificates Recitals
Units Recitals
Warrant Agent Recitals
Warrant Agreement Recitals
Warrant Shares Recitals
Warrants Recitals
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Appointment of Unit Agent.........................................................1
SECTION 2. Unit Certificates.................................................................2
SECTION 3. Execution of Unit Certificates....................................................2
SECTION 4. Registration and Authentication...................................................3
SECTION 5. Registration of Transfers and Exchanges...........................................3
SECTION 6. Separation of the Notes and the Warrants..........................................8
SECTION 7. Rights of Unit Holders............................................................9
SECTION 8. Unit Agent........................................................................9
SECTION 9. Resignation and Appointment of Successor.........................................12
SECTION 10. Notices to the Company and Unit Agent, Trustee and Warrant Agent.................13
SECTION 11. Supplements and Amendments.......................................................14
SECTION 12. Successors.......................................................................14
SECTION 13. Governing Law....................................................................14
SECTION 14. Benefits of This Agreement.......................................................14
SECTION 15. Counterparts.....................................................................15
</TABLE>
ii
<PAGE>
UNIT AGREEMENT
This UNIT AGREEMENT (this "Agreement") dated as of August 15, 1996 is
---------
among International Wireless Communications Holdings, Inc., a Delaware
corporation (the "Company"), and Bankers Trust Company, a New York banking
-------
corporation, not in its individual capacity but solely as unit agent (with any
successor unit agent, the "Unit Agent") and Warrant Agent (as defined below),
----------
and Marine Midland Bank, as Trustee (as defined below).
WHEREAS, the Company proposes to issue $196,720,000 aggregate
principal amount at maturity of its 14% Senior Secured Discount Notes due 2001
(the "Notes") pursuant to an Indenture dated as of August 15, 1996 (the
-----
"Indenture") between the Company and Marine Midland Bank, as Trustee (the
- ----------
"Trustee"), and to issue warrants (the "Warrants") to initially purchase an
- -------- --------
aggregate 2,289,428 shares of its common stock, par value $.01 per share (the
"Common Stock"), pursuant to a Warrant Agreement dated as of August 15, 1996
- -------------
(the "Warrant Agreement") between the Company and Bankers Trust Company, as
-----------------
Warrant Agent (the "Warrant Agent"). The Notes and the Warrants will initially
-------------
be represented by units (the "Units"), with each Unit consisting of $1,000
-----
principal amount of Notes and one Warrant to purchase 11.638 shares of Common
Stock (the "Warrant Shares").
--------------
WHEREAS, the Company, the Trustee and the Warrant Agent desire to
appoint Bankers Trust Company to act as their agent for the purpose of issuing
certificates ("Unit Certificates") representing the Units and for the
-----------------
registration of transfers and exchanges thereof.
WHEREAS, the Units will be exchangeable for the Notes and Warrants
represented thereby upon the earliest to occur of: (i) November 15, 1996, (ii)
the occurrence of an Exercise Event (as defined in the Warrant Agreement), (iii)
the date a registration statement with respect to a registered exchange offer
for the Notes or a shelf registration statement for the Notes is declared
effective under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
and (iv) such earlier date as the Initial Purchasers (as defined in the
Indenture) may, in their discretion, deem appropriate. The date on which an
event listed in the preceding sentence occurs is referred to as the "Separation
----------
Date."
- ----
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given to such terms in the Indenture.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Unit Agent. (a) The Company hereby
-------------------------
appoints the Unit Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Unit Agent hereby
accepts such appointment.
1
<PAGE>
(b) The Trustee and the Company hereby appoint the Unit Agent as an
Authenticating Agent and Registrar (as such terms are defined in the Indenture)
for the Notes for so long as the Notes are represented by the Units. In its
capacity as an Authenticating Agent and Registrar, the Unit Agent shall have the
rights and obligations provided for such capacities in the Indenture.
(c) The Warrant Agent and the Company hereby appoint the Unit Agent
as Registrar (as such term is defined in the Warrant Agreement) for the Warrants
for so long as the Warrants are represented by the Units. In its capacity as
Registrar, the Warrant Agent shall have the rights and obligations provided for
such capacities in the Warrant Agreement.
SECTION 2. Unit Certificates. Units offered and sold in reliance on
-----------------
Rule 144A or to Non-U.S. Persons in accordance with Regulation S may be issued
in registered global form ("Global Units"), substantially in the form of Exhibit
------------
A attached hereto. Units offered and sold to Institutional Accredited Investors
who are not QIBs (excluding Non-U.S. Persons) shall be issued in registered form
as definitive unit certificates ("Definitive Units"), substantially in the form
----------------
of Exhibit A hereto. Any certificates evidencing the Global Units to be
delivered pursuant to this Agreement shall also bear the legend set forth in
Exhibit B attached hereto. Such Global Units shall represent such of the
outstanding Units as shall be specified therein and each shall provide that it
shall represent the aggregate Units from time to time endorsed thereon and that
the aggregate amount of outstanding Units represented thereby may from time to
time be reduced or increased, as appropriate. Any endorsement of a Global Unit
to reflect the amount of any increase or decrease in the amount of outstanding
Units represented thereby shall be made by the Unit Agent in accordance with
instructions given by the holder thereof. The Depository Trust Company shall
act as the Depository with respect to the Global Units until a successor shall
be appointed by the Company and the Unit Agent. Upon written request, a Unit
holder may receive from the Unit Agent Definitive Units as set forth in Section
5 below.
SECTION 3. Execution of Unit Certificates. Unit Certificates shall
------------------------------
be signed on behalf of the Company by two Officers (as such term is defined in
the Indenture). The Company's corporate seal shall also be reproduced on the
Unit Certificates. Each such signature upon the Unit Certificates may be in the
form of a facsimile signature of any person who is an Officer as of or
subsequent to the date hereof and may be imprinted or otherwise reproduced on
the Unit Certificates and for that purpose the Company may adopt and use the
facsimile signature of any person who shall have been an Officer,
notwithstanding the fact that at the time the Unit Certificates shall be
authenticated and delivered or disposed of he or she shall have ceased to hold
such office. The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced on the Unit
Certificates.
In case any Officer of the Company who shall have signed any of the
Unit Certificates shall cease to be such Officer before the Unit Certificates so
signed shall have been authenticated by the Unit Agent, or disposed of by the
Company, such Unit Certificates nevertheless may be authenticated and delivered
or disposed of as though such person had not ceased to be such Officer of the
Company; and any Unit Certificate may be signed on behalf of the Company by any
person
2
<PAGE>
who, at the actual date of the execution of such Unit Certificate, shall be a
proper Officer of the Company to sign such Unit Certificate, although at the
date of the execution of this Unit Agreement any such person was not such
officer.
Unit Certificates shall be dated the date of authentication by the
Unit Agent.
SECTION 4. Registration and Authentication. The Unit Agent, on
-------------------------------
behalf of the Company, shall number and register the Unit Certificates in a
register as they are issued by the Company.
Unit Certificates shall be manually authenticated by the Unit Agent
and shall not be valid for any purpose unless so authenticated. The Unit Agent
shall, upon written instructions of an Officer of the Company specifying the
number of Units to be authenticated, whether the Units are to be Global Units or
Definitive Units, the date of such Units, and such other information as the Unit
Agent may request, initially authenticate and deliver not more than 196,720
Units and shall thereafter authenticate and deliver Units as otherwise provided
in this Agreement.
SECTION 5. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange. The Unit Certificates shall be issued in
---------------------
registered form only. The Company shall cause to be kept at the office of the
Unit Agent a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Unit Certificates
and transfers or exchanges of Unit Certificates as herein provided. All Unit
Certificates issued upon any registration of transfer or exchange of Unit
Certificates shall be valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the Unit
Certificates surrendered for such registration of transfer or exchange.
A holder of Units may transfer its Units only by complying with the
terms of this Agreement. No such transfer shall be effected until final
acceptance and registration of the transfer by the Unit Agent in the register.
Prior to the registration of any transfer of Units as provided herein, the
Company, the Unit Agent and any agent of the Company or the Unit Agent may treat
the Person in whose name the Units are registered as the owner thereof for all
purposes and as the Person entitled to exercise the rights represented thereby,
any notice to the contrary notwithstanding. Furthermore, any holder of a Global
Unit, shall, by acceptance of such Global Unit, agree that transfers of
beneficial interests in such Global Unit may be effected only through a book-
entry system maintained by the holder of such Global Unit (or its agent), and
that ownership of a beneficial interest in the Units represented thereby shall
be required to be reflected in a book entry. When Unit Certificates are
presented to the Unit Agent with a request to register the transfer or to
exchange them for an equal amount of Units of other authorized denominations,
the Unit Agent shall register the transfer or make the exchange in accordance
with the provisions hereof.
(b) Registration, Registration of Transfer and Exchange. Prior to
---------------------------------------------------
the Separation Date, when Unit Certificates are presented to the Unit Agent with
a request from the holder of such Units to register the transfer or to exchange
them for an equal number of Units of other authorized
3
<PAGE>
denominations, the Unit Agent shall register the transfer or make the exchange
as requested; provided, however, that every Unit presented and surrendered for
registration of transfer or exchange, as well as the Notes and Warrants to which
it relates, shall be duly endorsed and be accompanied by a written instrument of
transfer in form satisfactory to the Company, duly executed by the holder
thereof or such holder's attorneys duly authorizing in writing.
Prior to the Separation Date, to permit registrations of transfer and
exchanges, the Company shall make available to the Unit Agent a sufficient
number of executed Unit Certificates to effect such registrations of transfers
and exchanges. No service charge shall be made to the holder of Units for any
registration of transfer or exchange of Units, but the Company may require from
the transferring or exchanging holder payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable under the Indenture or the
Warrant Agreement and exchanges in respect of portions of Units not exercised
and the Company may deduct such taxes from any payment of money to be made and
such transfer or exchange shall not be consummated (if such taxes are not
deducted in full) unless or until such holder shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
and the Unit Agent that such tax has been paid.
(c) Book-Entry Provisions for Global Units.
--------------------------------------
(i) The Global Units initially shall (A) be registered in the
name of the Depository (as defined in the Indenture) for such Global Units or
the nominee of such Depository, (B) be delivered to the Unit Agent as custodian
for such Depository and (C) bear the legends as set forth on Exhibit A and
Exhibit B.
Members of, or participants in, the Depository ("Agent Members")
-------------
shall have no rights under this Agreement with respect to any Global Unit held
on their behalf by the Depository or the Unit Agent as its custodian, or under
any Global Unit, and the Depository may be treated by the Company, the Unit
Agent and any agent of the Company or the Unit Agent as the absolute owner of
any Global Unit for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Unit Agent or any agent of the
Company or the Unit Agent from giving effect to any written certification, proxy
or other authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Unit.
(ii) Transfers of Global Units shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Units may be transferred
or exchanged for Definitive Units and Definitive Units may be transferred or
exchanged for beneficial interests in the Global Units in accordance with the
rules and procedures of the Depository and the provisions of Section 5(d). In
addition, Definitive Units shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Units if (x) the Company
notifies the Unit Agent that the Depository is unwilling or unable to continue
as Depository for any Global Unit and a successor Depository is not appointed by
the Company within
4
<PAGE>
90 days of such notice or (y) an Event of Default (as defined in the Indenture)
has occurred and is continuing and the Unit Agent has received a request from
the Depository to issue Definitive Units.
(iii) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Unit to beneficial owners pursuant to
paragraph (ii) above, the Unit Agent shall (if one or more Definitive Units are
to be issued) reflect on its books and records the date and a decrease in the
number of Units represented by the Global Unit in an amount equal to the number
of Units represented by the beneficial interest in the Global Unit to be
transferred, and the Company shall execute, and the Unit Agent shall
authenticate and cause to be delivered, one or more Definitive Units in an
amount equal to the beneficial interest in the Global Unit so transferred.
(iv) In connection with the transfer of Global Units as an
entirety to beneficial owners pursuant to paragraph (ii) above, the Global Units
shall be deemed to be surrendered to the Unit Agent for cancellation, and the
Company shall execute, and the Unit Agent shall countersign and cause to be
delivered to each beneficial owner identified by the Depository in exchange for
its beneficial interest in the Global Units, Definitive Units of authorized
denominations representing, in the aggregate, the number of Units theretofore
represented by the Global Units so transferred.
(v) Any Definitive Unit delivered in exchange for an interest
in a Global Unit pursuant to paragraph (ii) or (iii) shall bear the legend
described as the Private Placement Legend on Exhibit A (the "Private Placement
-----------------
Legend").
- ------
(vi) The registered holder of any Global Unit may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a holder is
entitled to take under this Unit Agreement or the Units.
(d) Special Transfer Restrictions.
-----------------------------
(i) Transfers to Institutional Accredited Investors Who Are
--------------------------------------------------------
Not QIBs. The following provisions shall apply with respect to the registration
- --------
of any proposed transfer of a Unit to any Institutional Accredited Investor who
is not a QIB (excluding Non-U.S. Persons):
(A) the Unit Agent shall register the transfer of any
Units if, in the case of a transfer to an Institutional
Accredited Investor who is not a QIB (excluding non-U.S.
Persons), the proposed transferee has delivered to the Unit Agent
a certificate substantially in the form of Exhibit C hereto; and
(B) if the proposed transferor is an Agent Member holding
a beneficial interest in a Global Unit, upon receipt by the Unit
Agent of (x) the certificate required by paragraph (A) above and
(y) instructions given in accordance with the Depository's and
the Unit Agent's procedures, the Unit Agent shall reflect on its
books and records the date of such transfer and a
5
<PAGE>
decrease in the number of Units represented by the Global Unit in
an amount equal to the beneficial interest to be transferred, and
the Company shall execute, and the Unit Agent, upon receipt of a
written order of the Company in the form of an Officers'
Certificate, shall authenticate and deliver, one or more
Definitive Units of authorized denominations representing, in the
aggregate, the number of Units so transferred.
(ii) Transfers to QIBs. The following provisions shall apply
-----------------
with respect to the registration of any proposed transfer of a Unit to a QIB
(excluding non-U.S. Persons):
(A) if the Unit to be transferred consists of (x)
Definitive Units or a beneficial interest in a Global Unit (other
than transfers of beneficial interests within the same Global
Unit), the Unit Agent shall register the transfer if such
transfer is being made by a proposed transferor who has checked
the box provided for on the form of Unit stating that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the
form of Unit stating, or has otherwise advised the Company and
the Unit Agent in writing, that it is purchasing the Unit for its
own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (y) a
beneficial interest in a Global Unit that is to be transferred
within the same Global Unit, the transfer of such interest may be
effected only through the book entry system maintained by the
Depository; and
(B) if the proposed transferee is an Agent Member, and
the Units to be transferred consist of Definitive Units which
after transfer are to be evidenced by an interest in a Global
Unit, upon receipt by the Unit Agent of the Definitive Unit, duly
endorsed or accompanied by appropriate instruments of transfer,
together with a certificate to the effect that such transferee is
a QIB and instructions given in accordance with the Depository's
and the Unit Agent's procedures, the Unit Agent shall reflect on
its books and records the date and an increase in the number of
Units represented by the Global Unit in an amount equal to the
number of Definitive Units to be transferred, and the Unit Agent
shall cancel the Definitive Units so transferred; and
(C) with respect to transfers that consist of beneficial
interest in a Global Unit which after transfer are to be
evidenced by a Definitive Unit and upon compliance with the
provisions set forth in clause (A) above, the Unit
6
<PAGE>
Agent shall reflect on its books and records the date and a
decrease in the number of Units represented by the Global Unit in
which the transferor owns the beneficial interest to be
transferred in an amount equal to the beneficial interest in the
Global Unit so transferred.
(iii) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to any transfer of a Unit to a
Non-U.S. Person:
(A) the Registrar shall register any proposed transfer to
any Non-U.S. Person if the Unit to be transferred is a Definitive
Unit or a beneficial interest in a Global Unit (other than
transfers of beneficial interests within the same Global Unit)
only upon receipt of a certificate substantially in the form of
Exhibit D hereto from the proposed transferor;
(B) (x) if the proposed transferee is an Agent Member,
and the Unit to be transferred consists of a beneficial interest
in a Global Unit which after transfer is to be evidenced by a
beneficial interest in a different Global Unit, upon receipt by
the Unit Agent of (1) the documents required by paragraph (A) and
(2) instructions in accordance with the Depository's and the Unit
Agent's procedures, the Unit Agent shall reflect on its books and
records (a) the date, (b) a decrease in the number of Units
represented by the Global Unit in which the transferor owns the
beneficial interest to be transferred in an amount equal to the
beneficial interest to be transferred and (c) an increase in the
number of Units represented by the Global Unit in which the
transferee will hold its beneficial interest in like amount and
(y) if the proposed transferee is an Agent Member, and the Unit
to be transferred consists of a Definitive Units which after
transfer is to be evidenced by a beneficial interest in a Global
Unit, upon receipt by the Registrar of (1) the documents required
by paragraph (A) and (2) instructions in accordance with the
Depository's and the Unit Agent's procedures, the Unit Agent
shall reflect on its books and records (a) the date and (b) an
increase in the number of Units represented by the Global Unit in
an amount equal to the number of Units represented by the
Definitive Unit to be transferred, and the Unit Agent shall
cancel or cause to be canceled the Definitive Unit so
transferred;
(C) with respect to transfers that consists of beneficial
interests in a Global Unit which after transfer are to be
evidenced by a Definitive Unit and upon compliance by the
transferee with the provisions set forth in paragraph (A) above,
the Unit Agent shall reflect on its books and records the date
and a decrease in the number of Units represented by such Global
Unit in an amount equal to the beneficial interests in such
Global Unit so transferred and the Company shall execute, and the
Unit Agent, upon receipt of a written order of the Company in the
form of an Officer's Certificate, shall authenticate and
7
<PAGE>
deliver, one or more Definitive Units of authorized denominations
representing, in the aggregate, the number of units transferred;
and
(D) transfers of beneficial interests in the same Global
Unit may be effected only through the book entry system
maintained by the Depository.
(iv) Restricted Period under Regulation S. Notwithstanding the
------------------------------------
other provisions of this Section 5(d), Units offered and sold by the Initial
Purchasers in reliance on Regulation S shall not be transferred to a U.S. Person
or for the account or benefit of a U.S. Person during the applicable "restricted
period" (as defined in Regulation S).
(e) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Units, the Unit Agent shall deliver only Units that bear the
Private Placement Legend.
(f) Cancellation and/or Adjustment of Global Unit. At such time as
---------------------------------------------
all beneficial interests in Global Units have either been exchanged for
Definitive Units or canceled, all Global Units shall be returned to or retained
and canceled by the Unit Agent and destroyed by the Company, or by the Unit
Agent at the Company's request. At any time prior to such cancellation, if any
beneficial interest in a Global Unit is exchanged for Definitive Units or
canceled, the number of Units represented by such Global Unit shall be reduced
and an endorsement shall be made on such Global Unit by the Unit Agent to
reflect such reduction.
(g) Legends. Each Unit Certificate evidencing the Global Units and
-------
the Definitive Units (and all Units issued in exchange therefor or substitution
thereof) shall bear a legend substantially to the following effect:
THIS SECURITY HAS BEEN OFFERED AS PART OF A UNIT. EACH OF THE UNITS
CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 14% SENIOR SECURED DISCOUNT NOTES
DUE 2001 (THE "NOTES") OF INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS,
INC. (THE "COMPANY") AND ONE WARRANT TO PURCHASE 11.638 SHARES OF COMMON
STOCK OF THE COMPANY (THE "WARRANT"). THE NOTES AND WARRANTS WILL NOT BE
TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM EACH OTHER UNTIL THE
"SEPARATION DATE," WHICH SHALL BE THE EARLIEST OF (I) NOVEMBER 15, 1996;
(II) THE OCCURRENCE OF AN EXERCISE EVENT (AS DEFINED IN THE WARRANT
AGREEMENT), (III) THE DATE A REGISTRATION STATEMENT WITH RESPECT TO A
REGISTERED EXCHANGE OFFER FOR THE NOTES OR A SHELF REGISTRATION STATEMENT
FOR THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND (IV) SUCH EARLIER DATE AS THE INITIAL PURCHASERS (AS DEFINED
IN THE WARRANT AGREEMENT) MAY, IN THEIR DISCRETION, DEEM APPROPRIATE.
SECTION 6. Separation of the Notes and the Warrants. After the
----------------------------------------
Separation Date, the Notes and the Warrants represented by the Units shall be
separately transferable. Upon
8
<PAGE>
presentation after the Separation Date of any Unit Certificate for exchange for
Warrants and Notes or for registration of transfer or otherwise, (i) the Unit
Agent shall notify the Trustee and the Warrant Agent of the number of Units so
presented, the registered owner thereof, such owner's registered address, the
nature of any legends or restrictive endorsements set forth on such Unit
Certificate and any other information provided by the holder thereof in
connection therewith, (ii) the Trustee and Registrar under the Indenture, if the
requirements of the Indenture for such transaction are met, shall promptly
register, authenticate and deliver a new Note equal in principal amount to the
Notes represented by such Unit Certificate in accordance with the direction of
such holder and (iii) the Warrant Agent, if the requirements of the Warrant
Agreement for such transactions are met, shall promptly countersign, register
and deliver a new Warrant certificate for the number of Warrants previously
represented by such Unit Certificate in accordance with the directions of such
holder. The Warrant Agent and the Trustee will notify the Unit Agent of any
additional requirements in connection with a particular transfer or exchange.
Following the Separation Date, no Unit Certificates shall be issued
upon transfer or exchange of Unit Certificates, or otherwise.
SECTION 7. Rights of Unit Holders. The registered owner of a Unit
----------------------
Certificate shall have all the rights and privileges of a registered owner of
the principal amount of Notes represented thereby and the number of Warrants
represented thereby and shall be treated as the registered owner thereof for all
purposes. The Company agrees that it shall be bound by all provisions of the
Indenture, the Notes, the Warrant Agreement and the Warrants and that the Notes
and Warrants represented by each Unit Certificate shall be deemed legal, valid
and binding obligations of the Company and that upon exercise of the Warrants,
the Warrant Shares will be validly issued, fully paid and nonassessable.
SECTION 8. Unit Agent. The Unit Agent undertakes the duties and
----------
obligations imposed by this Agreement upon the following terms and conditions,
by which the Company and the holders of Units, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Unit Certificates
shall be taken as statements of the Company, and the Unit Agent assumes no
responsibility for the correctness of any of the same, other than with
respect to the certificate of authentication, except such as describe the
Unit Agent or action taken or to be taken by it. The Unit Agent assumes no
responsibility with respect to the distribution of the Unit Certificates
except as herein otherwise specifically provided.
(b) The Unit Agent shall not be responsible for any failure of the
Company to comply with any of the covenants in this Agreement, Unit
Certificates, the Indenture or the Warrant Agreement to be complied with by
the Company.
(c) The Unit Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Unit Agent shall incur
no liability or responsibility to the Company or to any holder of any Unit
Certificate in respect of any action taken,
9
<PAGE>
suffered or omitted by it hereunder in good faith and in accordance with
the written opinion or the written advice of such counsel.
(d) The Unit Agent shall incur no liability or responsibility to the
Company or to any holder of any Unit Certificate for any action taken in
reliance on any Unit Certificate, certificate of shares, notice,
resolution, waiver, consent, order, certificate, or other paper, document
or instrument reasonably believed by the Unit Agent to be genuine and to
have been signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Unit Agent reasonable
compensation for all services rendered by the Unit Agent in connection with
this Agreement, to reimburse the Unit Agent for all expenses (including
reasonable fees, expenses and disbursements of counsel), taxes and
governmental charges and other charges of any kind and nature incurred by
the Unit Agent in connection with this Agreement and to indemnify the Unit
Agent and save it harmless against any and all losses and liabilities,
including judgments, costs and counsel fees and actual expenses, for any
action taken or omitted by the Unit Agent or arising in connection with
this Agreement and the exercise by the Unit Agent of its rights hereunder
and the performance by the Unit Agent of any of its obligations hereunder
except as a result of the Unit Agent's gross negligence or bad faith or
willful misconduct.
(f) The Unit Agent, and any stockholder, director, officer, affiliate
or employee ("Related Parties") of it, may buy, sell or deal in any of the
---------------
Units, Notes, Warrants, Common Stock or other securities of the Company or
become pecuniarily interested in any transaction in which the Company may
be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Unit Agent under this
Agreement. Nothing herein shall preclude the Unit Agent or such Related
Parties from acting in any other capacity for the Company or for any other
legal entity.
(g) The Unit Agent shall act hereunder solely as agent for the
Company, the Trustee and the Warrant Agent, and its duties shall be
determined solely by the provisions hereof. The Unit Agent shall not be
liable for anything which it may do or refrain from doing in connection
with this Agreement except for its own gross negligence or bad faith or
willful misconduct.
(h) No provision of this Agreement shall require the Unit Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(i) The Unit Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action unless the
Company or one or more registered holders of Unit Certificates shall
furnish the Unit Agent with security and indemnity for any costs and
expenses which may be incurred acceptable to the Unit Agent. This
provision shall not affect
10
<PAGE>
the power of the Unit Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Units may be enforced by
the Unit Agent without the possession of any of the Unit Certificates or
the production thereof at any trial or other proceeding relative thereto,
and any such action, suit or proceeding instituted by the Unit Agent shall
be brought in its name as Unit Agent and any recovery of judgment shall be
for the ratable benefit of the registered holders of the Units, as their
respective rights or interests may appear.
(j) Before the Unit Agent acts or refrains from acting with respect
to any matter contemplated by this Unit Agreement, it may require:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Unit
Agreement relating to the proposed action have been complied with; and
(2) an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or opinion of counsel with respect to
compliance with a condition or covenant provided for in this Unit Agreement
shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
The Unit Agent shall not be liable for any action it takes or omits to
take in good faith in reliance on any such certificate or opinion.
(k) In the absence of bad faith on its part, the Unit Agent may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Unit Agent and conforming to the requirements of this Unit Agreement.
However, the Unit Agent shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this Unit
Agreement.
11
<PAGE>
(l) The Unit Agent may rely and shall be fully protected in relying
upon any document believed by it to be genuine and to have been signed or
presented by the proper person. The Unit Agent need not investigate any
fact or matter stated in the document.
(m) The Unit Agent may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
due care.
SECTION 9. Resignation and Appointment of Successor. (a) The
------------------------------ ---------
Company agrees, for the benefit of the Holders from time to time of the Units,
that there shall at all times be a Unit Agent hereunder.
(b) The Unit Agent may at any time resign as Unit Agent by giving
written notice to the Company of such intention on its part, specifying the date
on which its desired resignation shall become effective, provided that such date
shall be at least 30 days after the date on which such notice is given unless
the Company agrees to accept less notice. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Unit Agent,
qualified as provided in Section 9(d) hereof, by written instrument in duplicate
signed on behalf of the Company, one copy of which shall be delivered to the
resigning Unit Agent and one copy to the successor Unit Agent. As provided in
Section 9(d) hereof, such resignation shall become effective upon the earlier of
(x) the acceptance of the appointment by the successor Unit Agent or (y) 30 days
after receipt by the Company of notice of such resignation. The Company shall
remove the Unit Agent and appoint a successor Unit Agent by written instrument
signed by the Company, one copy of which shall be delivered to the Unit Agent
being removed and one copy to the successor Unit Agent, if the Unit Agent shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Unit Agent or of its property shall be appointed, or any public
officer shall take charge or control of it or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation. The Company may also
remove the Unit Agent for any reason, in the manner described in the preceding
sentence, with the consent of the Trustee and the Warrant Agent. Any removal of
the Unit Agent and any appointment of a successor Unit Agent shall become
effective upon acceptance of appointment by the successor Unit Agent as provided
in Section 9(d). As soon as practicable after appointment of the successor Unit
Agent, the Company shall cause written notice of the change in the Unit Agent to
be given to each of the registered holders of the Units in the manner provided
for in Section 10 hereof.
(c) Upon resignation or removal of the Unit Agent, if the Company
shall fail to appoint a successor Unit Agent within a period of 30 days after
receipt of such notice of resignation or removal, then the holder of any Unit
Certificate or the Unit Agent may apply to a court of competent jurisdiction for
the appointment of a successor to the Unit Agent. Pending appointment of a
successor to the Unit Agent, either by the Company or by such a court, the
duties of the Unit Agent shall be carried out by the Company.
(d) Any successor Unit Agent, whether appointed by the Company or by
a court, shall be a bank or trust company in good standing, incorporated under
the laws of the United States of America or any State thereof and having, at the
time of its appointment, a combined capital surplus of at least $100 million.
Such successor Unit Agent shall execute and deliver to its predecessor and
12
<PAGE>
to the Company an instrument accepting such appointment hereunder and all the
provisions of this Agreement, and thereupon such successor Unit Agent, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as Unit Agent hereunder, and such predecessor shall
thereupon become obligated to (i) transfer and deliver, and such successor Unit
Agent shall be entitled to receive, all securities, records or other property on
deposit with or held by such predecessor as Unit Agent hereunder and (ii) upon
payment of the amounts then due it pursuant to Section 8(e) hereof, pay over,
and such successor Unit Agent shall be entitled to receive, all monies deposited
with or held by any predecessor Unit Agent hereunder.
(e) Any corporation or bank into which the Unit Agent hereunder may
be merged or converted, or any corporation or bank with which the Unit Agent may
be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Unit Agent shall be a party, or any
corporation or bank to which the Unit Agent shall sell or otherwise transfer all
or substantially all of its corporate trust business, shall be the successor to
the Unit Agent under this Agreement (provided that such corporation or bank
shall be qualified as aforesaid) without the execution or filing of any document
or any further act on the part of any of the parties hereto.
(f) No Unit Agent under this Unit Agreement shall be personally
liable for any action or omission of any successor Unit Agent.
(g) The indemnity provisions of Section 8(e) hereof shall survive the
resignation or removal of the Unit Agent.
SECTION 10. Notices to the Company and Unit Agent, Trustee and
--------------------------------------------------
Warrant Agent. Notice to the Unit Agent, the Warrant Agent and the Trustee shall
- -------------
be sufficiently given or made when received by the Unit Agent, the Warrant Agent
or the Trustee, as applicable, at the addresses set forth below. Notice or
demand authorized by this Agreement to be given to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage paid, addressed to:
International Wireless Communications Holdings, Inc.
400 South El Camino Real
Suite 1275
San Mateo, California 94402
Attention: Chief Financial Officer
Address of the Unit Agent or the Warrant Agent:
Bankers Trust Company
4 Albany Street
New York, New York
Attention: Corporate Market Services
13
<PAGE>
Address of the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Services - IWC
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent communications or notice.
Any notice to be mailed to a holder of Units shall be mailed to him or
her at the address that appears on the register of Units maintained by the Unit
Agent. Copies of any such communication shall also be mailed to the Unit Agent,
Trustee and Warrant Agent. The Unit Agent shall furnish the Company, the
Trustee or the Warrant Agent promptly when requested with a list of registered
holders of Units for the purpose of mailing any notice or communication to the
holders of the Notes or Warrants and at such other times as may be reasonably
requested.
SECTION 11. Supplements and Amendments. The Company and the Unit
--------------------------
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Units in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company, the Trustee, the
Warrant Agent and the Unit Agent may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Unit Certificates in any
material respect. Any amendment or supplement to this Agreement that has a
material adverse effect on the interests of Unit holders shall require the
written consent of registered holders of the then outstanding Units representing
not less than a majority in principal amount of the then outstanding Units.
SECTION 12. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company, the Trustee, the Warrant Agent
or the Unit Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 13. Governing Law. THIS AGREEMENT AND EACH UNIT CERTIFICATE
-------------
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
SECTION 14. Benefits of This Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Trustee, the Warrant Agent, the Unit Agent and the registered holders of the
Unit Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Trustee, the Warrant Agent, the Unit Agent and the registered
holders of the Unit Certificates.
14
<PAGE>
SECTION 15. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By: /s/ Douglas S. Sinclair
-------------------------------------
Name: Douglas S. Sinclair
Title: Executive Vice President and
Chief Financial Officer
BANKERS TRUST COMPANY, as Unit Agent
By: /s/ Kevin Weeks
-------------------------------------
Name: Kevin Weeks
Title: Assistant Treasurer
MARINE MIDLAND BANK, as Trustee
By: /s/ James D. Nesci
-------------------------------------
Name: James D. Nesci
Title: Corporate Trust Officer
BANKERS TRUST COMPANY, as Warrant Agent
By: /s/ Kevin Weeks
-------------------------------------
Name: Kevin Weeks
Title: Assistant Treasurer
<PAGE>
EXHIBIT A
[FORM OF UNIT CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR
THE LAST DATE ON WHICH INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. (THE
"COMPANY") OR ANY AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THIS SECURITY (THE "RESALE RESTRICTION
TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY, OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THIS SECURITY IS ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO NON-U.S. PERSONS OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE UNIT AGENT, IN THE CASE OF ANY
TRANSFER OF UNITS, THE REGISTRAR, IN THE CASE OF ANY TRANSFER OF THE NOTES, AND
THE WARRANT AGENT, IN THE CASE OF ANY TRANSFER OF THE WARRANTS, A SIGNED LETTER
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE UNIT AGENT, THE REGISTRAR OR
THE WARRANT AGENT, AS APPLICABLE) CERTIFYING TO THE COMPANY AND SUCH AGENT OR
REGISTRAR THAT SUCH TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS
ACQUIRING SUCH SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE, THE HOLDER SHALL, PRIOR TO SUCH TRANSFER,
FURNISH TO THE UNIT AGENT, THE REGISTRAR OR THE WARRANT AGENT, AS APPLICABLE,
AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS ANY
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
A-1
<PAGE>
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSONS" HAVE THE MEANINGS
GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.*/
-
THE NOTE COMPRISING A PART OF THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE
DISCOUNT." THE ISSUE PRICE IS $354.32 FOR EACH $1,000 OF STATED PRICNIPAL
AMOUNT. THE ORIGINAL ISSUE DISCOUNT IS $645.68 OF STATED PRINCIPAL AMOUNT. THE
ISSUE DATE IS AUGUST 15, 1996. THE YIELD TO MATURITY IS 23.06%, COMPOUNDED
SEMI-ANNUALLY.
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
Units, Each Consisting of $1,000 Principal Amount of 14% Senior Secured Discount
Notes due 2001 and one Warrant to Purchase 11.638 Warrant Shares of Common Stock
No._________ CUSIP No._________
International Wireless Communications Holdings, Inc., a Delaware
corporation (the "Company," which term includes any successor corporation),
-------
hereby certifies that _____________ is the owner of __________ Units as
described above, transferable only on the books of the Company by the holder
thereof in person or by his or her duly authorized attorney, on surrender of
this Certificate properly endorsed.
Each Unit consists of one $1,000 principal amount 14% Senior Secured
Discount Note due 2001 of the Company (collectively, the "Notes") and one
-----
warrant (collectively, the "Warrants") to purchase 11.638 shares of Common Stock
--------
of the Company, par value $.01 per share (the "Common Stock"). The Notes and
------------
the Warrants represented by this Unit Certificate, which are attached hereto and
made a part hereof, are non-detachable and not separately transferrable except
as set forth herein. This Unit is issued pursuant to the Unit Agreement (the
"Unit Agreement") dated as of August 15, 1996, among the Company, Bankers Trust
--------------
Company (the "Unit Agent"), Bankers Trust Company, as Warrant Agent, and Marine
----------
Midland Bank, as Trustee, and is subject to the terms and provisions contained
therein, to all of which terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. The terms of the Notes are governed
by an Indenture (the "Indenture") dated as of AUGUST 15, 1996 between the
---------
Company and Marine Midland Bank, as Trustee (the "Trustee"), and are subject to
-------
the terms and provisions contained therein, to all of which terms and provisions
the holder of this Unit Certificate consents by acceptance hereof.
The terms of the Warrants are governed by a Warrant Agreement dated as
of August 15, 1996 (the "Warrant Agreement") between the Company and Bankers
-----------------
Trust Company, as Warrant
_________________________
*/ The foregoing legend is the Private Placement Legend referred to in the
- -
Unit Agreement.
A-2
<PAGE>
Agent (the "Warrant Agent"), and are subject to the terms and provisions
-------------
contained therein, to all of which terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. The Company will furnish to any
Holder of a Unit upon written request and without charge a copy of the Unit
Agreement, the Indenture and the Warrant Agreement. Requests may be made to:
International Wireless Communications Holdings, Inc., 400 South El Camino Real,
Suite 1275, San Mateo, California 94402, Attn: Chief Financial Officer.
The Notes and Warrants represented by this Unit Certificate shall be
non-detachable and not separately transferable until the earliest to occur of:
(i) November 15, 1996, (ii) the occurrence of an Exercise Event (as defined in
the Warrant Agreement), (iii) the date a registration statement with respect to
a registered exchange offer for the Notes or a shelf registration statement for
the Notes is declared effective under the Securities Act of 1933, as amended,
and (iv) such earlier date as the Initial Purchasers (as defined in the
Indenture) may, in their discretion, deem appropriate.
Dated:
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
A-3
<PAGE>
Certificate of Authentication: This is one
of the Units referred to in the above
mentioned Unit Agreement.
BANKERS TRUST COMPANY, as Unit Agent
By:___________________________________
Authorized Signatory
A-4
<PAGE>
NOTICE: THIS UNIT MAY NOT BE TRANSFERRED SEPARATELY
FROM THE NOTES AND WARRANTS THAT COMPRISE THIS UNIT
ASSIGNMENT FORM
To assign this Unit, fill in the form below: (I) or (we) assign and
transfer this Unit to:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Unit on the books of the Company. The agent may substitute
another to act for him.
[Check One]
---------
[_] (a) this Unit is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
[_] (b) this Unit is being transferred pursuant to Rule 904 under the
Securities Act and documents are being furnished which comply with the
conditions of transfer set forth in the Unit Agreement.
[_] (c) this Unit is being transferred other than in accordance with (a) or
(b) above and documents are being furnished which comply with the
conditions of transfer set forth in the Unit Agreement.
If none of the foregoing boxes is checked, the Unit Agent shall not be obligated
to register this Unit in the name of any person other than the holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in Section 5 of the Unit Agreement shall have been satisfied.
Date: ____________________
A-5
<PAGE>
Your Signature:________________________________
(Sign exactly as your names
appears on the face ofthis Unit)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Registrar)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants to the Company, the Unit Agent, the
Trustee and the Warrant Agent that it is purchasing this Unit for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date:__________________________ ____________________________________
NOTICE: to be executed by an executive
officer
A-6
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE UNITS**/
--------------------------------------------
The following exchanges of a part of this Global Unit for Definitive Units have
been made:
<TABLE>
<CAPTION>
Number of Units
Decrease in Increase in of this Global Signature of
Number of Number of Unit following authorized
Units of this Units of this such decrease signatory of
Date of Exchange Global Unit Global Unit (or increase) Unit Agent
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
_________________________
**/ This is to be included only if the Unit is in global form.
- ---
A-7
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR GLOBAL UNIT
Any Global Unit authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in sub stantially the following form:
THIS SECURITY IS A GLOBAL UNIT WITHIN THE MEANING OF THE UNIT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE>
================================================================================
EXHIBIT C
(TRANSFERS TO NON-QIB ACCREDITED INVESTORS)
C-1
<PAGE>
EXHIBIT C
(Transfers to Non-QIB Accredited Investors)
___________________, ____
BANKERS TRUST COMPANY, as Unit Agent
4 Albany Street
New York, New York 10006
Attention: Corporate Market Services
Re: INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
-----------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of ______ Units (the "Securities")
of International Wireless Communications Holdings, Inc. (the "Company"), each
consisting of $1,000 aggregate principal amount of the Company's 14% Senior
Secured Discount Notes due 2001 and one Warrant to purchase Common Stock of the
Company, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated August 9, 1996, relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages 3 and 4
of the Offering Memorandum and in the section entitled "Transfer Restrictions"
of the Offering Memorandum, including the restrictions on duplication and
circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Unit Agreement
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (i) to the
Company or any of its subsidiaries, (ii) for so long as the Securities are
eligible for resale pursuant
C-2
<PAGE>
to Rule 144A under the Securities Act ("Rule 144A"), in accordance with Rule
144A to a "qualified institutional buyer" (as defined in Rule 144A), (iii) to
non-U.S. Persons outside the United States in accordance with Regulation S under
the Securities Act, (iv) to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to the Unit Agent (as defined in the Unit Agreement
relating to the Securities), a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Securities (the
form of which letter can be obtained from the Unit Agent), (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
available), or (vi) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing any of
the Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will not
transfer the Securities to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974 as amended), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we will
be required to furnish to the Unit Agent and the Company, such certifications,
legal opinions and other information as the Unit Agent and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We acknowledge that the Unit Agent and the Company will rely upon
the truth and accuracy of such information. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion. We are not
acquiring the Securities with a view toward distribution thereof in a
transaction that would violate the Securities Act or the securities laws of any
State of the United States or any other applicable jurisdiction.
C-3
<PAGE>
You, the Company, the Trustee and the Warrant Agent are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Capitalized terms
used herein and not otherwise defined shall have the meanings given to such
terms in the Unit Agreement dated as of August 15, 1996 among the Company,
Bankers Trust Company, as Unit Agent and Warrant Agent, and Marine Midland Bank,
as Trustee.
Very truly yours,
By: ___________________________
Name:
Title:
C-4
<PAGE>
================================================================================
EXHIBIT D
(FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S)
____________, ____
Bankers Trust Company, as Unit Agent
4 Albany Street
New York, New York 10006
Attention: Corporate Market Services
Re: International Wireless Communications Holdings, Inc. (the
---------------------------------------------------------
"Company")
----------
Ladies and Gentlemen:
In connection with our proposed sale of Units (the "Units"), each
consisting of $1,000 aggregate principal amount of the Company's 14% Senior
Secured Discount Notes due 2001 and one Warrant to purchase Common Stock of the
Company, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, we represent that:
1. The offer of the Units was not made to a person in the United States or to
a U.S. Person;
2. Either (a) at the time the buy offer was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States and a non-U.S.
Person, or (b) the transaction was executed in, on or through the facilities of
a designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
3. No directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable;
4. The transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act; and
5. We have advised the transferee of the transfer restrictions applicable to
the Units.
D-1
<PAGE>
You, the Trustee, the Warrant Agent and the Company are entitled to
reply upon this letter and are irrevocably authorized to produce this letter or
a copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby. Certain terms
used in paragraph 2 of this certificate have the meanings set forth in
Regulation S. Capitalized terms used herein and not otherwise defined shall
have the meanings given to such terms in the Unit Agreement dated as of August
15, 1996 between the Company, Bankers Trust Company, as Unit Agent and Warrant
Agent, and Marine Midland Bank, as Trustee.
Very truly yours,
[Name of Transferor]
By____________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT 4.4
_______________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of August 15, 1996
Among
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
and
BT SECURITIES CORPORATION
TORONTO DOMINION SECURITIES (USA) INC.
and
SALOMON BROTHERS INC
as Initial Purchasers
_______________________________________________________________________________
$196,720,000
14% SENIOR SECURED DISCOUNT NOTES DUE 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions............................................................. 1
2. Exchange Offer.......................................................... 4
3. Shelf Registration Statement............................................ 8
4. Additional Interest..................................................... 9
5. Registration Procedures................................................ 11
6. Registration Expenses.................................................. 19
7. Indemnification........................................................ 21
8. Rule 144 and 144A...................................................... 24
9. Underwritten Registrations............................................. 25
10. Miscellaneous.......................................................... 25
(a) No Inconsistent Agreements......................................... 25
(b) Adjustments Affecting Registrable Notes............................ 25
(c) Amendments and Waivers............................................. 25
(d) Notices............................................................ 26
(e) Successors and Assigns............................................. 28
(f) Counterparts....................................................... 28
(g) Headings........................................................... 28
(h) GOVERNING LAW...................................................... 28
(i) Severability....................................................... 28
(j) Senior Notes Held by the Company or its Affiliates................. 28
(k) Third Party Beneficiaries.......................................... 29
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
---------
August 15, 1996, by and among International Wireless Communications Holdings,
Inc., a Delaware corporation (the "Company"), and BT Securities Corporation,
-------
Toronto Dominion Securities (USA) Inc. and Salomon Brothers Inc (the "Initial
-------
Purchasers").
- ----------
This Agreement is entered into in connection with the Purchase
Agreement, dated August 9, 1996, among the Company, International Wireless
Communications, Inc. and the Initial Purchasers (the "Purchase Agreement"),
------------------
which provides for the sale to the Initial Purchasers of Units (the "Units")
-----
consisting of an aggregate of $196,720,000 principal amount of 14% Senior
Secured Discount Notes due 2001 of the Company (the "Senior Notes") and
------ -----
Contingent Warrants (the "Warrants") to purchase shares of the Company's Common
--------
Stock, $0.01 par value per share. The Senior Notes and the Warrants will be
separately transferable upon the earlier of (i) November 15, 1996, (ii) the
occurrence of an Exercise Event (as defined in the Warrants), (iii) the date a
registration statement with respect to a registered exchange offer for the
Senior Notes or a shelf registration for the Senior Notes is declared effective
under the Securities Act of 1933, as amended, and (iv) such earlier date as the
Initial Purchasers, in their discretion, deem appropriate. In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the obligation of
the Initial Purchasers to purchase the Units under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the first introductory paragraph
---------
hereto.
Applicable Period: See Section 2(b) hereof.
-----------------
Closing Date: The Closing Date as defined in the Purchase Agreement.
------------
-1-
<PAGE>
Company: See the first introductory paragraph hereto.
-------
Effectiveness Date: The 90th day after the Issue
------------------
Date.
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Registration Statement: See Section 2(a) hereof.
-------------------------------
Filing Date: The 45th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of August 15, 1996 among the
---------
Company and Marine Midland Bank, as trustee, pursuant to which the Senior Notes
are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchasers: See the first introductory paragraph hereto.
------------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: The date on which the original Senior Notes were sold to
----------
the Initial Purchasers pursuant to the Purchase Agreement.
NASD: See Section 5(s) hereof.
----
Participant: See Section 7(a) hereof.
-----------
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, limited
------
liability company, limited liability limited partnership, joint stock company,
trust, unincorporated
-2-
<PAGE>
association, union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph hereto.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Senior Note upon original issuance of the
-----------------
Senior Notes and at all times subsequent thereto, each Exchange Note as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Senior Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) a Registration Statement (other than, with respect to any Exchange
Note as to which Section 2(c)(v) hereof is applicable, the Exchange Registration
Statement) covering such Senior Note, Exchange Note or Private Exchange Note, as
the case may be, has been declared effective by the SEC and such Senior Note
(unless such Senior Note was not tendered for exchange by the Holder thereof),
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Senior Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, or (iii) such Senior Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Registration Statement, that covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and
-3-
<PAGE>
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the Company of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Senior Notes: See the second introductory paragraph hereto.
------------
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration Statement: See Section 3(a) hereof.
----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the trustee
-------
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Company agrees to file with the SEC no later than the Filing
Date an offer to exchange (the "Exchange Offer") any and all of the Registrable
--------------
Notes (other than the Private Exchange Notes, if any) for a like aggregate
principal amount of debt securities of the Company, which are identical in all
material respects to the Senior Notes (the "Exchange Notes") (and which are
--------------
entitled to the benefits of the Indenture or a trust indenture
-4-
<PAGE>
which is identical in all material respects to the Indenture (other than such
changes to the Indenture or any such identical trust indenture as are necessary
to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA), except that the Exchange Notes (other than Private
Exchange Notes, if any) shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Exchange Offer shall be registered under the
Securities Act on the appropriate form (the "Exchange Registration Statement")
-------------------------------
and shall comply with all applicable tender offer rules and regulations under
the Exchange Act. The Company agrees to use its best efforts to (x) cause the
Exchange Registration Statement to be declared effective under the Securities
Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at
least 20 business days (or longer if required by applicable law) after the date
that notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 135th day following the Issue Date. If after
such Exchange Registration Statement is declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to represent
that any Exchange Notes received by it will be acquired in the ordinary course
of its business, that at the time of the consummation of the Exchange Offer such
Holder will have no arrangement or understanding with any Person to participate
in the distribution of the Exchange Notes in violation of the provisions of the
Securities Act, and that such Holder is not an affiliate of the Company within
the meaning of the Securities Act. Upon consummation of the Exchange Offer in
accordance with this Section 2, the Company shall have no further obligation to
register Registrable Notes (other than Private Exchange Notes and other than in
respect of any Exchange Notes as to which clause 2(c)(v) hereof applies)
pursuant to Section 3 hereof. No securities other than the Exchange Notes shall
be included in the Exchange Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
-------------
Broker-Dealer"), whether such positions or policies have been publicly
- -------------
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the
-5-
<PAGE>
Initial Purchasers, represent the prevailing views of the staff of the SEC. Such
"Plan of Distribution" section shall also expressly permit the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 180 days after the
- -------- -------
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5 hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Senior Notes acquired by them and having the status of an
unsold allotment in the initial distribution, the Company shall, upon the
request of any of the Initial Purchasers, simultaneously with the delivery of
the Exchange Notes in the Exchange Offer issue and deliver to the Initial
Purchasers in exchange (the "Private Exchange") for such Senior Notes held by
----------------
the Initial Purchasers a like principal amount of debt securities of the Company
that are identical in all material respects to the Exchange Notes (the "Private
-------
Exchange Notes") (and which are issued pursuant to the same indenture as the
- --------------
Exchange Notes) except for the placement of a restrictive legend on such Private
Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Senior Notes surrendered in exchange therefor or, if no interest has been paid
on the Senior Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
-6-
<PAGE>
(3) permit Holders to withdraw tendered Senior Notes at any time
prior to the close of business, New York time, on the last business day on
which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Senior Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Senior Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Senior Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Senior Notes of such Holder
so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that (1) the Exchange Notes shall
not be subject to the transfer restrictions set forth in the Indenture and (2)
the Private Exchange Notes shall be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Senior Notes shall vote and
consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Senior Notes will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 135 days of
the Issue Date, (iii) any holder of Private Exchange Notes so requests at any
time within one year after the consummation of the Private Exchange, (iv) the
Holders of not less than a majority in aggregate principal amount of the
Registrable Notes reasonably determine that the interests of the Holders would
be materially adversely affected by consummation of the Exchange Offer or (v) in
the case of any Holder that participates in the Exchange Offer, such Holder does
not receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Company
-7-
<PAGE>
within the meaning of the Securities Act), then the Company shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
-----
Notice") to the Trustee and in the case of clauses (i), (ii) and (iv), all
- ------
Holders, in the case of clause (iii), the Holders of the Private Exchange Notes
and in the case of clause (v), the affected Holder, and shall file a Shelf
Registration Statement pursuant to Section 3 hereof.
3. Shelf Registration Statement
----------------------------
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration Statement. The Company shall as promptly as
----------------------------
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Shelf Registration Statement"). If the Company
----------------------------
shall not have yet filed an Exchange Registration Statement, the Company shall
use its best efforts to file with the SEC the Shelf Registration Statement on or
prior to the Filing Date. Otherwise, the Company shall use its best efforts to
file with the SEC the Shelf Registration Statement on or prior to the 30th day
after the delivery of the Shelf Notice. The Shelf Registration Statement shall
be on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Company shall not permit any securities other than the Registrable Notes to be
included in the Shelf Registration Statement. The Company will, in the event of
the filing of a Shelf Registration Statement, notify each Holder when such Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Senior Notes.
The Company shall use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the filing of the Shelf Registration Statement and to keep the
Shelf Registration Statement continuously effective under the Securities Act
until the date which is three years from the Issue Date, subject to extension
pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"),
--------------------
or such shorter period ending when all Registrable Notes covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement.
(b) Withdrawal of Stop Orders. If the Shelf Registration Statement
-------------------------
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company
-8-
<PAGE>
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(c) Supplements and Amendments. The Company shall promptly
--------------------------
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Notes covered by such Registration Statement or by any
underwriter of such Registrable Notes.
4. Additional Interest
-------------------
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay, as liquidated damages, additional interest on the
Senior Notes ("Additional Interest") under the circumstances and to the extent
-------------------
set forth below (each of which shall be given independent effect and shall not
be duplicative):
(i) if neither the Exchange Registration Statement nor the
Shelf Registration Statement has been filed on or prior to the Filing Date,
then, commencing on the 46th day after the Issue Date, Additional Interest
shall accrue on the Senior Notes over and above the stated interest at a
rate of 0.50% per annum for the first 90 days immediately following the
Filing Date, such Additional Interest rate increasing by an additional
0.50% per annum at the beginning of each subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor the
Shelf Registration Statement is declared effective by the SEC on or prior
to the Effectiveness Date, then, commencing on the 91st day after the Issue
Date, Additional Interest shall accrue on the Senior Notes included or
which should have been included in such Registration Statement over and
above the stated interest at a rate of 0.50% per annum for the first 90
days immediately following the Effectiveness Date, such Additional Interest
rate increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; and
(iii) if (A) the Company has not exchanged Exchange Notes for
all Senior Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 135th day after the Issue Date or (B) the
Exchange Registration Statement ceases to be effective at any time prior to
the time that the Exchange Offer is consummated or (C) if applicable,
-9-
<PAGE>
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue over and above
the stated interest at a rate of 0.50% per annum for the first 90 days
commencing on (x) the 136th day after the Issue Date with respect to the
Senior Notes validly tendered and not exchanged by the Company, in the case
of (A) above, or (y) the day the Exchange Registration Statement ceases to
be effective in the case of (B) above, or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest rate increasing by an additional 0.50% per annum
at the beginning of each such subsequent 90-day period (it being understood
and agreed that, notwithstanding any provision to the contrary, so long as
any Senior Notes which is the subject of a Shelf Notice is then covered by
an effective Shelf Registration Statement, no Additional Interest shall
accrue on such Senior Notes);
provided, however, that the Additional Interest rate on any affected Senior
- -------- -------
Notes may not exceed at any one time in the aggregate 2.0% per annum; and
provided, further, that (1) upon the filing of the Exchange Registration
- -------- -------
Statement or a Shelf Registration Statement (in the case of clause (i) of this
Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement
or the Shelf Registration Statement (in the case of clause (ii) of this Section
4(a)), or (3) upon the exchange of Exchange Notes for all Senior Notes tendered
(in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness
of the Exchange Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the case
of (iii)(C) of this Section 4(a)), Additional Interest on the affected Senior
Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture within one business day after each and every date on which an
event occurs in respect of which Additional Interest is required to be paid (an
"Event Date"). Any amounts of Additional Interest due pursuant to clauses
----------
(a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable to the Holders of
affected Senior Notes in cash semi-annually on each February 15 and August 15
(to the holders of record on the February 1 and August 1 immediately preceding
such dates), commencing with the first such date occurring after any Event Date.
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the affected
Registrable Notes of such Holders, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of
-10-
<PAGE>
a 360-day year comprised of twelve 30-day months and, in the case of a partial
month, the actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registration(s) to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:
(a) Prepare and file with the SEC prior to the Filing Date a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided, however,
-------- -------
that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
hereof is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each case
at least five business days prior to such filing). The Company shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period or until consummation of the Exchange Offer, as the case may be; cause
the related Prospectus to be supplemented by any Prospectus supplement required
by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities Act; and
comply with the
-11-
<PAGE>
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; the Company shall be deemed not to
have used its best efforts to keep a Registration Statement effective during the
Applicable Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless such action
is required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of paragraph 5(k) hereof
and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, the Company shall notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, their counsel and the managing underwriters, if any, promptly (but in any
event within two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement), contemplated by Section 5(n) hereof
cease to be true and correct, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or
sale in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any condition
or any information becoming known that makes any statement made in
-12-
<PAGE>
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in or amendments or supplements to
such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the determination by the Company that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes for sale in any jurisdiction, and, if any such order is issued,
to use its best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any), or the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering, (i) promptly incorporate
in a prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters (if any), such Holders, or counsel for any
of them reasonably request to be included therein and (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment.
(f) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and to counsel and each managing underwriter, if any, at the sole expense of the
Company, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
-13-
<PAGE>
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Company, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify such
Registrable Notes (and to cooperate with selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes) for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request in writing; provided, however, that where
-------- -------
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Company agrees to cause
its counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that the Company shall not be required to (A)
-------- -------
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself
-14-
<PAGE>
to taxation in excess of a nominal dollar amount in any such jurisdiction where
it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request .
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the Holders thereof or the underwriter or underwriters, if any, to dispose of
such Registrable Notes, except as may be required solely as a consequence of the
nature of a selling Holder's business, in which case each of the Company will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals.
(k) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating Broker-
Dealer, any such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) [Intentionally Omitted]
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes or Exchange Notes, as the case may be, in a form eligible
for deposit
-15-
<PAGE>
with The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes or Exchange Notes, as the case may be .
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings of debt securities similar to the
Senior Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to facilitate the registration or
the disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Company and its respective subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, as are customarily made
by issuers to underwriters in underwritten offerings of debt securities similar
to the Senior Notes, and confirm the same in writing if and when requested; (ii)
obtain the written opinion of counsel to the Company and written updates thereof
in form, scope and substance reasonably satisfactory to the managing underwriter
or underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt similar to the
Senior Notes and such other matters as may be reasonably requested by the
managing underwriter or underwriters; (iii) obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings of debt similar to
the Senior Notes and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any
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<PAGE>
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer, as the
case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the case
may be, or underwriter (collectively, the "Inspectors"), at the offices where
----------
normally kept, during reasonable business hours and upon reasonable advance
notice to the Company, all financial and other records, pertinent corporate
documents and instruments of the Company and its respective subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them to
-------
exercise any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Company and its respective subsidiaries to supply
all information reasonably requested by any such Inspector in connection with
such Registration Statement. Records which the Company determines, in good
faith, to be confidential and any Records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a material misstatement or
material omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is, in the opinion
of counsel for any Inspector, necessary or advisable in connection with any
action, claim, suit or proceeding, directly or indirectly, involving or
reasonably likely to involve such Inspector and arising out of, based upon,
relating to, or involving this Agreement, or any transactions contemplated
hereby or arising hereunder, or (iv) the information in such Records has been
made generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such information
is generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to further
agree that it will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give prompt notice to the Company and allow the
Company to undertake appropriate action to prevent disclosure of the Records
deemed confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such
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<PAGE>
indenture and the Holders of the Registrable Notes, to effect such changes to
such indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and in the event that such qualification
would require the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
the Indenture; and execute, and use its best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
----
(t) Use its best efforts to take all other reasonable steps necessary
or advisable to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any Registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time,
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<PAGE>
reasonably request. The Company may exclude from such registration the
Registrable Notes of any seller who unreasonably fails to furnish such
information within a reasonable time after receiving such request. Each seller
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such seller not
materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
------
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event the Company shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a
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<PAGE>
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
or by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or sold by any Participating
Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, if any, and any fees associated with
making the Registrable Notes or Exchange Notes eligible for trading through The
Depository Trust Company, (vii) Securities Act liability insurance, if the
Company desires such insurance, (viii) fees and expenses of all other Persons
retained by the Company, (ix) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (x) the expense of any annual
audit, (xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange, if applicable, and (xii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) The Company shall (i)reimburse the Holders of the Registrable
Notes being registered in a Shelf Registration Statement for the reasonable fees
and disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Notes to be included in such Registration Statement and (ii)
reimburse reasonable out-of-pocket expenses (other than legal expenses) of
Holders of Registrable Notes incurred in connection with the registration and
sale of the Registrable Notes pursuant to a Shelf Registration Statement or in
connection with the exchange of Registrable Notes pursuant to the Exchange
Offer. In addition, the Company shall reimburse the Initial Purchasers for the
reasonable fees and expenses of one counsel in connection with the Exchange
Offer which shall be Winston & Strawn, and shall not be required to pay any
other legal expenses in connection therewith.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes offered pursuant to a Shelf Registration Statement and each
Participating Broker-Dealer selling
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<PAGE>
Exchange Notes during the Applicable Period, the officers and directors of each
such Person, and each Person, if any, who controls any such Person within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all losses, claims,
-----------
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which the offering of such Registrable Notes
or Exchange Notes, as the case may be, is registered (or any amendment thereto)
or related Prospectus (or any amendments or supplements thereto) or any related
preliminary prospectus, or caused by, arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
-------- -------
that the Company will not be required to indemnify a Participant if (i) such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by or on behalf of such Participant expressly for use therein or (ii)
if such Participant sold to the person asserting the claim the Registrable Notes
or Exchange Notes which are the subject of such claim and such untrue statement
or omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and it is established by
the Company in the related proceeding that such Participant failed to deliver or
provide a copy of the Prospectus (as amended or supplemented) to such Person
with or prior to the confirmation of the sale of such Registrable Notes or
Exchange Notes sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) or as a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its respective directors and officers and each
Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only (i) with
reference to information relating to such Participant furnished to the Company
in writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus or
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<PAGE>
(ii) with respect to any untrue statement or representation made by such
Participant in writing to the Company. The liability of any Participant under
this paragraph shall in no event exceed the proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes giving rise to
such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemnifying Person, upon request of the
- ------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not otherwise aware of
such action or claim). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that, unless there exists a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any one such proceeding or
separate but substantially similar related proceedings in the same jurisdiction
arising out of the same general allegations, be liable for the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed
promptly as they are incurred. Any such separate firm for the Participants and
such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Notes and Exchange
Notes sold by all such Participants and any such separate firm for the Company,
their directors, their officers and such control Persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its prior written
consent (which consent shall not
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<PAGE>
be unreasonably withheld), but if settled with such consent or if there be a
final non-appealable judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
Person agrees to indemnify and hold harmless each Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses actually incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; provided,
--------
however, that the Indemnifying Person shall not be liable for any settlement
- -------
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (A) includes an unconditional written release of
such Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such settlement and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Senior Notes or (ii) if the allocation provided by the foregoing clause (i)
is not permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such
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<PAGE>
losses, claims, damages or liabilities (or actions in respect thereof). The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Participant on the other, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and 144A
-----------------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available annual reports and such
information, documents and other reports of the type specified in Sections 13
and 15(d) of the Exchange Act. The Company further covenants for so long as any
Registrable Notes remain outstanding, to make available to any Holder or
beneficial
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<PAGE>
owner of Registrable Notes in connection with any sale thereof and any
prospective purchaser of such Registrable Notes from such Holder or beneficial
owner the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered
into any agreement with respect to any of its securities which grants to any
Person piggy-back registration rights with respect to a Registration Statement
which have not been waived in full. The Company will not enter into any
agreement which will grant any such rights.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Registrable Notes. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with
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<PAGE>
respect to a matter that relates exclusively to the rights of holders of
Registrable Notes whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount of the Registrable
Notes being sold by such Holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be
- -------- -------
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: High Yield
Administration
Toronto Dominion Securities
(USA) Inc.
31 W. 52nd Street, 21st Floor
New York, New York 10019
Facsimile No: (212)397-4733
Attention: Gordon Paris
Salomon Brothers Inc
555 California Street
Suite 3900
San Francisco, California
Facsimile No: (415) 951-1777
Attention: M. Ian G. Gilchrist
with a copy to:
Winston & Strawn
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<PAGE>
200 Park Avenue
New York, New York 10166-4193
Facsimile No: (212) 294-4700
Attention: Robert W. Ericson
2. if to the Initial Purchasers, at the addresses specified in
Section 10(d)(1);
3. if to the Company, as follows:
International Wireless Communications
Holdings, Inc.
400 South El Camino Real
Suite 1275
San Mateo, California 94402
Facsimile No: (415) 548-1842
Attention: Douglas S. Sinclair
Chief Financial Officer
with copies to:
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, California 94304
Facsimile No.: (415) 843-0314
Attention: Brooks Stough
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that this Agreement shall not inure to the benefit of
-------- -------
or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate
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<PAGE>
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Senior Notes Held by the Company or its Affiliates. Whenever the
--------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
[Signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC., a
Delaware corporation
By: /s/ Douglas S. Sinclair
------------------------------------
Name: Douglas S. Sinclair
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By:___________________________
Name:
Title:
TORONTO DOMINION SECURITIES (USA) INC.
By:___________________________
Name:
Title:
SALOMON BROTHERS INC
By:___________________________
Name:
Title:
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC., a
Delaware corporation
By: ____________________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By: /s/ David Hadley
---------------------------
Name: David Hadley
Title: Vice President
TORONTO DOMINION SECURITIES (USA) INC.
By: /s/ Rod Ashtaryeh
----------------------------
Name: Rod Ashtaryeh
Title: Director
SALOMON BROTHERS INC
By:___________________________
Name:
Title:
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC., a
Delaware corporation
By: _________________________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By:___________________________
Name:
Title:
TORONTO DOMINION SECURITIES (USA) INC.
By:___________________________
Name:
Title:
SALOMON BROTHERS INC
By: /s/ Peter Westley
---------------------------
Name: Peter Westley
Title: Vice President
-29-
<PAGE>
EXHIBIT 10.1
================================================================================
WARRANT AGREEMENT
Dated as of August 15, 1996
by and between
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
and
BANKERS TRUST COMPANY
as Warrant Agent
================================================================================
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions ..................................................... 1
SECTION 2. Appointment of Warrant Agent..................................... 7
SECTION 3. Issuance of Warrants............................................. 7
SECTION 4. Warrant Certificates............................................. 7
SECTION 5. Execution of Warrant Certificates................................ 8
SECTION 6. Registration and Countersignature................................ 9
SECTION 7. Registration of Transfers and Exchanges.......................... 9
SECTION 8. Separation of Warrants; Terms of Warrants; Exercise of Warrants.. 16
SECTION 9. Payment of Taxes................................................. 18
SECTION 10. Mutilated or Missing Warrant Certificates........................ 19
SECTION 11. Reservation of Warrant Shares.................................... 19
SECTION 12. Obtaining of Governmental Approvals and Stock Exchange Listings.. 20
SECTION 13. Reports.......................................................... 20
SECTION 14. Adjustment of Exercise Price and Number of Warrant
Shares Issuable................................................. 20
SECTION 15. No Dilution or Impairment........................................ 30
SECTION 16. Fractional Interests............................................. 30
SECTION 17. Notice to Warrant Holders........................................ 30
</TABLE>
__________________________
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or provisions.
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 18. Merger, Consolidation or Change of Name of
Warrant Agent.................................................... 32
SECTION 19. Warrant Agent.................................................... 32
SECTION 20. Registration Rights.............................................. 34
SECTION 21. Tag-Along Rights with Respect to Vanguard........................ 44
SECTION 22. Change of Warrant Agent.......................................... 47
SECTION 23. Notices to the Company and Warrant Agent......................... 47
SECTION 24. Supplements and Amendments....................................... 48
SECTION 25. Successors....................................................... 49
SECTION 26. Termination...................................................... 49
SECTION 27. Governing Law; Jurisdiction...................................... 49
SECTION 28. Benefits of this Agreement....................................... 49
SECTION 29. Counterparts..................................................... 49
SECTION 30. Further Assurances............................................... 49
</TABLE>
ii
<PAGE>
WARRANT AGREEMENT dated as of August 15, 1996 between International
Wireless Communications Holdings, Inc., a Delaware corporation (the "Company"),
and Bankers Trust Company, as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue Common Stock Purchase Warrants,
as hereinafter described (the "Warrants"), which will initially entitle the
holders thereof to purchase up to an aggregate of 2,289,428 shares of Common
Stock, $.01par value per share, of the Company (the "Common Stock") (the Common
Stock issuable on exercise of the Warrants being referred to herein as the
"Warrant Shares"), in connection with an offering of an aggregate of
$196,720,000 principal amount of the Company's 14% Senior Secured Discount Notes
due 2001 (the "Senior Notes"), and 196,720 Warrants, each Warrant initially
entitling the holder thereof to purchase 11.638 Warrant Shares. The Senior Notes
and Warrants will be sold in Units, each Unit consisting of one $1,000 principal
amount of Senior Notes and one Warrant; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties herein agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not otherwise
-----------
defined shall have the meanings assigned to such terms in the Indenture
governing the Senior Notes of even date herewith between the Company and Marine
Midland Bank, as trustee (the "Indenture"). In addition, unless otherwise
indicated, the following terms used herein shall have the meanings set forth
below:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control",
when used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of this Agreement, (i)
holding office as an executive officer or director of a Person or (ii)
beneficial ownership of 10% or more of the equity securities of a Person, either
individually or as part of a group, shall be deemed to be control.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certificate, which is delivered to the Warrant Agent.
<PAGE>
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition, whether direct or
indirect (by way of a merger, consolidation or otherwise), by the Company or a
Subsidiary of the Company, in one or a series of related transactions, of all or
substantially all of the assets of the Company and its subsidiaries taken as a
whole to any Person other than a wholly owned subsidiary of the Company; (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company; (iii) any Person or group (as such term is used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), other than Permitted Holders, directly or
indirectly acquires more than 50% of the total voting power of all classes of
voting stock of the Company and/or warrants or options to acquire such voting
stock, calculated on a fully diluted basis; or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date of this Agreement, (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination.
"Current Market Value" means for each share of Common Stock or for any
other security at any date:
(1) if the security is registered under the Exchange Act,
the average of the daily Market Prices for each business day during
the period commencing 30 business days before such date and ending on
the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 30 consecutive
business days before such date, then the average of the daily Market
Prices for all of the business days before such date for which daily
market prices are available. If the Market Price is not determinable
for at least 15 business days in such period, the Current Market Value
of the security shall be determined as if the security was not
registered under the Exchange Act; or
(2) in the event a security is not registered under the
Exchange Act, if any single transaction or series of related
transactions for which the Current Market Value of the security is
being determined involves consideration of less than $2,000,000, the
value of the security determined in good faith by the
2
<PAGE>
Board of Directors of the issuer of the security and certified in a
Board Resolution; or
(3) in the event a security is not registered under the
Exchange Act, if any single transaction or series of related
transactions for which the Current Market Value of the security is
being determined involves consideration equal to or exceeding
$2,000,000, then (i) the value of the security determined in good
faith by the Board of Directors of the issuer of the security and
certified in a Board Resolution, based on the most recently completed
arm's length cash investment transaction between the issuer of the
security and a Person other than an Affiliate (as defined below) of
the issuer of the security in which such determination is necessary
and the closing of which occurs on such date or shall have occurred
within six months preceding such date, (ii) if no such transaction
shall have occurred on such date or within such six-month period, the
value of the security most recently determined as of a date within the
six-months preceding such date by an Independent Financial Expert or
(iii) if neither clause (i) or (ii) is applicable, the value of the
security determined as of such date by an Independent Financial
Expert.
"Exercise Event" means (i) a Change of Control, (ii) the closing of an
Initial Public Offering, (iii) the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company or (iv) August 14, 2001.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Preferred Stock" means each authorized and outstanding
series of the Company's Preferred Stock, par value $0.01 per share, as of the
date of this Agreement.
"Fair Market Value" means, with respect to the Common Stock, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction (without giving effect to any
discount for lack of liquidity or to the fact that shares of Common Stock may
not be registered under the Exchange Act). In connection with a Warrant
Repurchase, Fair Market Value shall be determined as of the business day
immediately preceding the Triggering Date by an Independent Financial Expert in
an opinion letter delivered and addressed to the Warrant Agent.
"Fully Diluted Shares" means (i) shares of Common Stock outstanding as
of a specified date and (ii) shares of Common Stock into or for which rights,
options, warrants or other securities outstanding as of such date are at any
time exercisable, convertible or exchangeable (including the Warrants).
"Independent Financial Expert" means a nationally recognized
investment banking firm reasonably acceptable to the holders of a majority of
the Warrants (i) that does not
3
<PAGE>
(and whose directors, officers, employees and Affiliates do not) have a direct
or indirect material financial interest in the Company or any of its Affiliates,
(ii) that has not been and, at the time it is called upon to serve as
Independent Financial Expert under this Agreement, is not (and none of its
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company, (iii) that has not been retained by the Company or any of its
Affiliates for any purpose, other than to perform an equity valuation, within
the preceding twelve months, and (iv) that, in the reasonable judgment of the
Board of Directors of the Company, is otherwise qualified to serve as an
independent financial advisor. Any such Person may receive customary
compensation and indemnification by the Company for opinions or services it
provides as an Independent Financial Expert.
"Initial Public Offering" means the initial bona fide underwritten
sale to the public of common stock or any other Capital Stock of the Company
that is made pursuant to a registration statement (other than a registration
statement or Form S-8 or any other form relating to securities issuable under an
employee benefit plan of the Company) that is declared effective by the SEC.
"IPO Contingency Date" means May 15, 1997.
"Initial Purchasers" means BT Securities Corporation, Toronto Dominion
Securities (USA) Inc. and Salomon Brothers Inc.
"Investor Rights Agreement" means the Fifth Amended and Restated
Investor Rights Agreement dated as of December 18, 1995 by and among
International Wireless Communications, Inc. and the other parties named therein,
as in effect on the date of this Agreement.
"Market Price" means for any security on each business day: (i) if
such security is listed or admitted to trading on any securities exchange, the
closing price on such day on the principal exchange on which such security is
traded, or if no sale takes place on such day, the average of the closing bid
and ask prices on such day, (ii) if such Security is not then listed or admitted
to trading on any securities exchange, the last reported sale price on such day,
or if there is no such last reported sale price on such day, the average of the
closing bid and ask prices on such day, as reported by a reputable quotation
source designated by the issuer of the security, or (iii) if neither clause (i)
nor (ii) is applicable, the average of the reported high bid and low ask prices
on such day, as reported by a reputable quotation service, or a newspaper of
general circulation in the Borough of Manhattan, City of New York, customarily
published on each business day, designated by the issuer of the security. If
there are no such prices on a business day, then the market price shall not be
determinable for such business day.
"Non-Qualified Reorganization" means any Reorganization (as defined in
Section 14(k) hereof) other than a Qualified Reorganization.
4
<PAGE>
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Warrant Agent and which is delivered to the Warrant
Agent.
"Permitted Holders" means Vanguard Cellular Systems, Inc., a North
Carolina corporation, and its wholly owned subsidiaries.
"Person" means an individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Public Market" means any time after (i) an Initial Public Offering
has been consummated, (ii) at least 15% of the total issued and outstanding
capital stock of the Company has been distributed by means of an effective
registration statement under the Act and (iii) the Common Stock is registered
under the Exchange Act and the Company is current in its reporting thereunder.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Qualified Reorganization" means any Reorganization that (a) occurs
simultaneously with or following a Change of Control and (b) results in there
being deliverable upon exercise of any Warrant cash and/or securities registered
under Section 12 of the Exchange Act that are freely tradeable and listed on a
national securities exchange or traded on a national quotation service.
"Regulation S" means Regulation S under the Securities Act.
"Repurchase Price" means (a) in respect of a Warrant, the Fair Market
Value of one share of Common Stock multiplied by the number of Warrant Shares
that would be obtained if such Warrant were exercised on the date of repurchase
and (b) in respect of a Warrant Share, the Fair Market Value of one share of
Common Stock of the Company.
"SEC" means the United States Securities and Exchange Commission.
"Senior Notes" has the meaning assigned to such term in the preamble
to this Agreement.
"Separation Date" means 5:00 p.m., New York City time, on the earliest
to occur of (i) November 15, 1996, (ii) the occurrence of an Exercise Event,
(iii) the date a registration statement with respect to a registered exchange
offer for the Senior Notes or a shelf registration statement for the Senior
Notes is declared effective under the Act and (iv) such earlier date as the
Initial Purchasers may, in their discretion, deem appropriate.
5
<PAGE>
"Subject Transaction" means any transaction or series of transactions
involving the sale, disposition or transfer of shares of Common Stock (or any
securities convertible into or exchangeable for Common Stock) other than
pursuant to, or in connection with any foreclosure under, a bona fide pledge to
a financial institution securing indebtedness for money borrowed.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person or a combination thereof and (ii) any partnership of which more
than 50% of the partnership's capital accounts, distribution rights or general
or limited partnership interests are owned or controlled, directly or directly,
by such Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"Transfer Restricted Warrant" means a Warrant that is a "restricted
security" as defined in Rule 144(a)(3) under the Securities Act; provided, that
the Warrant Agent shall be entitled to request and conclusively rely upon an
Opinion of Counsel with respect to whether any Warrant is a Transfer Restricted
Warrant.
"Threshold Initial Public Offering" means an Initial Public Offering
that results in net cash proceeds to the Company of at least $50 million.
"U.S. Person" has the meaning provided in Regulation S.
"Vanguard" means Vanguard Cellular Operating Corp., a North Carolina
corporation, and its wholly-owned Subsidiaries.
"Warrant Agent" has the meaning assigned to such term in the preamble
to this Agreement.
"Warrant Number" means the number of Warrant Shares issuable upon the
exercise of each Warrant. The Warrant Number initially is 11.638, subject to
adjustment as provided in Section 14.
"Warrant Shares" has the meaning assigned to such term in the preamble
to this Agreement.
"Warrants" has the meaning assigned to such term in the preamble to
this Agreement.
In addition to the foregoing, the following terms shall have the
meanings assigned to such terms in the sections of this Agreement indicated
below:
6
<PAGE>
<TABLE>
<CAPTION>
Term Defined In Section
---- ------------------
<S> <C>
"Additional Tag Along Shares" 21(b)
"Agent Members" 7(c)
"Definitive Warrants" 4
"Depository" 4
"Eligible Holders" 21
"Exercise Notice" 21(b)
"Exercise Price" 8
"Expiration Date" 8
"Global Warrants" 4
"Indemnified Holder" 20(d)
"Notice Date" 21
"Private Placement Legend" 7(c)
"Registration Notice" 20(f)
"Reorganizations" 14(k)
"Repurchase Date" 20(f)
"Sale Notice" 21(a)
"Shelf Registration Statement" 20
"Tag-Along" 21
"Tag-Along Allotment" 21(a)
"Tag-Along Shares" 21(c)
"Transfer Agent" 11
"Transfer Amount" 7(d)
"Trigger Date" 20(f)
"Unexercised Warrant Shares" 21
"Warrant Certificates" 4
</TABLE>
SECTION 2. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
----------------------------
Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 3. ISSUANCE OF WARRANTS. Warrants shall be originally issued in
--------------------
connection with the issuance of the Senior Notes and shall not be separably
transferable from the Senior Notes until on or after the Separation Date as
provided in Section 8.
SECTION 4. WARRANT CERTIFICATES. Warrants offered and sold in reliance on
--------------------
Rule 144A or to Non-U.S. Persons in accordance with Regulation S may be issued
in the form of one or more permanent Global Warrants in registered form ("Global
Warrants"), substantially in the form of Exhibit A (including footnotes 1 and 2
thereto). Warrants offered and sold to Institutional Accredited Investors who
are not QIBs (excluding Non-U.S. Persons) shall be issued in registered
definitive form ("Definitive Warrants"), substantially in the form of Exhibit A
(not including footnotes 1 and 2 thereto). Each Global Warrant shall represent
such of the outstanding Warrants as shall be specified therein and each shall
provide that it shall represent
7
<PAGE>
the aggregate amount of outstanding Warrants from time to time endorsed thereon
and that the aggregate amount of outstanding Warrants represented thereby may
from time to time be reduced or increased, as appropriate. Any endorsement of a
Global Warrant to reflect the amount of any increase or decrease in the amount
of outstanding Warrants represented thereby shall be made by the Warrant Agent
and Depository (as defined below) in accordance with instructions given by the
holder thereof. The Depository Trust Company shall act as the Depository with
respect to the Global Warrants (the "Depository") until a successor shall be
appointed by the Company and the Warrant Agent. The Global Warrants shall be
registered in the name of the Depository, or the nominee of such Depository. So
long as the Depository or its nominee is the registered owner of such Global
Warrant it will be deemed the sole owner and holder of such Global Warrant for
all purposes hereunder and under such Global Warrant. Upon request, a Warrant
holder may receive from the Depository and the Warrant Agent separate Definitive
Warrants as set forth in Section 7 below. Any certificates (the "Warrant
Certificates") evidencing the Global Warrants or the Definitive Warrants to be
delivered pursuant to this Agreement shall be substantially in the form of
Exhibit A attached hereto.
The terms and provisions contained in the form of the Warrant Certificate
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Agreement.
Warrant Certificates shall be typed, printed, lithographed or engraved or
produced by any combination of these methods, all as determined by the officer
of the Company executing such Warrant Certificates, as evidenced by such
officer's execution of such Warrant Certificates.
Pending the preparation of definitive Warrant Certificates, temporary
Warrant Certificates may be issued, which may be printed, lithographed,
typewritten, mimeographed or otherwise produced, and which will be substantially
of the tenor of the definitive Warrant Certificates in lieu of which they are
issued.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay. After
the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the holder thereof. Until so exchanged the temporary Warrant
Certificates shall in all respects be entitled to the same benefits under this
Agreement as definitive Warrant Certificates.
SECTION 5. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
---------------------------------
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future Chairman of
the Board, President, Vice President, Secretary or Assistant Secretary and may
be imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that
8
<PAGE>
at the time the Warrant Certificates shall be countersigned and delivered or
disposed of he or she shall have ceased to hold such office. The seal of the
Company may be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to hold such office before the Warrant Certificates so
signed shall have been countersigned by the Warrant Agent, or disposed of by the
Company, such Warrant Certificates nevertheless may be countersigned and
delivered or disposed of as though such person had not ceased to be such officer
of the Company; and any Warrant Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement any
such person was not such an officer.
SECTION 6. REGISTRATION AND COUNTERSIGNATURE. The Warrant Agent, on
---------------------------------
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company. Warrant Certificates shall be
manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. The Warrant Agent shall, upon written
instructions of the Chairman of the Board, the President, a Vice President, the
Treasurer or the Controller of the Company, initially countersign, issue and
deliver Warrants entitling the holders thereof to purchase not more than the
number of Warrant Shares referred to above in the first recital hereof (subject
to adjustment as provided herein) and shall countersign and deliver Warrants as
otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
The Company hereby appoints the Warrant Agent as the registrar for the
Warrants.
SECTION 7. REGISTRATION OF TRANSFERS AND EXCHANGES. All transfers and
---------------------------------------
exchanges of Warrants pursuant to this Section 7 are subject to the limitations
of Section 8 below.
(A) TRANSFER AND EXCHANGE. The Warrant Certificates shall be issued in
---------------------
registered form only. The Company shall cause to be kept at the office of the
Warrant Agent a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Warrant
Certificates and transfers or exchanges of Warrant Certificates as herein
provided. All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
9
<PAGE>
A holder of Warrants may transfer its Warrants only by complying with the
terms of this Agreement. No such transfer shall be effected until final
acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants as provided
herein, the Company, the Warrant Agent and any agent of the Company or the
Warrant Agent may treat the Person in whose name the Warrants are registered as
the owner thereof for all purposes and as the Person entitled to exercise the
rights represented thereby, any notice to the contrary notwithstanding.
Furthermore, any holder of a Global Warrant, shall, by acceptance of such Global
Warrant, agree that transfers of beneficial interests in such Global Warrant may
be effected only through a book-entry system maintained by the Depository of
such Global Warrant, and that ownership of a beneficial interest in the Warrants
represented thereby shall be required to be reflected in a book entry. When
Warrant Certificates are presented to the Warrant Agent with a request to
register the transfer or to exchange them for an equal amount of Warrants of
other authorized denominations, the Warrant Agent shall register the transfer or
make the exchange in accordance with the provisions hereof.
(B) REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. Each Warrant
---------------------------------------------------
shall initially be issued as part of a Unit consisting of $1,000 principal
amount at maturity of Senior Notes and one Warrant. Prior to the Separation
Date, the Warrants may not be transferred or exchanged separately from, but may
be transferred or exchanged only together with, the Senior Notes attached to
such Warrants. Prior to the Separation Date, the Registrar under the Indenture
shall act as registrar (in such capacity, the "Registrar") for both the Warrants
and the Notes. Any request for transfer of a Warrant prior to the Separation
Date to the Registrar shall be accompanied by the Senior Note attached thereto
and the Registrar will not execute any such transfer without such Senior Note
attached thereto. Such Senior Note will be duly endorsed and accompanied by a
written instrument of transfer in form satisfactory to the Company, duly
executed by the holder thereof or such holder's attorneys duly authorized in
writing. The Company shall provide notice to the Registrar, the Warrant Agent,
the Trustee under the Indenture and the Depository of the Separation Date ten
business days prior to such date.
When Warrant Certificates are presented to the Warrant Agent with a request
from the holder of such Warrants to register the transfer or to exchange them
for an equal number of Warrants of other authorized denominations, the Warrant
Agent shall register the transfer or make the exchange as requested; provided,
however, that every Warrant presented and surrendered for registration of
transfer or exchange shall be duly endorsed and be accompanied by a written
instrument of transfer in form satisfactory to the Company, duly executed by the
holder thereof or such holder's attorneys duly authorized in writing.
To permit registrations of transfer and exchanges, the Company shall make
available to the Warrant Agent a sufficient number of executed Warrant
Certificates to effect such registrations of transfers and exchanges. No service
charge shall be made to the holder of Warrants for any registration of transfer
or exchange of Warrants, but the Company may require from the transferring or
exchanging holder payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable upon exchanges pursuant to Section 9 and
exchanges in respect of portions of Warrants not exercised, and the Company may
deduct such taxes from any
10
<PAGE>
payment of money to be made and such transfer or exchange shall not be
consummated (if such taxes are not deducted in full) unless or until such holder
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company and the Warrant Agent that such tax has been
paid.
(C) BOOK-ENTRY PROVISIONS FOR GLOBAL WARRANTS.
-----------------------------------------
(i) Global Warrants initially shall (A) be registered in the name
of the Depository for such Global Warrants or the nominee of the Depository, (B)
be delivered to the Warrant Agent as custodian for such Depository and (C) bear
the legend as set forth on Exhibit C (the "Private Placement Legend").
Members of, or participants in, the Depository ("Agent Members") shall have
no rights under this Agreement with respect to any Global Warrant held on their
behalf by the Depository or the Warrant Agent as its custodian, or under the
Global Warrant, and the Depository may be treated by the Company, the Warrant
Agent and any agent of the Company or the Warrant Agent as the absolute owner of
the Global Warrant for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Warrant Agent or any agent of the
Company or the Warrant Agent from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Warrant.
(ii) Transfers of Global Warrants shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Warrants may be
transferred or exchanged for Definitive Warrants and Definitive Warrants may be
transferred or exchanged for beneficial interests in the Global Warrants in
accordance with the rules and procedures of the Depository and the provisions of
Section 7(d). In addition, Definitive Warrants shall be transferred to all
beneficial owners in exchange for their beneficial interests in Global Warrants
if (A) the Company notifies the Warrant Agent that the Depository is unwilling
or unable to continue as Depository for any Global Warrant and a successor
Depository is not appointed by the Company within 90 days of such notice or (B)
prior to the Separation Date, the Senior Notes are required to be held in
definitive form.
(iii) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Warrant to beneficial owners pursuant to
paragraph (ii) above, the Warrant Agent shall (if one or more Definitive
Warrants are to be issued) reflect on its books and records the date and a
decrease in the number of Warrants represented by the Global Warrant in an
amount equal to the number of Warrants represented by the beneficial interest in
the Global Warrant to be transferred, and the Company shall execute, and the
Warrant Agent, upon receipt of a written order by the Company in the form of an
Officers' Certificate, shall countersign and cause to be delivered, one or more
Definitive Warrants of like amount.
11
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(iv) In connection with the transfer of Global Warrants as an
entirety to beneficial owners pursuant to paragraph (ii) above, the Global
Warrants shall be deemed to be surrendered to the Warrant Agent for
cancellation, and the Company shall execute, and the Warrant Agent shall
countersign and cause to be delivered to each beneficial owner identified by the
Depository in exchange for its beneficial interest in the Global Warrants,
Definitive Warrants of authorized denominations representing, in the aggregate,
the number of Warrants theretofore represented by the Global Warrants so
transferred.
(v) Any Definitive Warrant constituting a Transfer Restricted
Warrant delivered in exchange for an interest in a Global Warrant pursuant to
paragraph (ii) or (iii) shall, except as otherwise provided by paragraphs
(i)(A)(w) and (z) of Section 7(d), bear the Private Placement Legend.
(vi) The registered holder of any Global Warrant may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a holder is
entitled to take under this Warrant Agreement or the Warrants.
(vii) Beneficial owners of interests in a Global Warrant may receive
Definitive Warrants in accordance with the rules and procedures of the
Depository and the provisions of Section 7(d). In connection with the issuance
and delivery of Definitive Warrants, the Warrant Agent shall reflect on its
books and records a decrease in the number of Warrants represented by the Global
Warrant and the Company shall execute and the Warrant Agent shall, upon receipt
of a written order of the Company in the form of an Officers' Certificate,
countersign and cause to be delivered one or more Definitive Warrants of like
amount.
(D) SPECIAL TRANSFER RESTRICTIONS.
-----------------------------
(i) Transfers to Institutional Accredited Investors Who Are Not
-----------------------------------------------------------
QIBs. The following provisions shall apply with respect to the registration of
- ----
any proposed transfer of a Warrant constituting a Transfer Restricted Warrant to
any Institutional Accredited Investor who is not a QIB (excluding Non-U.S.
Persons):
(A) the Warrant Agent shall register the transfer of any
Warrants constituting a Transfer Restricted Warrant, whether or not
such Warrant bears the Private Placement Legend, if (w) the requested
transfer is after August 15, 1999, (x) the proposed transferee has
delivered to the Warrant Agent certificates substantially in the forms
of Exhibits B and D hereto, (y) [intentionally omitted], or (z) the
Warrant Agent has received both an Opinion of Counsel and an Officers'
Certificate directing transfer without a Private Placement Legend; and
(B) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Warrant, upon, receipt by the Warrant
Agent of (x) the certificates, if any, required by paragraph (A) above
and (y) instructions given in
12
<PAGE>
accordance with the Depository's and the Warrant Agent's procedures,
the Warrant Agent shall reflect on its books and records the date of
such transfer and a decrease in the number of Warrants represented by
the Global Warrant in an amount equal to the number of Warrants
represented by the beneficial interest in the Global Warrant to be
transferred, and the Company shall execute, and the Warrant Agent,
upon receipt of a written order of the Company in the form of an
Officers' Certificate, shall countersign and cause to be delivered,
one or more Definitive Warrants of like amount.
(ii) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Warrant constituting a
Transfer Restricted Warrant to a QIB (excluding non-U.S. Persons):
(A) if the Warrant to be transferred consists of (a)
Definitive Warrants or a beneficial interest in a Global Warrant
(other than transfers of beneficial interests within the same Global
Warrant), the Warrant Agent shall register the transfer if such
transfer is being made by a proposed transferor who has executed a
certification substantially in the form of Exhibit B that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification, or has otherwise advised
the Company and the Warrant Agent in writing, that it is purchasing
the Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (b) a beneficial interest in a
Global Warrant that is to be transferred within the same Global
Warrant, the transfer of such interest may be effected only through
the book entry system maintained by the Depository; and
(B) if the proposed transferee is an Agent Member, and the
Warrants to be transferred consist of Definitive Warrants which after
transfer are to be evidenced by an interest in a Global Warrant, upon
receipt by the Warrant Agent of the Definitive Warrant, duly endorsed
or accompanied by appropriate instruments of transfer, together with a
certificate to the effect that such transferee is a QIB and
instructions given in accordance with the Depository's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants and Warrant
Shares represented by the Global Warrant in an amount equal to the
number of Definitive Warrants to be transferred, and the Warrant Agent
shall cancel or cause to be canceled the Definitive Warrants so
transferred; and
13
<PAGE>
(C) with respect to transfers that consist of beneficial
interest in a Global Warrant which after transfer are to be evidenced
by a Definitive Warrant and upon compliance with the provisions set
forth in clause (A) above, the Warrant Agent shall reflect on its
books and records the date and a decrease in the number of Warrants
represented by the Global Warrant in which the transferor owns the
beneficial interest to be transferred in an amount equal to the
beneficial interest in the Global Warrant so transferred.
(iii) Transfers to Non-U.S. Persons at Any Time. The
-----------------------------------------
following provisions shall apply with respect to any transfer of a Transfer
Restricted Warrant to a Non-U.S. Person:
(A) the Warrant Agent shall register any proposed transfer
to any Non-U.S. Person if the Warrant to be transferred is a
Definitive Warrant or a beneficial interest in a Global Warrant (other
than transfers of beneficial interests within the same Global Warrant)
only upon receipt of a certificate substantially in the form of
Exhibit E hereto from the proposed transferor;
(B) (x) if the proposed transferee is an Agent Member, and
the Warrant to be transferred consists of a beneficial interest in a
Global Warrant which after transfer is to be evidenced by a beneficial
interest in a different Global Warrant, upon receipt by the Warrant
Agent of (1) the documents required by paragraph (A) and (2)
instructions in accordance with the Depository's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records (a) the date, (b) a decrease in the number of Warrants
represented by the Global Warrant in which the transferor owns the
beneficial interest to be transferred in an amount equal to the
beneficial interest to be transferred and (c) an increase in the
number of Warrants represented by the Global Warrant in which the
transferee will hold its beneficial interest in like amount and (y) if
the proposed transferee is an Agent Member, and the Warrant to be
transferred consists of Definitive Warrants which after transfer is to
be evidenced by a beneficial interest in a Global Warrant, upon
receipt by the Warrant Agent of (1) the documents required by
paragraph (A) and (2) instructions in accordance with the Depository's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records (a) the date and (b) an increase in the number
of Warrants represented by the Global Warrant in an amount equal to
the number of Warrants represented by the Definitive Warrant to be
transferred, and the Warrant Agent shall cancel or cause to be
canceled the Definitive Warrant so transferred;
(C) with respect to transfers that consists of beneficial
interests in a Global Warrant which after transfer are to be evidenced
by a
14
<PAGE>
Definitive Warrant and upon compliance with the provisions set forth
in paragraph (A) above, the Warrant Agent shall reflect on its books
and records the date and a decrease in the number of Warrants
represented by such Global Warrant in an amount equal to the
beneficial interest in such Global Warrant so transferred and the
Company shall execute, and the Warrant Agent, upon receipt of a
written order of the Company in the form of an Officers' Certificate,
shall authenticate and deliver, one or more Definitive Warrants of
authorized denominations representing, in the aggregate, the number of
Warrants transferred; and
(D) transfers of beneficial interests in the same Global
Warrant may be effected only through the book entry system maintained
by the Depository.
(iv) Restricted Period under Regulation S. Notwithstanding the
------------------------------------
other provisions of this Section 7(d), Warrants offered and sold by the Initial
Purchasers in reliance on Regulation S shall not be transferred to a U.S. Person
or for the account or benefit of a U.S. Person during the applicable "restricted
period" (as defined in Regulation S).
(E) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or replacement
------------------------
of Warrants not bearing the Private Placement Legend, the Warrant Agent shall
deliver Warrants that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Warrants bearing the Private Placement
Legend, the Warrant Agent shall deliver only Warrants that bear the Private
Placement Legend unless (i) the circumstances contemplated by clauses
(d)(i)(A)(w) or (z) of this Section 7 exist, (ii) there is delivered to the
Warrant Agent an Opinion of Counsel reasonably satisfactory to the Company and
the Warrant Agent to the effect that such Warrants are no longer Transfer
Restricted Warrants and neither the Private Placement Legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Warrants have been sold pursuant
to an effective registration statement under the Securities Act.
(F) SEPARATION LEGEND. Upon original issuance of the Warrants and,
-----------------
thereafter until the Separation Date, the Warrant Certificates will bear the
following legend.
"UNTIL THE EARLIEST TO OCCUR OF (i) NOVEMBER 15, 1996, (ii) THE
OCCURRENCE OF AN EXERCISE EVENT (AS DEFINED IN THE WARRANT AGREEMENT),
(iii) THE DATE A REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED
EXCHANGE OFFER FOR THE SENIOR NOTES (AS DEFINED IN THE WARRANT
AGREEMENT) OR A SHELF REGISTRATION STATEMENT FOR THE SENIOR NOTES IS
DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(iv) SUCH EARLIER DATE AS MAY BE DETERMINED BY THE INITIAL PURCHASERS
(AS DEFINED IN THE WARRANT AGREEMENT), THE SECURITIES EVIDENCED HEREBY
MAY
15
<PAGE>
NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS,
SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE
SAME TRANSFEREE $1,000 PRINCIPAL AMOUNT OF SENIOR NOTES FOR EACH
WARRANT SO TRANSFERRED."
On or following the Separation Date, a holder of Warrants may
surrender its Warrant Certificate to the Warrant Agent for the exchange of such
certificate for one or more Warrant Certificates that do not bear the Separation
Legend, representing the number of Warrants equal to the number of Warrants
represented by the Warrant Certificate so surrendered.
(G) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL WARRANT. At such time as all
------------------------------------------------
beneficial interests in Global Warrants have either been exchanged for
Definitive Warrants, exercised or canceled, all Global Warrants shall be
returned to or retained and canceled by the Warrant Agent. At any time prior to
such cancellation, if any beneficial interest in a Global Warrant is exchanged
for Definitive Warrants, exercised or canceled, the number of Warrants and
Warrant Shares represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant Agent to reflect
such reduction.
(H) TRANSFERS AND EXCHANGES OF WARRANT SHARES. Following the exercise of
-----------------------------------------
any Warrant and the issuance of any Warrant Shares, the Company shall provide
for the transfer and exchange of such Warrant Shares on such terms and
conditions as it shall deem appropriate under the circumstances.
(I) REGISTRATION WITHOUT TRANSFER. The Warrant Agent shall register the
-----------------------------
transfer of any Transfer Restricted Warrant delivered by a holder for
registration in the name of such holder upon delivery of the certification set
forth in Exhibit B.
SECTION 8. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF
------------------------------------------------------
WARRANTS. The Senior Notes and Warrants will not be separately transferable or
- --------
exchangeable prior to the Separation Date, at which time such Warrants shall
become separately transferable.
Subject to the terms of this Agreement, each Warrant holder shall have the
right, which may be exercised commencing at the opening of business on the first
business day following the date on which an Exercise Event has occurred, and
until 5:00 p.m., New York City time, on August 15, 2001 (the "Expiration Date"),
to receive from the Company the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
its Warrants and payment of the Exercise Price then in effect for such Warrant
Shares; provided, however, that no Warrant holder shall be entitled to exercise
such holder's Warrants at any time unless, at the time of exercise, (i) a
registration statement under the Act, relating to the Warrant Shares has been
filed with, and declared effective by, the SEC, and no stop order suspending the
effectiveness of such registration statement has been issued by the SEC, written
notice of which shall be provided to the Warrant Agent in the form of an
Officers' Certificate, or (ii) the issuance of the Warrant Shares is permitted
pursuant to an exemption from
16
<PAGE>
the registration requirements of the Act; and provided, further, that if the
Company or a holder of Warrants reasonably believes that the exercise of any
Warrant requires prior compliance with the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 and the rules and regulations thereunder, any such
exercise shall be contingent upon such prior compliance. Each Warrant not
exercised prior to 5:00 p.m., New York City time, on August 15, 2001 shall
become void and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of such time. No adjustments as to dividends will
be made upon exercise of the Warrants.
A Definitive Warrant may be exercised upon surrender to the Company at the
principal office of the Warrant Agent of the certificate evidencing the
Definitive Warrant to be exercised with the form of election to purchase on the
reverse thereof properly completed and executed, which signature shall be
guaranteed by an "eligible guarantor" as defined in the regulations promulgated
under the Exchange Act, and upon payment to the Company of the exercise price of
$0.01 per share, as adjusted as provided herein (the "Exercise Price"), for the
number of Warrant Shares in respect of which such Definitive Warrant is then
exercised. Payment of the aggregate Exercise Price shall be made (i) in cash or
by certified or official bank check payable to the order of the Company, (ii) by
tendering Senior Notes having an Accreted Value (as defined in the Indenture) at
the time of tender equal to the Exercise Price, (iii) by tendering Warrants
having a fair market value equal to the Exercise Price or (iv) with any
combination of (i), (ii) or (iii). For purposes of clause (iii) above, the fair
market value of the Warrants shall equal their Current Market Value. In
determining the fair market value of Warrants delivered in payment or partial
payment of the Exercise Price, the Warrant Agent shall be entitled to rely on a
determination by the Company set forth in an Officers' Certificate.
If Senior Notes are surrendered in payment of the Exercise Price, the
Warrant Agent shall deliver such Senior Notes to the Company and the Company
shall deliver such Senior Notes to the Trustee (as defined in the Indenture) for
cancellation and the Trustee shall notify the Company in writing whether such
Senior Notes were in good form and, if such Senior Notes were in good form the
Company shall notify the Warrant Agent in writing that the Company has received
full and proper payment of the Exercise Price.
Subject to the provisions of Section 9, upon such surrender of Definitive
Warrants the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of such Warrant holder, a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise of
such Warrants together with cash as provided in Section 16; provided, however,
that if any consolidation, merger or lease or sale of assets is proposed to be
effected by the Company as described in subsection (k) of Section 14, or a
tender offer or an exchange offer for shares of Common Stock of the Company
shall be made, upon such surrender of Definitive Warrants as aforesaid, the
Company shall, as soon as possible, but in any event not later than five
business days thereafter, issue and cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Definitive Warrants in the
manner described in this sentence together with cash as provided in Section 16.
Such certificate or certificates shall be deemed to have been issued and any
Person so designated to be named therein shall be
17
<PAGE>
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Definitive Warrants.
The Definitive Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part and, in the event
that a certificate evidencing Definitive Warrants is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise at any time prior
to the date of expiration of the Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be issued and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
Certificate or Certificates pursuant to the provisions of this Section and of
Section 6, and the Company, whenever required by the Warrant Agent, will supply
the Warrant Agent with Warrant Certificates duly executed on behalf of the
Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Warrant Agent and disposed of by the Company, or by the Warrant
Agent at the Company's request, in accordance with applicable law. The Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and shall concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such
Warrants. The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the holders of Warrants
during normal business hours at its office for ten years following the
Expiration Date. The Company shall supply the Warrant Agent from time to time
with such numbers of copies of this Agreement as the Warrant Agent may request.
A holder of Global Warrants shall not be able to exercise such Global
Warrants for Warrant Shares. In order to exercise such Global Warrants, the
beneficial owner thereof must first obtain a Definitive Warrant pursuant to the
provisions of this Agreement and comply with the procedures set forth in this
Section 8.
Upon the occurrence of an Exercise Event, the Company shall (i) send
promptly to each holder of Warrants, by first class mail, at the addresses
appearing on the register of Warrant holders a notice of the Exercise Event,
which notice shall describe the type of Exercise Event and the date of the
occurrence thereof and (ii) cause a notice of such Exercise Event to be
published in The Wall Street Journal, National Edition, which notice shall
identify the Warrants, describe the type of Exercise Event and the date of the
occurrence thereof.
SECTION 9. PAYMENT OF TAXES. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
Person or Persons requesting the issuance
18
<PAGE>
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
SECTION 10. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
-----------------------------------------
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and the Warrant Agent may countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 11. RESERVATION OF WARRANT SHARES. The Company will at all times
-----------------------------
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
Company's Common Stock will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's Common Stock. The Warrant Agent is hereby irrevocably authorized to
requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 16. The Company
will furnish such Transfer Agent with a copy of all notices of adjustments and
certificates related thereto, transmitted to each Holder pursuant to Section 17.
Before taking any action which would cause an adjustment pursuant to
Section 14 to reduce the Exercise Price below the then par value (if any) of the
Warrant Shares, the Company will take any corporate action which may, in the
opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
19
<PAGE>
SECTION 12. OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE
------------------------------------------------------
LISTINGS. The Company from time to time will (a) obtain and keep effective any
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and all permits, consents and approvals of governmental agencies and authorities
and make any necessary filings under federal or state securities laws which may
become requisite in connection with the issuance, sale, transfer and delivery of
the Warrant Certificates, the exercise of the Warrants and the issuance, sale,
transfer and delivery of the Warrant Shares, and (b) cause the Warrant Shares,
upon their issuance upon the exercise of Warrants, to be listed on the principal
securities exchange within the United States of America on which the Common
Stock is then listed.
SECTION 13. REPORTS.
-------
(a) At the Company's expense, following the first fiscal quarter ending
after the date of this Agreement and regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the rules and
regulations of the SEC, for so long as the Warrants remain outstanding, the
Company shall file with the Warrant Agent and mail to the holders of the
Warrants (i) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year and 90 days after the end of each fiscal year all
quarterly and annual financial information, as the case may be, that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or any
successor Forms) if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K (or any successor
Form) if the Company were required to file such reports.
(b) In addition, whether or not required by the rules and regulations of
the SEC, the Company will file a copy of all such information and reports with
the SEC for public availability (unless the SEC will not accept such a filing)
and make such information available to securities analysts and prospective
investors upon request.
(c) The Company will, for so long as any Warrants remain outstanding,
furnish to the holders of the Warrants and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Act.
SECTION 14. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
---------------------------------------------------------
ISSUABLE. The Exercise Price and the Warrant Number are subject to adjustment
- --------
from time to time upon the occurrence of the events enumerated in this Section
14. For purposes of this Section 14 "Common Stock" means shares now or hereafter
authorized of any class of Common Stock of the Company and any other stock of
the Company, however designated, that has the right (subject to any prior rights
of any class or series of preferred stock) to participate in any distribution of
the assets or earnings of the Company without limit as to the per share amount
(including, without limitation, the Existing Preferred Stock).
20
<PAGE>
(A) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
--------------------------------------
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of
its capital stock,
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(B) ADJUSTMENT FOR RIGHTS ISSUE.
---------------------------
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 60 days
after the record date mentioned below to purchase shares of Common Stock or
securities convertible into, or exchangeable or exercisable for, Common Stock at
a price per share (or with an initial conversion, exchange or exercise price)
less than the Current Market Value per share on that record date, the Warrant
Number shall be adjusted in accordance with the following formula:
W' = W x O + N
-------------------------
O + N x P
-----
M
21
<PAGE>
where:
W'= the adjusted Warrant Number.
W = the Warrant Number immediately prior to such adjustment.
O = the number of Fully Diluted Shares outstanding on the record date.
N = the number of additional shares of Common Stock offered or otherwise
issuable upon exercise of such rights, options or warrants.
P = the offering price per share of the additional shares offered or
otherwise issuable.
M = the Current Market Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Warrant Number shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(C) ADJUSTMENT FOR OTHER DISTRIBUTIONS.
----------------------------------
If the Company distributes to all or any holders of its Common Stock
(i) evidences of indebtedness of the Company or any of its Subsidiaries, (ii)
any assets (including cash) of the Company or any of its Subsidiaries or (iii)
any rights, options or warrants to acquire any of the foregoing, the Warrant
Number shall be adjusted in accordance with the following formula:
W' = W x M
-------
M - F
where:
W'= the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date or, if
applicable, the date of distribution mentioned above.
M = the Current Market Value per share of Common Stock on the record date
mentioned below.
22
<PAGE>
F = the fair market value on the record date of the indebtedness, assets,
securities, rights, options or warrants so distributed applicable to
one share of Common Stock. The Board of Directors shall determine the
fair market value in such manner as it deems reasonable under the
circumstances.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution
(or, if no record date is established, on the date of distribution). If an
adjustment shall be made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the Warrant shall be immediately
readjusted as if "F" in the above formula was the fair market value on the
record date of the indebtedness or assets actually distributed upon exercise of
such rights, options or warrants divided by the number of shares of Common Stock
outstanding on the record date.
This subsection (c) does not apply to rights, options or warrants
referred to in subsection (b) of this Section 14.
(D) ADJUSTMENT FOR COMMON STOCK ISSUE.
---------------------------------
If the Company issues shares of Common Stock for a consideration per
share less than the Current Market Value per share of Common Stock on the date
the Company fixes the offering price of such additional shares, the Warrant
Number shall be adjusted in accordance with the formula:
W' = W x A
---------
O + P
-
M
where:
W'= the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of Fully Diluted Shares outstanding immediately prior to
the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares of Common Stock.
M = the Current Market Value per share on the date of issuance of such
additional shares of Common Stock.
23
<PAGE>
A = the number of Fully Diluted Shares outstanding immediately after the
issuance of such additional shares of Common Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsection (a) or the
issuance of Common Stock pursuant to any transaction described in
subsections (b) or (c) of this Section 14;
(2) the issuance of Common Stock in connection with (a) the
exercise of Warrants or (b) the conversion, exercise or exchange of any
options, warrants or other securities convertible into or exchangeable for
Common Stock which are issued after the date hereof in a transaction
described in subsection (e) of this Section 14 and in compliance with all
other applicable provisions of this Agreement;
(3) the issuance of Common Stock pursuant to any option, warrant
or other convertible or exchangeable security outstanding on the date
hereof; and
(4) Common Stock issued in a bona fide public offering pursuant
to a firm commitment underwriting by a nationally recognized investment
banking firm.
(E) ADJUSTMENTS FOR CONVERTIBLE SECURITIES ISSUE.
--------------------------------------------
If the Company after the date hereof issues any options, warrants or
other securities convertible into or exchangeable or exercisable for Common
Stock, or securities convertible into or exchangeable or exercisable for Common
Stock (other than securities issued in transactions described in subsections (b)
and (c) of this Section 14), for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such securities (including
the amount of consideration paid to the Company for issuance of each option,
warrant or other security) less than the Current Market Value per share on the
date of issuance of such securities, the Warrant Number shall be adjusted in
accordance with the formula:
W' = W x O + D
-----
O + P
-
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
24
<PAGE>
O = the number of Fully Diluted Shares outstanding immediately prior to
the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the Current Market Value per share on the date of issuance of such
securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion or in exchange for or upon exercise of such securities at
the initial conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities has not been issued when such securities are no longer
outstanding, then the Warrant Number shall promptly be readjusted to the Warrant
Number which would then be in effect had the adjustment upon the issuance of
such securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion or exchange of such securities.
This subjection (e) does not apply to:
(1) convertible securities issued in a bona fide public offering
pursuant to a firm commitment underwriting by a nationally recognized
investment banking firm; and
(2) stock options issued to the Company's employees, consultants
or directors pursuant to an employee benefit plan approved by the Company's
stockholders.
(F) CONSIDERATION RECEIVED.
----------------------
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 14, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common
Stock, for cash, the consideration shall be the gross amount of such cash,
provided that in no case shall any deduction be made for any commissions,
discounts or other costs, fees or expenses incurred by the Company for any
underwriting of the issue or otherwise in connection with the sale and
issuance of such shares;
(2) in the case of the issuance of Common Stock, or securities
convertible into or exchangeable or exercisable for Common Stock, for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be
25
<PAGE>
the fair market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof), whose
determination shall be conclusive, and described in a Board Resolution; and
(3) in the case of the issuance of securities convertible into
or exchangeable or exercisable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Company for the issuance of such securities plus the
additional minimum consideration, if any, to be received by the Company
upon the conversion, exchange or exercise thereof (the consideration in
each case to be determined in the same manner as provided in clauses (1)
and (2) of this subsection).
(G) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.
------------------------------------------
No adjustment in the Warrant Number need be made unless the adjustment
would require an increase or decrease of at least 1% in the Warrant Number. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment, provided that no such adjustment shall be deferred
after the date on which the Warrants become exercisable.
All calculations under this Section 14 shall be made to the nearest
1/100th of a share.
(H) WHEN NO ADJUSTMENT REQUIRED.
---------------------------
If an adjustment is made upon the establishment of a record date for a
distribution subject to subsections (a), (b) or (c) of this Section 14 and such
distribution is subsequently canceled, the Warrant Number then in effect shall
be readjusted, effective as of the date when the Board of Directors of the
Company determines to cancel such distribution, to that which would have been in
effect if such record date had not been fixed.
No adjustment need to be made for a change in the par value, or from
par value to no par value, or from no par value to par value, of the Common
Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(I) NOTICE OF ADJUSTMENT.
--------------------
Whenever the Warrant Number is adjusted, the Company shall provide the
notices required by Section 17.
26
<PAGE>
(J) VOLUNTARY REDUCTION.
-------------------
The Company from time to time may, as the Board of Directors deems
appropriate, reduce the Exercise Price by any amount for any period of time if
the period is at least 20 days and if the reduction is irrevocable during the
period; provided, however, that in no event may the Exercise Price be less than
the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction in the Exercise Price does not change or adjust the
Warrant Number otherwise in effect for purposes of subsections (a), (b), (c),
(d) and (e) of this Section 14.
(K) REORGANIZATION OF THE COMPANY.
-----------------------------
In case of any capital reorganization or the consolidation or merger
of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock
into shares of other stock or other securities, cash or property), or the sale
of the assets and property of the Company as an entirety or substantially as an
entirety (collectively, such actions being hereinafter referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of any
Warrant (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock that would otherwise have
been deliverable upon the exercise of such Warrant would have been entitled upon
such Reorganization if such Warrant had been exercised in full immediately prior
to such Reorganization (but after giving effect to any adjustment in the Warrant
Number pursuant to Section 14(o) that would otherwise be attributable to such
Reorganization). In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a Board Resolution, shall be made in the
application of the provisions herein set forth with respect to the rights and
interests of holders of Warrants so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume, by a supplemental Warrant Agreement executed and
delivered to the Warrant Agent (and a notice of which shall be delivered to the
holders of the Warrants) the obligation to deliver to each such holder such
shares
27
<PAGE>
of stock, securities, cash or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase, and all other obligations
and liabilities under this Agreement.
(L) WARRANT AGENT'S DISCLAIMER.
--------------------------
The Warrant Agent has no duty to determine when an adjustment under
this Section 14 should be made, how it should be made or what it should be. The
Warrant Agent has no duty to determine whether any provisions of a supplemental
Warrant Agreement under subsection (k) of this Section 14 are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets issued upon exercise of Warrants. The Warrant Agent shall
not be responsible for the Company's failure to comply with this Section 14.
(M) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.
----------------------------------------
In any case in which this Section 14 shall require that an adjustment
in the Warrant Number be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 16; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(N) ADJUSTMENT IN EXERCISE PRICE.
----------------------------
Upon each adjustment of the Warrant Number pursuant to this Section
14, the Exercise Price applicable to each Warrant outstanding prior to the
making of the adjustment in the Warrant Number shall thereafter be adjusted to
reflect an adjusted Exercise Price (calculated to the nearest hundredth)
obtained from the following formula:
E' = E x W
---
W'
where:
E' = the adjusted Exercise Price for each Warrant following the adjustment
of the Warrant Number.
E = the Exercise Price prior to adjustment.
W' = the adjusted Warrant Number.
28
<PAGE>
W = the Warrant Number prior to adjustment.
provided that in no event shall the Exercise Price be less than the par value of
each share of capital stock deliverable upon the exercise of the Warrant for one
Warrant Share.
(O) CONTINGENT ADJUSTMENT IN NUMBER OF WARRANT SHARES.
The Warrant Number is subject to adjustment in the event that on or
prior to the IPO Contingency Date the Company does not complete a Threshold
Initial Public Offering or a Qualified Reorganization. If on or prior to the IPO
Contingency Date the Company does not complete a Threshold Initial Public
Offering or a Qualified Reorganization, the Warrant Number will be adjusted to
be the Warrant Number in effect immediately prior to the IPO Contingency Date
multiplied by 1.2272727; provided, however, that in the event that the Company
completes a Non-Qualified Reorganization on or prior to the IPO Contingency Date
the Warrant Number will be adjusted to be the Warrant Number in effect
immediately prior to such Non-Qualified Reorganization multiplied by 1.2272727
and no further adjustment pursuant to this Subsection 14(o) shall be made.
In the event the Company completes a Threshold Initial Public Offering
or Qualified Reorganization prior to the IPO Contingency Date, it shall cause
notice of such event to be published in the Wall Street Journal, National
Edition.
(P) FORM OF WARRANTS.
----------------
Upon each adjustment of the Exercise Price or the number or kind of
shares purchasable upon the exercise of the Warrants, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase the number and kind of shares then purchasable upon the
exercise of the Warrants, after giving effect to such adjustment, at the
adjusted Exercise Price. The Company may elect on or after any adjustment of the
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants to cause to be distributed to registered holders of Warrant
Certificates either Warrant Certificates representing the additional Warrants
issuable pursuant to the adjustment, or substitute Warrant Certificates to
replace all outstanding Warrant Certificates.
(Q) ADJUSTMENTS IN OTHER SECURITIES.
-------------------------------
If as a result of any event or for any other reason, any adjustment is
made which (i) increases the number of shares of Common Stock issuable upon
conversion, exercise or exchange of, or (ii) reduces the conversion or exercise
price or exchange ratio applicable to (below, in the case of this clause (ii), a
level which would have otherwise required an adjustment under this Article 14 if
the applicable security had been issued on the date of such reduction with such
reduced conversion or exercise price), any outstanding securities of the Company
that are convertible into, or exercisable or exchangeable for, Common Stock of
the Company, then an adjustment shall be made hereunder to increase the number
of shares of Common Stock issuable
29
<PAGE>
upon exercise of the Warrants in the same relative proportion, but only to the
extent that no adjustment has been made pursuant to Section 14(a), (b), (c), (d)
or (e) with respect to such event or for such other reason.
SECTION 15. NO DILUTION OR IMPAIRMENT.
-------------------------
(a) If any event shall occur as to which the provisions of Section 14 are
not strictly applicable but the failure to make any adjustment would adversely
affect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such Section, then, in each such case, the
Company shall appoint an Independent Financial Expert, which shall give its
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in Section 14, necessary to preserve, without
dilution, the purchase rights, represented by the Warrants. Upon receipt of such
opinion, the Company will promptly file a copy thereof with the Warrant Agent,
mail a copy thereof to the holders of the Warrants and make the adjustments
described therein.
(b) The Company will not, by amendment of its certificate of incorporation
or through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (1)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock on the exercise of the Warrants from time to time outstanding and
(2) will not take any action which results in any adjustment of the Exercise
Price if the total number of Warrant Shares issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock then authorized by the Company's Certificate of Incorporation and
available for the purposes of issue upon such exercise.
SECTION 16. FRACTIONAL INTERESTS. The Company shall not be required to
--------------------
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 16,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the same fraction of the Current
Market Value (as determined by the Company) of one Warrant Share on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 17. NOTICE TO WARRANT HOLDERS. Upon any adjustment of the
-------------------------
Warrant Number pursuant to Section 14, the Company shall within 15 days
thereafter: (i) except with
30
<PAGE>
respect to an adjustment pursuant to subsection 14(o), cause to be filed with
the Warrant Agent a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company (who may
be the regular auditors of the Company) setting forth the Warrant Number and
Exercise Price after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based,
which certificate shall be conclusive evidence of the correctness of the matters
set forth therein; and (ii) cause to be given to each of the registered holders
of the Warrant Certificates at such registered holder's address appearing on the
Warrant register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be given in advance and included as
a part of the notice required to be mailed under the other provisions of this
Section 17.
In case:
(a) The Company shall authorize the issuance to all or any holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or
(b) The Company shall authorize the distribution to all or any
holders of shares of Common Stock of assets including cash, evidences of its
indebtedness or other securities; or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) The Company proposes to take any action which would require an
adjustment of the Warrant Number or Exercise Price pursuant to Section 14;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of the Warrant certificates at his
address appearing on the Warrant register, at least 20 business days prior to
the applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, by first-class mail, postage prepaid,
a written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated,
31
<PAGE>
and the date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure to
give the notice required by this Section 17 or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, lease, dissolution, liquidation or
winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
SECTION 18. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
--------------------------------------------------------
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 22. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent at that time any of the Warrant Certificates
shall have been countersigned but not delivered, any such successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 19. WARRANT AGENT. The Warrant Agent undertakes the duties and
-------------
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates shall
be taken as statements of the Company. The Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it.
32
<PAGE>
The Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties. The Warrant Agent shall not be bound by any notice or
demand, or any waiver, modification, termination or revision of this Agreement
or any of the terms hereof, unless evidenced by a writing between the Company
and the Warrant Agent.
(e) The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes (including
withholding taxes) and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the execution, delivery and performance
of its responsibilities under this Agreement and to indemnify the Warrant Agent
and save it harmless against any and all liabilities, including judgments, costs
and counsel fees, for anything done or omitted by the Warrant Agent in the
execution, delivery and performance of its responsibilities under this Agreement
except as a result of its negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
33
<PAGE>
(g) Except as required by law, the Warrant Agent, and any stockholder,
director, officer or employee of the Warrant Agent, may buy, sell or deal in any
of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the Company,
and its duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own negligence or bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or the Warrant Number or other
securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. In addition, the Warrant
Agent shall not have any duty or responsibility to make a determination as to
Current Market Value. The Warrant Agent shall not be accountable with respect to
the validity or value or the kind of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other securities
will when issued be validly issued and fully paid and nonassessable, and makes
no representation with respect thereto.
(j) In the absence of bad faith on its part, the Warrant Agent may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Warrant Agent and its counsel conforming to the requirements of this Agreement.
However, the Warrant Agent or its counsel shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Agreement.
(k) The Warrant Agent may rely and shall be fully protected in relying
upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Warrant Agent need not investigate any fact
or matter stated in the document.
(l) The Warrant Agent may act through agents.
SECTION 20. REGISTRATION RIGHTS
-------------------
(A) SHELF REGISTRATION OF WARRANT SHARES. Not later than 181 days
------------------------------------
following the closing of an Initial Public Offering (or if such day is not a
business day, then the next succeeding business day), the Company shall file
with the SEC a registration statement (the
34
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"Shelf Registration Statement") for an offering to be made on a continuous basis
pursuant to Rule 415 under the Act covering the issuance of the Warrant Shares.
The Company shall take all necessary action to cause the Shelf Registration
Statement to be declared effective under the Act as promptly as practicable, and
to keep the Shelf Registration Statement continuously effective until 30 days
after the earliest date on which all of the Warrants shall have expired or been
exercised. During any consecutive 365-day period, the Company may suspend the
availability of the Shelf Registration Statement for up to two 30 day periods
(or one 60-day period), except for the 60-day period beginning immediately after
the Shelf Registration Statement is declared effective by the SEC and the 60-day
period ending on the Expiration Date, if the Company's Board of Directors
determines in the exercise of its reasonable judgment that there is a valid
business purpose for such suspension.
(B) PIGGY-BACK REGISTRATION RIGHTS.
------------------------------
(1) Piggy Back Registration. Whenever the Company proposes to
-----------------------
effect an Initial Public Offering in which Capital Stock of the Company (or
any securities convertible into or exchangeable for Capital Stock of the
Company) will be offered by any stockholder of the Company, the Company
will give prompt written notice to all holders of Warrants and Warrant
Shares of its intention to do so and, upon the written request of any such
holder made within 20 business days after the receipt of any such notice
(which request shall specify the Warrant Shares intended to be disposed of
by such holder and the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the Act of all
Warrant Shares which the Company has been so requested to register by the
holders thereof, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Warrant
Shares to be so registered, subject to the limitations set forth in
subsection 20(c).
(2) Withdrawal of Registration Statement. If, at any time after
------------------------------------
giving written notice of its intention to register any securities in an
Initial Public Offering, and, prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities or
that the Initial Public Offering will not involve the offer of any Capital
Stock by any stockholder of the Company, the Company may, at its election,
give written notice of such determination to each holder of Warrants and
Warrant Shares and, thereupon, shall be relieved of its obligation to
register any Warrant Shares in connection with such registration (but not
from its obligation to pay the Registration Expenses (as defined below) in
connection therewith).
(3) Priority on Piggy-Back Registration. If in the Initial
-----------------------------------
Public Offering referred to in subsection 20(b) (1) above the managing
underwriter or underwriters thereof advise the Company in writing that in
its or their reasonable opinion the number of securities proposed to be
sold in such Initial Public Offering exceeds the number that can be sold in
such offering without having a material adverse effect on the marketing,
price, timing or distribution of the shares to be sold in the offering, the
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Company will include in such registration only the number of securities
that such underwriter or underwriters believe can be sold without having
such a material adverse effect in the following order of priority: (i)
first, shares to be issued and sold by the Company for its own account,
(ii) second, Warrant Shares requested to be included in such registration
by the holders thereof and other securities ("Other Securities") of the
Company that, as of the date hereof, are entitled to include such
securities in such registration, pro rata among all such holders requesting
such registration, on the basis of the number of shares held by such
requesting holders, and (iii) any other shares of securities of the Company
requested to be registered in such registration.
(C) REGISTRATION PROCEDURES.
-----------------------
If and whenever the Company is required pursuant to this Section 20 to
effect the registration under the Act of any Warrant Shares, the Company will
promptly:
(1) prepare and file with the SEC a registration statement with
respect to such securities, make all required filings with the National
Association of Securities Dealers, Inc. and use its best efforts to cause
such registration statement to become effective (subject to subsection
20(b)(2));
(2) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration
statement until such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement and this Agreement;
(3) furnish to counsel (if any) elected by holders of a majority
(by number of shares) of the Warrant Shares covered by such registration
statement copies of all documents proposed to be filed with the SEC in
connection with such registration, which documents will be subject to the
review of such counsel;
(4) furnish to the Warrant Agent and each holder of Warrant
Shares covered by a registration statement such number of conformed copies
of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits, except that the Company shall
not be obligated to furnish any holder with more than two copies of such
exhibits), such number of copies of the prospectus included in such
registration statement (including such preliminary prospectus and any
summary or supplemental prospectus), in conformity with the requirements of
the Act, and such other documents, as any such holder may reasonably
request in order to facilitate the disposition of the securities owned by
such holder;
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(5) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as each holder of Warrant Shares
shall request, and do any and all other acts and things which may be
necessary or advisable to enable such holder to consummate the disposition
of the securities owned by such holder in such jurisdictions, except that
the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it is
not so qualified, or to consent to general service of process in any such
jurisdiction;
(6) with respect to a registration under subsection 20(b) only,
furnish to each holder of Warrant Shares included in the registration
statement a signed counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company, dated the
effective date of the registration statement, and
(ii) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing
Standards No. 72, a "comfort" letter signed by the
independent public accountants who have certified the
Company's financial statements included in the
registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to changes subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters then being delivered to the
underwriters in underwritten public offerings of securities;
(7) notify each holder of Warrant Shares covered by a
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing, and at the request of any such holder prepare and furnish to such
holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(8) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to the Company's
securityholders, as
37
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soon as reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act;
(9) use its best efforts to list the Warrant Shares included in
a registration statement on any securities exchange on which the Common
Stock is then listed, if such securities are not already so listed and if
such listing is then permitted under the rules of such exchange, and to
provide a transfer agent and registrar for such Warrant Shares not later
than the effective date of such registration statement; and
(10) in connection with any underwritten public offering, use its
best efforts to cause the underwriters of such offering to purchase the
Warrants directly without requiring any prior exercise thereof.
The Company may require each holder of Warrant Shares as to which any
registration is being effected (i) to furnish to the Company such information
regarding such holder and the distribution of such Warrant Shares as the Company
may from time to time reasonably request in writing and as shall be required by
law in connection therewith, and (ii) if pursuant to an underwritten public
offering, to enter into an underwriting agreement on terms and conditions no
less favorable as shall be applicable to the other securities included in such
registration. The representations and warranties in any such underwriting
agreement by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the holder of Warrant Shares. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
By acquisition of Warrant Shares, each holder of such Warrant Shares shall
be deemed to have agreed that upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 20(c)(7), such holder
will promptly discontinue such holder's disposition of Warrant Shares pursuant
to the registration statement covering such Warrant Shares until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
section 20(c)(7). If so directed by the Company, each holder of Warrant Shares
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
covering such Warrant Shares current at the time of receipt of such notice.
(D) INDEMNIFICATION.
---------------
(1) Indemnification by the Company.
------------------------------
The Company agrees to indemnify and hold harmless each holder of
Warrant Shares, its officers, directors, employees and agents and each
Person or entity who controls such holder within the meaning of either
Section 15 of the Act or Section 20(a)
38
<PAGE>
of the Exchange Act (each such Person being sometimes hereinafter referred
to as an "Indemnified Holder") from and against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon
any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or allegation
thereof based upon information relating to such Indemnified Holder and
furnished in writing to the Company of such Indemnified Holder expressly
for use therein. This indemnity will be in addition to any liability which
the Company may otherwise have.
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which indemnity may be sought from the Company, such Indemnified
Holder shall promptly notify the Company in writing, and the Company shall
assume the defense thereof, including the employment of counsel
satisfactory to such Indemnified Holder and the payment of all expenses.
Such Indemnified Holder shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Holder
unless (a) the Company has agreed to pay such fees and expenses or (b) the
Company shall have failed to assume the defense of such action or
proceeding and has failed to employ counsel satisfactory to such
Indemnified Holder in any such action or proceeding or (c) the Indemnified
Holder shall have reasonably concluded that there may be defenses available
to it or them which are different from or additional to those available to
the Company (in which case, if such Indemnified Holder notifies the Company
in writing that it elects to employ separate counsel at the expense of the
Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Holder); provided,
however, that unless there exists a conflict among Indemnified Holders
hereunder, the Company shall not be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for such Indemnified Holder and any other
Indemnified Holders, which firm shall be designated in writing by such
Indemnified Holders. The Company shall not be liable for any settlement of
any such action or proceeding effected without its written consent, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Company agrees to indemnify
and hold harmless such Indemnified Holders from and against any loss or
liability by reason of such settlement or judgment.
(2) Indemnification by Holder of Warrant Shares.
-------------------------------------------
39
<PAGE>
Each holder of Warrant Shares agrees to indemnify and hold harmless
the Company, its directors and officers and each Person or entity, if any,
who controls the Company within the meaning of either Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such holders, but only with respect to
information relating to such holders furnished in writing by such holders
expressly for use in any registration statement or prospectus, or any
amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its directors
or officers or any such controlling Person, in respect of which indemnity
may be sought against a holder of Warrant Shares, such holder shall have
the rights and duties given to the Company and the Company or its directors
or officers or such controlling Person shall have the rights and duties
given to each holder by the preceding paragraph. In no event shall the
liability of any holder of Warrant Shares hereunder be greater in amount
than the dollar amount of the proceeds received by such holder upon the
sale of the Warrant Shares giving rise to such indemnification obligation.
(3) Contribution.
------------
If the indemnification provided for in this Section 20(d) is
unavailable to an indemnified party under Section 20(d)(1) or Section
20(d)(2) (other than by reason of exceptions provided in those Sections) in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the Indemnified
Holders on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Indemnified Holders on the other shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Indemnified Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in the
second paragraph of Section 20(d)(1), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each holder of Warrant Shares agree that it would not
be just and equitable if contribution pursuant to this Section 20(d)(3)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this
Section 20(d)(3), an Indemnified Holder shall not
40
<PAGE>
be required to contribute any amount in excess of the amount by which the
total price at which the Warrant Shares sold by such Indemnified Holder or
its affiliated Indemnified Holders and distributed to the public were
offered to the public exceeds the amount of any damages which such
Indemnified Holder, or its affiliated Indemnified Holder, has otherwise
been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(E) REGISTRATION EXPENSES.
---------------------
(1) All expenses incident to the Company's performance of or
compliance with this Section 20 will be paid by the Company, regardless of
whether any registration statement required hereunder becomes effective,
including, without limitation:
(i) all registration and filing fees (including, without
limitation, with respect to filings required to be
made with the NASD);
(ii) fees and expenses of compliance with securities or
blue sky laws (including, without limitation, fees
and disbursements of counsel for the underwriters
or, in the case of a non-underwritten offering, the
selling holders solely in connection with blue sky
qualifications of the Warrant Shares and
determination of their eligibility for investment
under the laws of such jurisdictions as the managing
underwriters or holders of Warrant Shares being sold
may designate);
(iii) printing (including, without limitation, expenses of
printing or engraving certificates for the Warrant
Shares and of printing prospectuses), messenger,
telephone and delivery expenses;
(iv) fees and disbursements of counsel for the Company,
for the underwriters and for the selling holders of
the Warrant Shares (subject to the provisions of
Section 20(f)(3));
(v) fees and disbursements of all independent certified
public accountants of the Company (including,
without limitation, the expenses of any special
audit and "cold comfort" letters required by or
incident to such performance);
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(vi) fees and disbursements of underwriters (excluding
discounts, commissions or fees of underwriters,
selling brokers, dealer managers or similar
securities industry professionals relating to the
distribution of the Warrant Shares or legal expenses
of any Person other than the Company, the
underwriters and the selling holders);
(vii) securities acts liability insurance if the Company
so desires or if the underwriters so require;
(viii) fees and expenses of other Persons retained by the
Company; and
(ix) fees and expenses associated with any NASD filing
required to be made in connection with the
registration of the Warrant Shares, including, if
applicable, the fees and expenses of any "qualified
independent underwriter" (and its counsel) that is
required to be retained in accordance with the rules
and regulations of the NASD
(all such expenses being herein called "Registration Expenses").
(2) The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expense of any
annual audit, the fees and expenses incurred in connection with the listing
of the Warrant Shares to be registered on each securities exchange on which
similar securities issued by the Company are then listed, rating agency
fees and the fees and expenses of any Person, including special experts,
retained by the Company.
(3) In connection with each registration of Warrant Shares required
pursuant to subsection 20(b), the Company will reimburse the holders of
Warrant Shares being registered pursuant to a registration statement
required hereunder for the reasonable fees and disbursements of not more
than one counsel representing all such holders chosen by the holders of a
majority in number of such Warrant Shares.
(F) REPURCHASE OF WARRANTS.
----------------------
(i) Triggering Date. In the event that a Public Market does not
---------------
exist for the Common Stock of the Company on February 15, 2001 (the "Triggering
Date"), the Company will be required, at its option, to (A) make an offer to
purchase (the "Warrant Repurchase") all outstanding Warrants and Warrant Shares
issued by it in cash at the Repurchase Price on such date or (B) to take all
necessary action at its own expense to cause all the Warrant Shares issued or
issuable by it to be registered with the SEC pursuant to an effective
registration statement
42
<PAGE>
under the Securities Act (including the filing and making available to holders
of Warrant Shares and their designees a prospectus meeting the requirements of
Section 10(a)(3) thereunder) and in accordance with applicable state securities
laws no later than August 14, 2001. In connection with such a registration
statement, the Company shall comply with the procedures and conditions specified
in subsection 20(c), and the indemnification provisions of subsection 20(d)
shall apply.
(ii) Notice of Election. In the event the Company intends to
------------------
effect a Warrant Repurchase, the Company shall as promptly as practicable
following the Triggering Date, give notice of the terms of the Warrant
Repurchase (a "Repurchase Notice") to each holder, as of the Triggering Date, of
then outstanding Warrants and Warrant Shares. Each Repurchase Notice: (A) shall
be given by the Company directly to all holders of the Warrants and Warrant
Shares, with a copy to the Warrant Agent and the transfer agent for the
Company's Common Stock or such other agent appointed by the Company for
repurchase of the Warrant Shares (the "Transfer Agent") and (B) shall be given
within five business days after the Triggering Date and shall specify (v) the
date on which the Warrant Repurchase will occur (the "Repurchase Date"), which
date will not be less than 30 days nor more than 45 days following the
Triggering Date, (w) the manner in which Warrants and Warrant Shares may be
surrendered to the Warrant Agent and the Transfer Agent, respectively, for
repurchase by the Company, (x) the Repurchase Price at which the Warrants and
Warrant Shares will be repurchased by the Company, (y) the name of the
Independent Financial Expert, if any, whose valuation of the Common Stock was
utilized in connection with determining such Repurchase Price and (z) that
payment of the Repurchase Price will be made by the Warrant Agent with respect
to the Warrants and the Transfer Agent with respect to the Warrant Shares. If
the Company does not intend to effect a Warrant Repurchase, the Company shall
give notice (a "Registration Notice") to the Warrant Agent and each holder, as
of the Triggering Date, of then outstanding Warrant Shares. The Registration
Notice (or notices) shall specify (A) the manner in which the Warrant Shares
shall be registered and (B) the date on which the registration statement
covering the Warrant Shares shall have been declared effective.
(iii) Payment for Warrants.
--------------------
(A) To receive payment for any unexercised Warrants and any
Warrant Shares pursuant to this paragraph (f), each holder thereof shall, except
as otherwise provided herein, surrender to the Warrant Agent the Warrant
Certificates evidencing such holder's Warrants and the Warrant Shares.
(B) As promptly as practicable and, in any event, within five
days following the issuance of any Repurchase Notice, the Company shall deposit
with the Warrant Agent and the Transfer Agent funds sufficient to make payment
for all unexercised Warrants and Warrant Shares, respectively. After receipt of
such deposit from the Company, the Warrant Agent or the Transfer Agent, as the
case may be, shall make payment to each holder, by delivering a check in an
amount equal to the Repurchase Price for each Warrant and each Warrant Share
surrendered by such holder in accordance with this paragraph (f), to such Person
or Persons as it may be directed in writing by any holder surrendering Warrant
Certificates or
43
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Warrant Shares, net of any transfer taxes required to be paid in the event that
the check is to be delivered to a Person other than the holder. Any funds not
used to pay for Warrants or Warrant Shares within 180 days after the Repurchase
Date shall be promptly returned to the Company.
(iv) Compliance with Laws. Notwithstanding anything contained in
--------------------
this effect aparagraph (f), if the Company is required to comply with laws or
regulations in connection with making the Warrant Repurchase, such laws or
regulations shall govern the making of such Warrant Repurchase. The Company
shall immediately notify the Warrant Agent in writing if any such laws or
regulations shall require the Company to supplement or amend this Agreement or
to modify or amend the procedures or manner of such repurchase or any other
provisions set forth herein and the Warrant Agent shall not be responsible or
liable for making any such determination, complying with any such laws or
regulations or for the failure of the Company to so notify the Warrant Agent.
SECTION 21. TAG-ALONG RIGHTS WITH RESPECT TO VANGUARD.
-----------------------------------------
(a) If, prior to the time a Public Market exists, Vanguard at any time or
from time to time proposes to sell, exchange, transfer or in any other manner
dispose of, in a Subject Transaction, shares of Common Stock or other securities
convertible or exchangeable into Common Stock, in an amount aggregating more
than 25% of the Fully Diluted Shares at the time of such proposed transaction (a
"Tag-Along"), then Vanguard and the Company shall promptly give written notice
(a "Sale Notice") to each holder of Warrants or Warrant Shares (such Persons
being referred to as "Eligible Holders") and to the Warrant Agent. Each Sale
Notice shall set forth: (i) the name and address of each proposed transferee or
purchaser of shares of Common Stock in the Tag-Along; (ii) the number of shares
of Common Stock or other securities proposed to be transferred or sold by
Vanguard, and the proposed amount and form of consideration to be paid for such
shares of Common Stock or other securities and the terms and conditions of
payment offered by each proposed transferee or purchaser; (iii) the number of
Warrants and Warrant Shares (including Warrant Shares which could be acquired
upon exercise of outstanding Warrants (the "Unexercised Warrant Shares")) held
of record as of the close of business on the date of the Sale Notice (the
"Notice Date") by the Eligible Holder to whom the notice is sent and the
aggregate number of Warrant Shares and Unexercised Warrant Shares outstanding on
the Notice Date; (iv) the number of Warrants and Warrant Shares that the
Eligible Holder is entitled to include in the Tag-Along (as computed in
accordance with the equation set forth in subsection (b) below) assuming each
Eligible Holder elected to sell the maximum number of Warrants and Warrant
Shares possible; (v) the aggregate number of shares of Common Stock and
securities convertible, exchangeable or exercisable into Common Stock held of
record as of the Notice Date by Vanguard; (vi) the number of Warrants and
Warrant Shares in the Tag-Along Allotment (as defined below); (vii) confirmation
that the proposed purchaser or transferee has been informed of the "Tag-Along"
rights provided for herein and has agreed to purchase Warrants and Warrant
Shares in accordance with the terms hereof; and (viii) the proposed date of the
Tag-Along. The number of Warrants and Warrant Shares that all of the Eligible
Holders shall be entitled to include in such Tag-Along in the aggregate (the
"Tag-Along Allotment") shall equal the product of (A) the total number of shares
of Common Stock or other securities proposed to
44
<PAGE>
be sold or otherwise disposed of by Vanguard pursuant to the Tag-Along (without
giving effect to the "Tag-Along" rights provided herein or the rights of any
other stockholder of the Company to participate in such proposed sale or other
disposition), multiplied by (B) a fraction, the numerator of which is the total
number of Warrant Shares and Unexercised Warrant Shares at the time owned by all
of the Eligible Holders, and the denominator of which is equal to the sum of (i)
the total number of Warrant Shares and Unexercised Warrant Shares at the time
owned by all of the Eligible Holders as of the Notice Date, plus (ii) the total
number of shares of Common Stock on a fully-diluted basis owned by Vanguard as
of the Notice Date plus (iii) the total number of shares of Common Stock, if
any, with respect to which the holders thereof have elected to exercise co-sale
rights in connection with such Tag-Along pursuant to Section 2.8 of the Investor
Rights Agreement. Without limiting the foregoing, nothing contained in this
Agreement shall be deemed to limit or modify the relative priorities and rights
of the parties to the Investor Rights Agreement, including, without limitation,
the relative priorities and rights set forth in Section 2.8 thereof.
(b) Each such Eligible Holder shall have the right, but not the
obligation, exercisable upon written notice (the "Exercise Notice") to Vanguard
and the Company within 20 business days after receipt by such Eligible Holder of
such copy of the Sale Notice, to participate in the proposed disposition of
shares of Common Stock on the terms and conditions set forth in the Sale Notice.
The Exercise Notice shall set forth the number of Warrants and Warrant Shares
that such Eligible Holder elects to include in the in the Tag-Along Allotment,
which shall not exceed the product of (i) the Tag-Along Allotment, multiplied by
(ii) a fraction, the numerator of which is the number of Warrant Shares and
Unexercised Warrant Shares owned by such Eligible Holders as of the Notice Date,
and the denominator of which is the total number of Warrant Shares and
Unexercised Warrant Shares owned by all of the Eligible Holder as of the Notice
Date. The Exercise Note shall also specify the aggregate number of additional
Warrants and Warrant Shares owned by such Eligible Holder as of the Notice Date,
if any, which such Eligible Holder desires also to include in the Tag-Along
("Additional Tag-Along Shares") in the event there is an under-subscription for
the entire Tag-Along Allotment. In the event there is an under-subscription by
the Eligible Holders for the entire Tag-Along Allotment, Vanguard shall
apportion the number of the unsubscribed Warrants and Warrant Shares to Eligible
Holders whose Exercise Notices specify an amount of Additional Tag-Along Shares,
which apportionment shall be on a pro rata basis among such Eligible Holders in
accordance with the number of Additional Tag-Along Shares specified by all such
Eligible Holders in their Exercise Notices.
Any such sales by any Eligible Holder shall be on the same terms and
conditions as the proposed disposition of shares of Common Stock or other
securities by Vanguard; provided, however, that (i) no Eligible Holder shall be
required to make any representation, covenant or warranty in connection with the
Tag-Along, other than any representation, covenant or warranty that is several
and not joint and several as to its ownership and authority to sell, free of
liens, claims and encumbrances, the Warrants and Warrant Shares proposed to be
sold by it and (ii) the maximum liability of any Eligible Holder in respect of
any such representation, covenant or
45
<PAGE>
warranty shall be expressly limited to the aggregate consideration received by
such Eligible Holder in connection with any Tag-Along.
If an Exercise Notice is not received by the Company from any Eligible
Holder within 20 business days after receipt by such Eligible Holder of the Sale
Notice, Vanguard shall have the right to sell or otherwise transfer the number
of shares of Common Stock and other securities specified in the Sale Notice to
the proposed purchaser or transferee without any participation by such Eligible
Holder (subject to the right of other Eligible Holders to sell additional
Warrants and Warrant Shares in the event of an under-subscription by Eligible
Holders, as described above), but only on terms and conditions no more favorable
in any respect to Vanguard than those stated in such Sale Notice to the Eligible
Holders and only in such sale occurs on a date within 30 business days after the
proposed date of the Tag-Along as set forth in the Sale Notice.
(c) Each Eligible Holder participating in the proposed disposition shall
concurrent with, and as a condition to, the exercise of its rights, deliver to
the Company, as agent for such Eligible Holder, for delivery to the proposed
purchaser or transferee, one or more certificates, properly endorsed for
transfer or accompanied by stock transfer powers duly endorsed for transfer
(with signature guaranteed), with all stock transfer taxes paid and stamps
affixed, which represent the number of Warrants and Warrant Shares that such
Eligible Holder elects to dispose of pursuant to this Section 21.
(d) The stock certificate or certificates delivered by an Eligible Holder
to the Company pursuant to Section 21(d) shall be delivered by the Company to
the proposed purchaser or transferee on behalf of such Eligible Holder in
consummation of the disposition of Warrants or Warrant Shares pursuant to the
terms and conditions specified in this Section 21 and the Company shall promptly
thereafter remit to such Eligible Holder that portion of the proceeds of
disposition to which such Eligible Holder is entitled by reason of its
participation.
(e) Vanguard shall not enter into any Subject Transaction constituting a
Tag-Along unless the pledgee or purchaser therein shall agree in writing to be
bound by the provisions of this Agreement and to deliver written notice of such
agreement to the Company and to the Warrant Agent.
(f) The foregoing notwithstanding, this Section 21 shall not apply to (i)
transfers by Vanguard to any of its Affiliates, (ii) transfers by an Affiliate
of Vanguard to another Affiliate of Vanguard, (iii) transfers by Vanguard of
shares of Common Stock and other securities if required to do so to comply with
applicable laws or regulations if, by providing the tag-along rights set forth
in this Section 21, Vanguard would, in its reasonable judgment, be materially
prejudiced in complying with such laws and regulations, and (iv) transfers by
Vanguard and its Affiliates made pursuant to an effective registration statement
under the Act; provided that in the case of clauses (i), (ii), and (iii) above,
the transferee agrees in writing to be bound by the provisions of this Section
21.
46
<PAGE>
(g) The Warrant Agent shall have no duty and responsibility to ensure
compliance by the Company, Vanguard or any holder with this Section 21.
SECTION 22. CHANGE OF WARRANT AGENT. If the Warrant Agent shall become
-----------------------
incapable of acting as a Warrant Agent or shall resign as provided below, the
Company shall appoint a successor to such Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after it has been
notified in writing of such incapacity by the Warrant Agent, then the Warrant
Agent may apply to any court of competent jurisdiction for an appointment of a
successor to the Warrant Agent. Pending appointment of a successor to such
Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. Such successor to the Warrant
Agent need not be approved by the Company or the former Warrant Agent. After
appointment, the successor to the Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor to the Warrant Agent any property at the
time held by it hereunder and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to give any notice
provided for in this Section 22, however, or any defect therein, shall not
affect the legality or validity of the appointment of a successor Warrant Agent.
The Warrant Agent may resign at any time and be discharged from the obligations
hereby created by so notifying the Company in writing at least 30 days in
advance of the proposed effective date of its resignation. If no successor
Warrant Agent accepts the engagement hereunder by such time, the Company shall
act as Warrant Agent. The indemnity provisions of subsection 19(e) shall survive
the resignation or removal of any Warrant Agent.
SECTION 23. NOTICES TO THE COMPANY AND WARRANT AGENT. Any notice or
----------------------------------------
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant Certificate to or on the Company shall
be sufficiently given or made if deposited in the mail, first class or
registered, postage prepaid, or delivered by telex, telecopier or overnight
courier guaranteeing next day delivery to the other's address, as follows:
International Wireless Communications Holdings, Inc.
400 South El Camino Real
San Mateo, California 94402
Attention: Chief Financial Officer
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
600 Hansen Way
Second Floor
Palo Alto, California 94303
Attention: Brooks Stough
47
<PAGE>
If to the Warrant Agent:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Market Services
The Company or the Warrant Agent, by notice to the others, may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to holders of the
Warrants) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Notwithstanding the foregoing, notices to the Warrant Agent shall only be
effective upon receipt.
Any notice or communication to a holder of Warrants shall be mailed by
first class mail or by overnight air courier guaranteeing next day delivery to
its address shown on the register kept by the Warrant Agent. Failure to mail a
notice or communication to any holder or any defect in it shall not affect its
sufficiency with respect to any other holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to holders of Warrants, it
shall mail a copy to the Warrant Agent at the same time.
SECTION 24. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
--------------------------
Agent may from time to time supplement or amend this Agreement without the
consent of any holders of Warrant Certificates in order to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
materially adversely affect the interests of the holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of holders shall require the written consent of
registered holders of a majority of the then outstanding Warrants (excluding
Warrants held by the Company or any of its Affiliates). The consent of each
holder of a Warrant affected shall be required for any amendment pursuant to
which the number of Warrant Shares purchasable upon exercise of Warrants would
be decreased or the Exercise Price would be increased.
48
<PAGE>
SECTION 25. SUCCESSORS. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 26. TERMINATION. Except as otherwise provided in this section,
-----------
this Agreement shall terminate at 5:00 p.m., New York, New York time on August
15, 2001. Notwithstanding the foregoing, this Agreement will terminate on such
earlier date on which all outstanding Warrants have been exercised. The
indemnification provisions of subsections 19(e) and 20(d) shall survive such
termination indefinitely, and the provisions of subsection 20(a) hereof shall
survive for 30 days after such termination.
SECTION 27. GOVERNING LAW; JURISDICTION. This Agreement and each Warrant
---------------------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the internal laws of said State. The parties hereto
irrevocably consent to the jurisdiction of the courts of the State of New York
and any federal court located in such state in connection with any action, suit
or proceeding arising out of or relating to this Agreement.
SECTION 28. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
--------------------------
be construed to give to any Person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrant Certificates.
SECTION 29. COUNTERPARTS. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 30. FURTHER ASSURANCES. From time to time on and after the date
------------------
hereof, the Company shall deliver or cause to be delivered to the Warrant Agent
such further documents and instruments and shall do and cause to be done such
further acts as the Warrant Agent shall reasonably request (it being understood
that the Warrant Agent shall have no obligation to make such request) to carry
out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected hereunder.
[Signature Page Follows]
49
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By: /s/ Douglas S. Sinclair
------------------------------------
Name: Douglas S. Sinclair
Title: Executive-vice President and
Chief Financial Officer
BANKERS TRUST COMPANY,
as Warrant Agent
By:/s/ Kevin Weeks
------------------------------------
Authorized Signatory
The undersigned referred to in the foregoing Warrant Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound by and to comply
with the terms of Section 21 thereof insofar as such terms are applicable to it.
VANGUARD CELLULAR OPERATING CORP.
By:_____________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:_______________________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Warrant Agent
By:_______________________________________
Authorized Signatory
The undersigned referred to in the foregoing Warrant Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound by and to comply
with the terms of Section 21 thereof insofar as such terms are applicable to it.
VANGUARD CELLULAR OPERATING CORP.
By: /s/ Richard C. Rowlenson
---------------------------------------
Name: Richard C. Rowlenson
Title: Vice President
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
This security is a global security within the meaning of the Warrant
Agreement relating hereto. Unless and until it is exchanged in whole or in part
for Warrants in definitive form, this Warrant may not be transferred except as a
whole by the Depository with respect to this Warrant (the "Depository") to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or such
other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein./1/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR
THE LAST DATE ON WHICH INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
(THE "COMPANY") OR ANY AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE
SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR THERETO) (THE "RESALE RESTRICTION TERMINATION DATE") RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) FOR SO LONG AS SUCH SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A
____________________________
/1/ This paragraph is to be included only if the Warrant is in global form.
A-1
<PAGE>
UNDER THE SECURITIES ACT ("RULE 144A") TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A, (C) TO NON-U.S. PERSONS OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
DEALER) TO THE UNIT AGENT, IN THE CASE OF ANY TRANSFER OF UNITS, THE
REGISTRAR, IN THE CASE OF ANY TRANSFER OF SENIOR NOTES, AND TO THE WARRANT
AGENT, IN THE CASE OF ANY TRANSFER OF THIS SECURITY, A SIGNED LETTER (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE UNIT AGENT, THE REGISTRAR OR
THE WARRANT AGENT, AS APPLICABLE) CERTIFYING TO THE COMPANY AND SUCH AGENT
THAT SUCH TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS
ACQUIRING SUCH SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE, THE HOLDER SHALL, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS ANY OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
UNTIL THE EARLIEST TO OCCUR OF (i) NOVEMBER 15, 1996, (ii) THE OCCURRENCE
OF AN EXERCISE EVENT, (iii) THE DATE A REGISTRATION STATEMENT WITH RESPECT
TO A REGISTERED EXCHANGE OFFER FOR THE SECURITIES OR A SHELF REGISTRATION
STATEMENT FOR THE SECURITIES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (iv) SUCH EARLIER DATE AS MAY BE DETERMINED BY THE
INITIAL PURCHASERS (AS DEFINED IN THE WARRANT AGREEMENT GOVERNING THE
SECURITIES EVIDENCED HEREBY), THE SECURITIES EVIDENCED HEREBY MAY NOT BE
SOLD, ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS,
SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME
TRANSFEREE $1,000 PRINCIPAL AMOUNT OF SENIOR NOTES (AS DEFINED IN THE
WARRANT AGREEMENT), OF INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
FOR EACH WARRANT SO TRANSFERRED.
A-2
<PAGE>
No.________ ______ Warrants
Warrant Certificate
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC..
This Warrant Certificate certifies that _________, or its registered
assigns, is the registered holder of Warrants expiring August 15, 2001 (the
"Warrants") to purchase Common Stock, $0.01 par value per share (the "Common
Stock"), of International Wireless Communications Holdings, Inc., a Delaware
corporation (the "Company"). Each Warrant initially entitles the holder upon
exercise to receive from the Company on or before 5:00 p.m., New York City time,
on August 15, 2001, 11.638 fully paid and nonassessable shares of Common Stock
("Warrant Shares") at the initial exercise price (the "Exercise Price") of $0.01
for each Warrant Share payable in (i) the form of cash or by certified or
official bank check payable to the order of Company, (ii) by tendering 14%
Senior Secured Discount Notes due 2001 issued in connection with the Warrants
(the "Senior Notes") having an Accreted Value at the time of tender equal to the
Exercise Price, (iii) by tendering Warrants having a fair market value equal to
the Exercise Price or (iv) with any combination of cash, Senior Notes or
Warrants, upon surrender of this Warrant Certificate with the form of election
to purchase common stock set forth on the reverse side hereof duly completed and
executed by the holder hereof and payment in full of the Exercise Price at the
office or agency of the Company designated for such purpose, which initially
will be the corporate trust office of the Warrant Agent in New York, New York,
but only subject to the conditions set forth herein and in the Warrant Agreement
referred to on the reverse hereof. The Exercise Price and number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment in the
event the Company has not completed a Threshold Initial Public Offering (as
defined in the Warrant Agreement) on or prior to May 15, 1997 and upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time on
August 15, 2001, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent.
This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of New York.
A-3
<PAGE>
IN WITNESS WHEREOF, International Wireless Communications Holdings,
Inc. has caused this Warrant Certificate to be signed manually or by facsimile
by its duly authorized officers.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
Dated:
Countersigned:
BANKERS TRUST COMPANY
as Warrant Agent
By:___________________________________
Authorized Signature
A-4
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring August 15, 2001 entitling the holder on
exercise to receive shares of Common Stock, $0.01 par value per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of August 15, 1996 (the "Warrant Agreement"), duly
executed and delivered by the Company, to Bankers Trust Company, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitations or rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or after the opening of
business on the first business day following the date on which an Exercise Event
has occurred, and on or before August 15, 2001. An Exercise Event means (i) a
Change of Control (as defined in the Warrant Agreement), (ii) the closing of an
Initial Public Offering (as defined in the Warrant Agreement), (iii) the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company or (iv) August 14, 2001.
The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase common stock attached hereto duly completed and executed by
the holder hereof, together with payment of the Exercise Price in (i) the form
of cash or by certified or official bank check payable to the order of the
Company, (ii) by tendering Senior Notes having an Accreted Value at the time of
tender equal to the Exercise Price, (iii) by tendering Warrants having a fair
market value equal to the Exercise Price or (iv) any combination of cash, Senior
Notes or Warrants, at the office or agency designated for such purpose, which
will initially be the corporate trust office of the Warrant Agent in New York,
New York. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised. No
fractional shares of a share of Common Stock will be issued upon the exercise of
any Warrant, but the Company will pay the cash value thereof determined as
provided in the Warrant Agreement.
The number of shares of Common Stock issuable upon exercise of a
Warrant (the "Warrant Number") is subject to adjustment from time to time upon
the occurrence of certain events, including (a) the failure by the Company to
complete a Threshold Initial Public Offering (as defined in the Warrant
Agreement) prior to the IPO Contingency Date (as defined in the Warrant
Agreement), (b) certain subdivisions, combinations or certain reclassifications
of the Common Stock and (c) sales by the Company of Common Stock or of any other
security convertible into or
A-5
<PAGE>
exchangeable for Common Stock (other than (i) pursuant to the exercise of the
Warrants, (ii) pursuant to the conversion of any shares of capital stock of the
Company outstanding on the date of the Warrant Agreement or (iii) any security
convertible into, or exchangeable or exercisable for, Common Stock as to which
the issuance thereof has previously been the subject of any required adjustment
pursuant to the Warrant Agreement) at a price per share less than the Current
Market Value (as defined in the Warrant Agreement) at the time of determination.
If the Company is a party to a consolidation, merger or binding share
exchange, or certain transfers of all or substantially all of its assets occur,
the right to exercise a Warrant for Common Stock may be changed into a right to
receive securities, cash or other assets of the Company or another person.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Such
registration rights are set forth in full in Section 20 of the Warrant
Agreement. The holders of the Warrants and the Warrant Shares also are entitled
to certain tag-along rights and such rights are set forth in full in Section 21
of the Warrant Agreement.
In the event that a Public Market (as defined in the Warrant
Agreement) does not exist for the Common Stock on February 15, 2001, the Company
will be required, at its option, to either make an offer to purchase all
outstanding Warrants and Warrant Shares or register all Warrant Shares under the
Securities Act of 1933, as amended, all as set forth in Section 20 of the
Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by a legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by an notice to the contrary.
In general, holders of Warrants will not be entitled, by virtue of
being such holders, to receive notice of any meetings of stockholders or
otherwise have any right of stockholders of the Company.
A-6
<PAGE>
[Form of Election to Purchase]
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _______ shares of Common
Stock and herewith (check item) tenders payment for such shares to the order of
International Wireless Communications Holdings, Inc. in the amount of $______
per share of Common Stock in accordance with the terms hereof, as follows:
[_] (i) $________ in cash or certified or official bank check to
the order of the Company;
[_] (ii) by surrender of Senior Notes with an Accreted Value of
$_________; or
[_] (iii) by surrender of Warrants having a fair market value of
$__________.
The undersigned requests that a certificate for such shares be
registered in the name of ___________________, which person, if other than the
undersigned, is the __________ (e.g., nominee or affiliate) of the undersigned,
and whose address is __________________________ and that such shares be
delivered to ___________________________ whose address is ________________.
If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of ________________, which person, if other than the undersigned, is
the _____________ (e.g., nominee or affiliate) of the undersigned, and whose
address is ____________________, and that such Warrant Certificate be delivered
to ________________, whose address is ______________________.
___________________________________________
Signature
Date:______________________________________
___________________________________________
Signature Guaranteed
A-7
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS/2/
--------------------------------------------
The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Warrants of Warrants of such signatory of
Date of this Global this Global decrease (or Warrant
Exchange Warrant Warrant increase) Agent
- -------- ----------- ----------- ------------ ------------
________________________________
/2/ This is to be included only if the Warrant is in global form.
A-8
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: _______ Warrants to purchase common stock (the "Warrants") of International
Wireless Communications Holdings, Inc.
This Certificate relates to _____ Warrants held in * ______ book-
entry or * _______ definitive form by _______ (the "Transferor").
The Transferor*:
[_] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrants held by the
Depository a Warrant or Warrants in definitive, registered form of authorized
denominations and aggregate principal amount equal to its beneficial interest in
such Global Warrant (or the portion thereof indicated above); or
[_] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants (the "Warrant Agreement") and
as provided in Section 7 of such Warrant Agreement, and that the transfer of
this Warrant does not require registration under the Act (as defined below)
because:
[_] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 7(i) of the Warrant Agreement).
[_] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Act"), in reliance on Rule 144A.
[_] Such Warrant is being transferred in accordance with Rule 144 under
the Act, or pursuant to an effective registration statement under the Act.
[_] Such Warrant is being transferred pursuant to Rule 904 under the Act
and documents are being furnished which comply with the conditions of transfer
set forth in the Warrant Agreement.
__________________________
* Check applicable box.
B-1
<PAGE>
[_] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act, other than Rule
144A or Rule 904 under the Act. Documents are being furnished which comply with
the conditions of transfer set forth in the Warrant Agreement.
___________________________________________
[INSERT NAME OF TRANSFEROR]
By:_______________________________________
Name:
Title:
Date:____________________________
B-2
<PAGE>
EXHIBIT C
[Form of Transfer Legend]
[Face]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1, (2), (3), OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE (WITHIN THE MEANING OF RULE
144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR THERETO) (THE "RESALE RESTRICTION TERMINATION DATE") RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) FOR SO LONG AS SUCH SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A, (C) TO NON-U.S. PERSONS OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE UNIT AGENT, IN THE CASE OF ANY TRANSFER OF UNITS, TO THE REGISTRAR, IN THE
CASE OF ANY TRANSFER OF SENIOR NOTES, AND TO THE WARRANT AGENT, IN THE CASE OF
ANY TRANSFER OF ANY WARRANTS, A SIGNED LETTER (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE WARRANT AGENT CERTIFYING TO THE COMPANY AND SUCH AGENT THAT
SUCH TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS ACQUIRING SUCH
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT
C-1
<PAGE>
AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
C-2
<PAGE>
EXHIBIT D
(Transfers to Non-QIB Accredited Investors)
___________________, ____
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Market Services
Re: INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
Common Stock Purchase Warrants (the "Warrants")
-----------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of Common Stock Purchase Warrants
(the "Securities") of International Wireless Communications Holdings, Inc. (the
"Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated August 9, 1996, relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages 3 and 4
of the Offering Memorandum and in the section entitled "Transfer Restrictions"
of the Offering Memorandum, including the restrictions on duplication and
circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Warrant
Agreement relating to the Securities (as described in the Offering Memorandum)
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (i) to the
D-1
<PAGE>
Company or any of its subsidiaries, (ii) for so long as the Securities are
eligible for resale pursuant to Rule 144A under the Securities Act ("Rule
144A"), in accordance with Rule 144A to a "qualified institutional buyer" (as
defined in Rule 144A), (iii) to non-U.S. Persons outside the United States in
accordance with Rule 904 of the Regulation S under the Securities Act, (iv) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Warrant Agent (as defined in the Warrant Agreement relating to the
Securities), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Securities (the form of which
letter can be obtained from the Warrant Agent), (v) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act (if available),
or (vi) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of the
Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will not
transfer the Securities to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974 as amended), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we will
be required to furnish to the Warrant Agent and the Company, such certification,
legal opinions and other information as the Warrant Agent and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We acknowledge that the Warrant Agent and the Company will rely
upon the truth and accuracy of such information. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion. We are not acquiring
the Securities with a view toward distribution thereof in a transaction that
would violate the Securities Act or the securities laws of any State of the
United States or any other applicable jurisdiction.
D-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By: ___________________________
Name:
Title:
D-3
<PAGE>
EXHIBIT E
(FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERVS
PURSUANT TO REGULATION S)
____________, ____
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Market Services
Re: International Wireless Communications Holdings, Inc. (the
"Company")
Common Stock Purchase Warrants
---------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of _______ Common Stock Purchase
Warrants (the "Securities"), we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
1. The offer of the Securities was not made to a person in the United States
or to a U.S. Person;
2. Either (a) at the time the buy offer was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States and a non-U.S.
Person, or (b) the transaction was executed in, on or through the facilities of
a designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
3. No directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable;
4. The transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act; and
5. We have advised the transferee of the transfer restrictions applicable to
the Securities.
E-1
<PAGE>
You and the Company are entitled to reply upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By____________________________
Authorized Signature
0039077.16
E-2
<PAGE>
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
SERIES F REDEEMABLE CONVERTIBLE PREFERRED STOCK
DATED AS OF DECEMBER 6, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. AUTHORIZATION OF FINANCING...............................................2
2. PURCHASE AND SALE OF SECURITIES..........................................2
3. CLOSING OF SALE OF SECURITIES............................................2
4. CONDITIONS OF CLOSING....................................................3
4A. CONDITIONS OF INITIAL CLOSING.....................................3
4A.1 CLOSINGS OF THE VANGUARD EXCHANGE.................................3
4A.2 CLOSINGS OF THE CTIP EXCHANGE.....................................3
4A.3 CONCURRENT FUNDING................................................4
4A.4 OPINION OF COUNSEL................................................4
4A.5 REPRESENTATIONS AND WARRANTIES; NO PREFERRED SOTCK
FAILURE EVENT.....................................................4
4A.6 PURCHASE AND EXCHANGE PERMITTED BY APPLICABLE LAWS................4
4A.7 APPROVALS AND CONSENTS............................................4
4A.8 PROCEEDINGS.......................................................5
4A.9 FEES..............................................................5
4A.10 LEGAL FEES........................................................5
4A.11 SECURITIES........................................................5
4A.12 INVESTOR RIGHTS AGREEMENT.........................................5
4A.13 REGISTRATION RIGHTS AGREEMENT.....................................5
4A.14 CERTIFICATE OF INCORPORATION......................................5
4A.15 FINANCIAL INFORMATION.............................................5
4A.16 COMPLIANCE CERTIFICATE............................................6
4A.17 SECRETARY'S CERTIFICATES; GOOD STANDING...........................6
4A.18 ADDITIONAL INFORMATION............................................6
4B. CONDITIONS OF SECOND CLOSING......................................6
4B.1 REPRESENTATIONS AND WARRANTIES; NO PREFERRED STOCK
FAILURE EVENT.....................................................6
4B.2 PURCHASE AND EXCHANGE PERMITTED BY APPLICABLE LAWS................7
4B.3 SECURITIES........................................................7
4B.4 OPINION OF COUNSEL................................................7
4B.5 COMPLIANCE CERTIFICATE............................................7
4B.6 INVESTOR RIGHTS AGREEMENT.........................................7
4B.7 REGISTRATION RIGHTS AGREEMENT.....................................7
4B.8 INITIAL CLOSING...................................................7
5. AFFIRMATIVE COVENANTS....................................................7
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS............................7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.2 INSPECTION OF PROPERTY...........................................10
5.3 MAINTENANCE OF PROPERTIES; INSURANCE.............................11
5.4 EXISTENCE, ETC...................................................11
5.5 PAYMENT OF TAXES AND CLAIMS......................................12
5.6 COMPLIANCE WITH LAWS, ETC........................................12
5.7 USE OF PROCEEDS..................................................12
5.8 ACCOUNTANTS......................................................12
5.9 FURTHER ASSURANCES...............................................13
5.10 ACCOUNTS AND RECORDS.............................................13
5.11 RESERVATION OF SHARES............................................13
5.12 INVESTMENT COMPANY ACT OF 1940...................................13
6. NEGATIVE COVENANTS......................................................13
6.1 LIMITATION ON DEBT...............................................13
6.2 LIMITATION ON LIENS..............................................14
6.3 LIMITATION ON RESTRICTED PAYMENTS................................14
6.4 LIMITATION ON INVESTMENTS........................................14
6.5 TRANSACTIONS WITH AFFILIATES.....................................14
6.6 MERGER, CONSOLIDATION, ACQUISITION OR SALE OF ASSETS.............14
6.7 SALES OF ASSETS..................................................15
6.8 ANNUAL BUDGET; CAPITAL EXPENDITURES..............................15
6.9 NO AMENDMENT OF CERTAIN DOCUMENTS................................15
6.10 CHANGE IN BUSINESS...............................................15
6.11 EXECUTIVE OFFICERS; BOARD OF DIRECTORS...........................16
6.12 WITHHOLDING TAXES................................................16
6.13 NO PLEDGE OF SHARES..............................................16
6.14 CHANGE IN CONTROL................................................17
6.15 SALE OF EQUITY SECURITIES........................................17
6.16 FISCAL YEAR; CHANGE IN ACCOUNTING PRACTICES......................17
7. PREFERRED STOCK FAILURE EVENTS..........................................17
7.1 PREFERRED STOCK FAILURE EVENTS...................................17
7.2 OTHER REMEDIES...................................................20
8. REPRESENTATIONS, COVENANTS AND WARRANTIES...............................20
8.1 ORGANIZATION; AUTHORITY..........................................20
8.2 AUTHORIZATION....................................................21
8.3 CAPITAL STOCK AND RELATED MATTERS................................21
8.4 LITIGATION.......................................................22
8.5 COMPLIANCE.......................................................23
8.6 OFFERING.........................................................24
8.7 ERISA AND LABOR RELATIONS........................................24
8.8 FINANCIAL STATEMENTS; MATERIAL FACTS.............................25
8.9 OUTSTANDING DEBT.................................................26
8.10 TAXES............................................................26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
8.11 CONFLICTING AGREEMENTS...........................................27
8.12 POLLUTION AND OTHER REGULATIONS..................................27
8.13 CERTAIN ACTS.....................................................28
8.14 GOVERNMENTAL PERMITS, CONSENTS, ETC..............................28
8.15 FEES AND COMMISSIONS.............................................29
8.16 INTELLECTUAL PROPERTY............................................29
8.17 ABSENCE OF CERTAIN CHANGES.......................................30
8.18 THE EXCHANGE DOCUMENTS...........................................30
8.19 INSURANCE........................................................30
8.20 RESERVATION OF SHARES............................................31
8.21 TITLE TO PROPERTIES..............................................31
8.22 CONTRACTS; DISCONTINUED PROJECTS.................................32
9. REPRESENTATIONS OF THE PURCHASERS.......................................32
9.1 PURCHASE OF SECURITIES...........................................32
9.2 INCORPORATION; AUTHORIZATION.....................................32
9.3 NO CONFLICTS.....................................................33
9.4 NO BROKERS' FEES.................................................33
9.5 LEGEND...........................................................33
10. DEFINITIONS.............................................................33
11. MISCELLANEOUS...........................................................46
11.1 PAYMENTS.........................................................46
11.2 EXPENSES; INDEMNITY..............................................47
11.3 CONSENT TO AMENDMENTS; SUBORDINATION.............................48
11.4 PERSONS DEEMED OWNERS............................................48
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES:
ENTIRE AGREEMENT.................................................49
11.6 SUCCESSORS AND ASSIGNS...........................................49
11.7 NOTICES..........................................................49
11.8 DESCRIPTIVE HEADINGS, ETC........................................50
11.9 CONFIDENTIALITY..................................................50
11.10 NO AGENCY........................................................50
11.11 GOVERNING LAW: CHOICE OF FORUM...................................51
11.12 WAIVER OF JURY TRIAL.............................................52
</TABLE>
iii
<PAGE>
SCHEDULES:
Schedule 1 Initial Closing Purchasers
Schedule 1A Bridge Investors
Schedule 2 Second Closing Purchasers
Schedule 5.7 Use of Proceeds
Schedule 6.1 Existing Debt
Schedule 6.5 Transactions with Affiliates
Schedule 8.1 Jurisdictions Where Qualified; Subsidiaries
Schedule 8.2 Authorization
Schedule 8.3 Capitalization
Schedule 8.4 Litigation
Schedule 8.7 Employee Benefits
Schedule 8.11 Conflicting Agreements
Schedule 8.12 Pollution and Other Regulations
Schedule 8.14 Governmental Permits
Schedule 8.16 Licenses and Options
Schedule 8.18 Amendments to the Exchange Documents
Schedule 8.19 Insurance
Schedule 8.21 Real Property
Schedule 8.22 Contracts and Discontinued Projects
EXHIBITS:
- --------
Exhibit 4A.4 Form of Opinions of the Company's Counsel
Exhibit 4A.12 Form of Investor Rights Agreement
Exhibit 4A.13 Form of Registration Rights Agreement
Exhibit 4A.14 Form of Certificate of Incorporation
Exhibit 4B.4 Form of Opinions of the Company's Counsel
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT dated as of December 6, 1995 by and
among (i) INTERNATIONAL WIRELESS COMMUNICATIONS, IWC., a Delaware corporation
(the "Company"), (ii) ELECTRA INVESTMENT TRUST P.L.C. ("EIT") and ELECTRA
ASSOCIATES, INC. ("EAI", and together with EIT, "Electra"), (iii) the additional
purchasers listed on Schedule 1 hereto, and (iv) the additional purchasers at
----------
the Second Closing (as hereinafter defined) (all such additional purchasers
referred to in clauses (iii) and (iv) above, together with Electra, and the
successors and assigns of any of them, are collectively referred to herein as
the "Purchasers" and each individually, a "Purchaser"),
---------- ---------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company has requested that the Purchasers purchase certain
securities from and extend certain financial accommodations to the Company in a
minimum amount equal to $50,000,000 in connection with the financing of certain
of the Projects (as hereinafter defined) and certain of the working capital
needs of the Company; and
WHEREAS, certain of the Purchasers (as hereinafter defined as the "Bridge
Investors") have extended certain financial accommodations to the Company in an
amount equal to $8,700,000, as evidenced by the Bridge Notes (as hereinafter
defined), in advance of the execution of this Agreement, which Bridge Notes
will be converted into the Securities (as hereinafter defined) in accordance
with the terms hereof; and
WHEREAS, the Company desires, upon the terms and conditions hereinafter
provided, to sell certain of the Securities to the Purchasers and exchange the
Bridge Notes for certain of the Securities; and
WHEREAS, the Purchasers, including the Bridge Investors, desire, upon the
terms and conditions hereinafter provided, to purchase from the Company the
Securities;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be bound, hereby agree as follows:
Certain terms used in this Agreement are defined in Section 10 hereof.
Unless otherwise indicated, references to statutes are to statutes of the
United States of America. Accounting terms used herein shall be construed in
accordance with GAAP. In addition, unless the contrary intention appears, terms
and expressions having a defined or generally accepted meaning under the
securities laws of the United States shall have the same meaning in this
Agreement.
<PAGE>
1. AUTHORIZATION OF FINANCING.
--------------------------
In order to provide funds for, among other things, the expansion and
development of the Projects and working capital of the Company, the Company has
authorized the issuance, sale and delivery of (i) 152,000 shares of its Series
F-1 Preferred Stock, par value $.01 per share, with a stated value and a
purchase price of $375 per share (the "Series F-1 Preferred Stock") and (ii)
--------------------------
21,200 shares of its Series F-2 Preferred Stock, par value $.01 per share, with
a stated value and a purchase price of $375 per share (the "Series F-2
----------
Preferred Stock"; and together with the Series F-1 Preferred Stock,
- ---------------
collectively the "Securities"), which series have the rights, restrictions,
----------
privileges and preferences as set forth in the Certificate of Incorporation.
Notwithstanding anything contained herein to the contrary, without the prior
written consent of the holders of 75% of the Securities (excluding the Series
F-2 Preferred Stock), (i) the aggregate amount of Securities sold hereunder at
both Closings shall not exceed $65,000,000, and (ii) no one holder of the
Securities shall purchase from the Company more than $10,000,000 of Securities.
2. PURCHASE AND SALE OF SECURITIES.
-------------------------------
The Company hereby agrees to (i) issue and sell to each of the
Purchasers listed on Schedule 1 hereto and each such Purchaser, severally and
----------
not jointly, hereby agrees to purchase from the Company, on the Initial Closing
Date, subject to the terms and conditions herein set forth and in reliance upon
the representations, warranties and agreements of the Company herein contained,
(ii) issue and exchange with each Bridge Investor listed on Schedule 1A hereto
-----------
and each Bridge Investor, severally and not jointly, hereby agrees to purchase
from the Company, on the Initial Closing Date, subject to the terms and
conditions herein set forth and in reliance upon the representations, warranties
and agreements of the Company herein contained, and (iii) issue and sell to the
additional Purchasers listed on an additional Schedule to be attached to this
Agreement on or before the Second Closing ("Schedule 2") and each such
----------
additional Purchaser, severally and not jointly, shall agree to purchase from
the Company, on the Second Closing Date, subject to the terms and conditions
herein set forth and in reliance upon the representations, warranties and
agreements of the Company herein contained, to purchase or exchange at the
applicable Closing from the Company the aggregate number of shares of Securities
set forth opposite such Purchaser's and Bridge Investor's name in Schedule 1 or
----------
Schedule 2 for the purchase price set forth opposite such Purchaser's name and
- ----------
registered in such Purchaser's or Bridge Investor's name or that of such
Purchaser's or Bridge Investor's nominee, as such Purchaser or Bridge Investor
shall request.
3. CLOSING OF SALE OF SECURITIES. (A) The initial purchase and
-----------------------------
delivery of the applicable Securities, and the exchange of the Bridge Notes for
the applicable Securities, shall each take place at the offices of Pryor,
Cashman, Sherman & Flynn, 410 Park Avenue, New York, New York 10022 (the
"Initial Closing") to be held simultaneously with the execution and delivery of
---------------
this Agreement, or at such other place or on such other date as the Purchasers,
the Bridge Investors and the Company may agree upon, but in no event later than
December 20, 1995 (the "Initial Closing Date").
2
<PAGE>
(B) The second purchase and delivery of the applicable Securities
shall take place at the offices of Pryor, Cashman, Sherman & Flynn, 410 Park
Avenue, New York, New York 10022 (the "Second Closing"; and together with the
--------------
Initial Closing, the "Closings") to be held on or before December 31, 1995, or
at such other place as the Purchasers and the Company may agree upon (the
"Second Closing Date") but in no event later than 30 days after the Initial
-------------------
Closing Date.
(C) The Company will (i) at each Closing, deliver one or more
certificates evidencing the appropriate Securities to each of the appropriate
Purchasers, against payment of the purchase price therefor by transfer of
immediately available funds to such bank or other financial institution as the
Company may direct in writing, for credit to the Company's account, (ii) at the
Initial Closing, deliver one or more certificates evidencing the appropriate
Securities to each of the appropriate Bridge Investors, against payment of the
purchase price therefor by cancellation of the Bridge Notes, and (iii) at the
Initial Closing, pay a non-refundable financing fee to EI of $100,000 (the
"Financing Fee") and the fee set forth in the Supplemental Letter. If at the
-------------
Initial Closing, the Company shall fail to tender to each of the appropriate
Purchasers any of the appropriate Securities provided for above in this Section
3, or any of the conditions specified in Section 4A hereof shall not have been
satisfied or waived by each such Purchaser, each such Purchaser shall, at such
Purchaser's election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights such Purchaser may have by
reason of such failure or such non-fulfillment. If at the Second Closing, the
Company shall fail to tender to each of the appropriate Purchasers any of the
appropriate Securities provided for above in this Section 3, or any of the
conditions specified in Section 4B hereof shall not have been satisfied or
waived by such Purchasers, such Purchaser shall, at such Purchaser's election,
be relieved of all further obligations under this Agreement, without thereby
waiving any other rights such Purchaser may have by reason of such failure or
such non-fulfillment.
4. CONDITIONS OF CLOSING.
---------------------
4A. CONDITIONS OF INITIAL CLOSING. Each Purchaser's obligation to
-----------------------------
purchase and pay for the applicable Securities, and each Bridge Investor's
obligation to exchange the Bridge Notes for the applicable Securities, at the
Initial Closing is subject to of the following conditions:
4A.1 CLOSINGS OF THE VANGUARD EXCHANGE. The transactions contemplated
---------------------------------
under the Vanguard Exchange and the Vanguard Exchange Documents shall close on
or before the Initial Closing of the transactions contemplated herein, without
any material terms or conditions therein being waived or modified by the
Company.
4A.2 CLOSINGS OF THE CTP EXCHANGE. The transactions contemplated under
----------------------------
the CTP Exchange and the CTP Exchange Documents shall close on or before the
Initial Closing of the transactions contemplated herein, without any material
terms or conditions therein being waived or modified by the Company.
3
<PAGE>
4A.3 CONCURRENT FUNDING. The Company shall have (i) received
------------------
concurrently from each Purchaser the appropriate purchase price for the
Securities being purchased by such Purchasers and (ii) concurrently consummated
the exchange and cancellation of the Bridge Notes with the Bridge Investors;
provided, however, that the aggregate proceeds received by the Company for the
Securities at the Initial Closing, in the form of cash and cancellation of debt,
equals at least $50,000,000.
4A.4 OPINION OF COUNSEL. Each Purchaser shall have received from (i)
------------------
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the
Company, and (ii) special local counsel to the Company in Malaysia, Indonesia,
Brazil and the Philippines, an opinion substantially in the forms set forth in
Exhibit 4A.4 hereto, each addressed to the Purchasers, dated the Initial
Closing Date and otherwise reasonably satisfactory in form and substance to
Purchasers.
4A.5 REPRESENTATIONS AND WARRANTIES; NO PREFERRED STOCK FAILURE
----------------------------------------------------------
EVENT. The representations and warranties of the Company contained in this
- -----
Agreement, the other Transaction Documents and those otherwise made in any
writing by the Company, furnished pursuant to this Agreement and the other
Transaction Documents, including, without limitation, relating to any Project
and the consummation of the Vanguard Exchange and the CTP Exchange), shall be
true and correct in all material respects when made and at the time of the
Initial Closing as though made at such time, and the Company shall have
performed or complied, in all material respects, with the covenants, conditions
and agreements contained in this Agreement and the other Transaction Documents
required to be performed and complied with by the Company at or prior to the
Initial Closing; and there shall exist at the time of the Initial Closing and
after giving effect to such transactions no Preferred Stock Failure Event or
Preferred Stock Failure.
4A.6 PURCHASE AND EXCHANGE PERMITTED BY APPLICABLE LAWS. The purchase
--------------------------------------------------
and exchange of, and payment for, the Securities shall not violate any
applicable law or governmental regulation including, without limitation, Section
5 of the Securities Act) and shall not subject any Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation or order. The Purchasers shall have
received such certificates or other evidence as they may reasonably request to
establish compliance with the conditions set forth in this Section 4A.6.
4A.7 APPROVALS AND CONSENTS. The Company shall have duly received all
----------------------
authorizations, waivers, consents, approvals, licenses, franchises, permits and
certificates (collectively, "Consents") by or of all (i) federal, state, local
and foreign governmental authorities, (ii) existing shareholders, warrant
holders and convertible debt holders of the Company, and (iii) other Persons,
in each case, necessary to be obtained on or before the Initial Closing Date
for the issuance of the Securities and the consummation of the transactions
contemplated herein and in the other Transaction Documents (including, without
limitation, the consummation of the Vanguard Exchange), and all thereof shall
be in full force and effect at the time of Initial Closing.
4
<PAGE>
4A.8 PROCEEDINGS. All proceedings taken or to be taken in connection
-----------
with the transactions contemplated hereby and in the other Transaction Documents
(including, without limitation, the consummation of the Vanguard Exchange and
the CTP Exchange), and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Purchasers, and the Purchasers shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
4A.9 FEES. EI shall have received payment in full of the Financing
----
Fee set forth in Section 3 hereof and the structuring fee set forth in the
Supplemental Letter.
4A.10 LEGAL FEES. Pryor, Cashman, Sherman & Flynn, counsel to the Lead
----------
Purchaser, shall have received payment of its fees and expenses referred to in
Section 11.2 hereof.
4A.11 SECURITIES. The Company shall have delivered to the Purchasers
----------
one or more certificates, each representing the number of shares of Securities
being purchased from the Company by each Purchaser, or exchanged by each Bridge
Investor, as set forth on Schedule 1 hereto.
4A.12 INVESTOR RIGHTS AGREEMENT. The Fifth Amended and Restated
-------------------------
Investor Rights Agreement, in the form of Exhibit 4A.12 hereto (the "Investor
Rights Agreement"), shall be executed by the Company and the requisite
percentage holders of "Registrable Securities" (as defined in the Original
Investor Rights Agreement) to effect the amendments to the Original Investor
Rights Agreement contemplated by the Investor Rights Agreement in accordance
with Section 3.7 of the Original Investor Rights Agreement, and delivered to the
Purchasers contemporaneously with the transactions contemplated herein.
4A.13 REGISTRATION RIGHTS AGREEMENT. The Registration Rights
-----------------------------
Agreement, in the form of Exhibit 4A.13 hereto (the "Registration Rights
Agreement"), shall be executed and delivered to the Purchasers contemporaneously
with the transactions contemplated herein.
4A.14 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
----------------------------
of the Company, in the form of Exhibit 4A.14 hereto, shall have been executed
and duly filed with the Delaware Secretary of State.
4A.15 FINANCIAL INFQRMATION. The Company shall have delivered to the
---------------------
Purchasers (i) the audited consolidated financial statements for the Company
for the years ended December 31, 1993 and 1994, and (ii) to the extent
available, the monthly profit and loss statements and balance sheets for the
Company and its Subsidiaries since December 31, 1994 for all monthly periods
ending within 15 days prior to the Initial Closing Date, which financial
information shall not represent a Material Adverse Change in the Company or any
of the Material Projects. The Company shall have delivered to the Purchasers a
consolidated pro forma opening balance sheet of the Company and its
Subsidiaries, as of the Initial Closing Date, giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents
5
<PAGE>
(including, without limitation, the consummation of the Vanguard Exchange and
the CTP Exchange), in form and substance satisfactory to the Purchasers.
4A.16 COMPLIANCE CERTIFICATE. Each Purchaser shall have received an
----------------------
Officers' Certificate, dated the Initial Closing Date, certifying that the
conditions specified in Article 4A required to be fulfilled on the Initial
Closing Date (other than actions required to be taken by the Purchasers) have
been fulfilled.
4A.17 SECRETARY'S CERTIFICATES; GOOD STANDING. The Company shall have
---------------------------------------
delivered to each Purchaser (i) a certificate of its corporate secretary or
assistant secretary as to (A) resolutions of its Board of Directors or
shareholders action, as required, approving and authorizing the execution,
delivery and performance of each of the Transaction Documents and the
transactions contemplated therein (including, without limitation, the
consummation of the Vanguard Exchange and the CTP Exchange) to which it is a
party and authorizing the issuance and delivery of the Securities, as being in
full force and effect without modification, supplementation or amendment and
(B) its Certificate of Incorporation and the By-laws and all amendments to date
as being in full force and effect, with true, correct and complete copies of
such resolutions, Certificates of Incorporation and By-laws attached thereto,
(ii) an incumbency certificate of the Company's officers executing this
Agreement and the other Transaction Documents to which it is a party, (iii) a
certificate of the corporate secretary or assistant secretary of each of its
domestic U.S. Subsidiaries as to such Subsidiary's Certificate of Incorporation
and By-laws and all amendments to date as being in full force and effect, with
true, correct and complete copies of such Certificate of Incorporation and
By-laws attached thereto, and (iv) a certificate of subsistence and/or good
standing of the Company and each domestic U.S. Subsidiary, dated as of a recent
date prior to the Initial Closing, issued by the Secretary of State of its
state of incorporation and of each other jurisdiction in which the Company and
such Subsidiary is qualified to do business.
4A.18 ADDITIONAL INFORMATION. The Company shall have executed and/or
----------------------
delivered such other information and documentation as the Purchasers and their
counsel shall reasonably request. The Purchasers shall have received such other
documents and opinions, in form and substance satisfactory to the Purchasers
and their counsel.
4B. CONDITIONS OF SECOND CLOSING. Each Purchaser's obligation to
----------------------------
purchase and pay for the applicable Securities at the Second Closing is subject
to the satisfaction prior to or at the Second Closing Date of each of the
following conditions:
4B.1 REPRESENTATIONS AND WARRANTIES; NO PREFERRED STOCK FAILURE
----------------------------------------------------------
EVENT. (A) The representations and warranties of the Company contained in this
- -----
Agreement, the other Transaction Documents and those otherwise made in any
writing by the Company, furnished in connection with or pursuant to this
Agreement and the other Transaction Documents, or in connection with the
transactions contemplated hereby or thereby (including, without limitation,
relating to any Project and the consummation of the Vanguard Exchange and the
CTP Exchange), shall be true and correct in all material respects when made and
at the time of the Initial Closing as though made at such time, and the Company
shall have performed or
6
<PAGE>
complied in all material respects with the covenants, conditions and agreements
contained in this Agreement and the other Transaction Documents required to be
performed and complied with by the Company at or prior to the Initial Closing.
(B) No Material Adverse Change shall have occurred since the Initial
Closing Date and there shall exist at the time of the Second Closing and after
giving effect to such transactions no Preferred Stock Failure Event or Preferred
Stock Failure.
4B.2 PURCHASE AND EXCHANGE PERMITTED BY APPLICABLE LAWS. The purchase
--------------------------------------------------
and exchange of, and payment for, the Securities shall not violate any
applicable law or governmental regulation (including, without limitation,
Section 5 of the Securities Act) and shall not subject any Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation or order.
4B.3 SECURITIES. The Company shall have delivered to the Purchasers
----------
one or more certificates, each representing the number of shares of Securities
being purchased from the Company by each Purchaser as set forth on Schedule 2
hereto.
4B.4 OPINION OF COUNSEL. Each Purchaser shall have received from
------------------
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the
Company, an opinion substantially in the form set forth in Exhibit 4B.4, each
addressed to the Purchasers, dated the Second Closing Date and otherwise
reasonably satisfactory in form and substance to Purchasers.
4B.5 COMPLIANCE CERTIFICATE. Each Purchaser shall have received an
----------------------
Officers' Certificate, dated the Second Closing Date, certifying that the
conditions specified in Article 4B required to be fulfilled on the Second
Closing Date (other than actions required to be taken by the Purchasers) have
been fulfilled.
4B.6 INVESTOR RIGHTS AGREEMENT. The Purchasers shall have executed
-------------------------
and delivered the Investor Rights Agreement to the Company contemporaneously
with the transactions contemplated herein.
4B.7 REGISTRATION RIGHTS AGREEMENT. The Purchasers shall have
-----------------------------
executed and delivered the Registration Rights Agreement to the Company
contemporaneously with the transactions contemplated herein.
4B.8 INITIAL CLOSING. The Initial Closing shall have been
---------------
consummated.
5. AFFIRMATIVE COVENANTS.
---------------------
The Company hereby covenants that from and after the date of this
Agreement through the Closings and thereafter so long as any Securities remain
outstanding, as follows:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. The Company
--------------------------------------
covenants that it will deliver, or cause to be delivered, to each of the
Purchasers:
7
<PAGE>
(i) as soon as practicable and in any event within 45 days
after the end of each fiscal month of the Company and, commencing with the month
ending January, 1996, for each of the Material Operating Companies (other than
the last month of each fiscal quarter for both the Company and each Material
Operating Company), statements of income and cash flow for such month and for
the period from the beginning of the current fiscal year to the end of such
month and balance sheets as at the end of such month, and setting forth in each
case where applicable, in comparative form, figures for the corresponding months
in the preceding fiscal year, all in reasonable detail, and certified by the
chief financial officer of the Company as being a true and correct reflection in
all material respects of the financial condition and results of operation of the
Company and, to his knowledge, each of the Material Operating Companies;
(ii) as soon as practicable and in any event within 45 days
after the end of each fiscal quarter of the Company and, commencing with the
fiscal quarter ending March 1996, for each of the Material Operating Companies
(other than the last fiscal quarter of each year for both the Company and each
Material Operating Company), statements of income and cash flow for such quarter
and for the period from the current fiscal year to the end of such quarter and
balance sheets as at the end of such quarter, and (a) setting forth, in
comparative form, figures for the corresponding quarter in the annual budget
(including, without limitation, the initial annual budget prepared on or prior
to the Initial Closing on a pro forma basis giving effect to the consummation of
the transactions contemplated under this Agreement), all in reasonable detail,
and (b) setting forth where applicable, in comparative form, figures for the
corresponding quarter in the preceding fiscal year, all in reasonable detail,
and certified by the chief financial officer of the Company as being a true and
correct reflection in all material respects of the financial condition and
results of operation of the Company and, to his knowledge, each of the Material
Operating Companies;
(iii) as soon as practicable and in any event within 120 days
after each fiscal year, audited consolidated and consolidating statements of
income and cash flow of the Company and its Subsidiaries for such year, and
audited consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of such year, and setting forth, in each case where
applicable, in comparative form, corresponding figures from the preceding fiscal
year, and corresponding figures for such year from the annual budget (including,
without limitation, the initial annual budget prepared on or prior to the
Initial Closing on a pro forma basis giving effect to the consummation of the
transactions contemplated under this Agreement) (which comparisons to the annual
budget need not be audited), all in reasonable detail, and, as to the
consolidated statements, reported upon by KPMG Peat Marwick LLP or another
independent accounting firm of nationally recognized standing whose
certification shall be without qualification as to the scope of the audit or as
to GAAP, and, as to the consolidating statements, certified by the chief
financial officer of the Company;
(iv) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, material non-confidential notices and
reports as the Company, any of its Subsidiaries or any Operating Company shall
send to its security holders, copies of all non-confidential reports which it or
any of its officers or directors send to, and all registration statements
(without exhibits) which it files, with the Commission or any securities
exchange
8
<PAGE>
(should the Company, any of its Subsidiaries or any Operating Company be or
become public companies), copies of all press releases and other statements made
generally available by the Company, any Subsidiary or any Operating Company to
the public concerning material developments in the business of the Company, its
Subsidiaries and any Operating Company, as the case may be;
(v) promptly upon receipt thereof, a copy of each other
report (including, without limitation, each management and/or controller letter)
submitted to the Company or any of its Subsidiaries by independent accountants
in connection with any annual, interim or special audit of the books of the
Company or any of its Subsidiaries made by such accountants;
(vi) together with each delivery of financial statements
required by clauses (ii) and (iii) above, an Officers' Certificate of the
Company stating that the signers have reviewed the terms of this Agreement and
the Securities and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of the Company and
its Subsidiaries during the fiscal period covered by such financial statements
and that such review has not disclosed the existence during or at the end of
such fiscal period, and that the signers do not have knowledge of the existence,
as at the date of the Officers' Certificate, of any condition or event which
constitutes a Preferred Stock Failure Event or Preferred Stock Failure or, if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what action, if any, the Company has taken or is taking
or proposes to take with respect thereto;
(vii) immediately upon any executive officer of the Company or
any of its Subsidiaries obtaining knowledge (a) of any condition or event which
constitutes a Preferred Stock Failure Event or Preferred Stock Failure, (b) that
the holder of any Securities has given any notice or taken any other action with
respect to a claimed Preferred Stock Failure Event or Preferred Stock Failure
under this Agreement, (c) of any condition or event which, in the opinion of
management of the Company, would have or would likely result in a Material
Adverse Effect, (d) that any Person has given any notice to the Company, any of
its Subsidiaries or any Material Operating Company or taken any material action
with respect to a claimed default of the type referred to in Section 7.1(ix)
hereof, or (e) of the institution of any litigation involving claims against the
Company, any of its Subsidiaries or any Material Operating Company equal to or
greater than $500,000 with respect to any single cause of action or $1,000,000
with respect to the aggregate of all causes of action, or any adverse
determination in any litigation involving a potential liability to the Company,
any of its Subsidiaries or any Material Operating Company equal to or greater
than $500,000 with respect to any single cause of action or $1,000,000 with
respect to the aggregate of all causes of action, an Officers' Certificate
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and the
nature of such claimed Preferred Stock Failure Event, Preferred Stock Failure,
event or condition, and what action, if any, the Company has taken, is taking or
proposes to take with respect thereto;
9
<PAGE>
(viii) immediately upon any officer of the Company or any of its
Subsidiaries becoming aware of the occurrence of (i) any "reportable event", as
such term is defined in Section 4043 of ERISA, in connection with any Plan or
trust created thereunder, (ii) an event requiring the Company or any Subsidiary
to provide security to a Plan under Section 401(a)(29) of the Code, (iii) any
"prohibited transaction" incurred by the Company, any of its Subsidiaries or any
"Disqualified Person" (as defined in Section 4975 of the Code) (other than an
exempt "prohibited transaction"), as such term is defined in Section 4975 of the
Code or in Section 406 of ERISA in connection with any Plan or any trust created
thereunder, (iv) the institution of proceedings or the taking or expected taking
of action by the PBGC or the Company or any of its Subsidiaries to terminate or
withdraw or partially withdraw from a Multi-employer Plan within the meaning of
Section 4203 or 4205 of ERISA or under Section 4062, 4063 or 4064 of ERISA (in
connection with any Plan or any trust created thereunder), (v) any "accumulated
funding deficiency" within the meaning of Section 412 of the Code or Section 302
of ERISA or any delinquency as to contributions or payments to or in respect of
any Plans, (vi) any employee benefit Plan and trust which is intended to be
qualified within the meaning of Section 401(a) and tax exempt within the meaning
of 501(a) of the Code, no longer being qualified or tax exempt, (vii) any
transaction or any failure to take any action or make any required contributions
or any act or omission which would or would likely give rise to liability for
any excise tax under Section 4971 through 4980B of the Code inclusive, (viii)
any action or event which would or would likely materially increase the cost of
any employee benefit Plan, or (ix) any other action taken by the Internal
Revenue Service, the PBGC or the Department of Labor in connection with any
employee benefit Plan and trust of the Company or its Subsidiaries, a written
notice specifying the nature thereof, what action, if any, the Company or any
such Subsidiary has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the Internal Revenue Service
or the PBGC with respect thereto);
(ix) immediately upon any material revision to any of the
budgets approved by the Board of Directors of clauses (i), (ii) or (iii) above,
such budgets and financial statements, as revised;
(x) subject to Section 11.9 hereof, with reasonable
promptness, such other information and data with respect to the Company, any of
its Subsidiaries or any Operating Company as may be reasonably requested by the
Lead Purchaser or any Significant Purchaser and, after a Preferred Stock Failure
Event, by the Lead Purchaser, any Significant Purchaser or the holders of a
majority of the Securities; and
(xi) together with each delivery of financial statements
required by clauses (ii) and (iii) above, an Officers' Certificate of the
Company containing an analysis of the variance between the results of operations
and the budget for such period and a management commentary as to such results of
operation.
5.2 INSPECTION OF PROPERTY. Subject to Section 11.9 hereof,
----------------------
the Company covenants that it, each of its Subsidiaries and each Operating
Company, will permit any Person designated in writing (i) prior to a Preferred
Stock Failure Event, by the Lead Purchaser or any Significant Purchaser, at the
Lead
10
<PAGE>
Purchaser's or such Significant Purchaser's expense, and (ii) after a Preferred
Stock Failure Event, by the Lead Purchaser, any Significant Purchaser or the
holders of a majority of the Securities, at the Company's expense, to visit and
inspect any of the properties of the Company, any of its Subsidiaries and each
Operating Company, to examine the books and financial records of the Company,
any of its Subsidiaries and each Operating Company and make copies thereof or
extracts therefrom and to discuss its affairs, finances and accounts with its
officers and its independent public accountants, all at such reasonable times
during normal business hours, upon reasonable prior notice and as often as may
be reasonably requested by the Lead Purchaser or a majority of the Purchasers,
as the case may be.
5.3 MAINTENANCE OF PROPERTIES; INSURANCE. Except pursuant to a
------------------------------------
Special Board Action, the Company will, will cause each of its Subsidiaries to,
and will use commercially reasonable efforts to cause each Material Operating
Company to, maintain or cause to be maintained in good repair, working order and
condition (ordinary wear and tear excepted) all material properties used in the
business of the Company, such Subsidiary and such Material Operating Company and
from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Except pursuant to a Special Board Action,
the Company shall not, shall not permit its Subsidiaries to, and shall use
commercially reasonable efforts to cause each Material Operating Company to not,
permit any lease or agreement pursuant to which the Company, any Subsidiary or
any Material Operating Company leases, uses or occupies any of its respective
real or personal property to be canceled or terminated by the other party to
such lease or agreement prior to the expiration of its stated term which
individually or in the aggregate would have or would likely result in a Material
Adverse Effect. Except pursuant to a Special Board Action, the Company will,
will cause each of its Subsidiaries to, and will use commercially reasonable
efforts to cause each Material Operating Company to, maintain or cause to be
maintained, with financially sound and reputable insurers or, as to workers'
compensation or similar insurance, in an insurance fund or by self-insurance
authorized by the laws of the jurisdiction in question, insurance with respect
to their respective properties and businesses against loss or damage of the
kinds customarily insured against by corporations or entities of established
reputation engaged in the same or similar businesses, similarly situated and in
similar jurisdictions, of such type and in such amounts including appropriate
deductible levels as are customarily carried under similar circumstances by such
other corporations. The Company, in its discretion, will use the proceeds of all
such casualty insurance policies maintained by the Company to either (i) repay
its Debt, (ii) redeem the Securities and other Capital Stock of the Company, in
accordance with the terms of the Certificate of Incorporation and the Investor
Rights Agreement and subject to the rights of any lenders, if any, (iii) repair
or replace the damaged property, or (iv) reinvest such proceeds in the Company's
business. The Company shall provide Directors and Officers insurance to all of
its directors and officers on commercially reasonable terms within sixty (60)
days after the Initial Closing Date.
5.4 EXISTENCE, ETC. Except pursuant to a Special Board Action
--------------
and subject to the sales of assets permitted in accordance with Section 6.7
hereof, the Company
11
<PAGE>
(i) will, and will cause each of its Subsidiaries to, and will use commercially
reasonable efforts to cause each Material Operating Company to, at all times
preserve and keep in full force and effect its corporate existence, Permits,
other rights, franchises and Intellectual Property, and (ii) will qualify and
cause each of its Subsidiaries to, and will use commercially reasonable efforts
to cause each Material Operating Company to, qualify to do business in any
jurisdiction where the ownership of such property or Permits, other rights,
franchises and Intellectual Property or the operation of its business makes such
qualification necessary except where the failure to so qualify does not have a
Material Adverse Effect.
5.5 PAYMENT OF TAXES AND CLAIMS. The Company will, will cause
---------------------------
each of its Subsidiaries to, and will use commercially reasonable efforts to
cause each Material Operating Company to, pay all Taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business income or properties before any
penalty or interest accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien upon any
of their properties or assets; provided, however, that no such charge or claim
-------- -------
need be paid if being contested in Good Faith and if adequate reserves shall
have been made therefor in accordance with GAAP.
5.6 COMPLIANCE WITH LAWS, ETC. The Company will, will cause
--------------------------
each of its Subsidiaries to, and will use commercially reasonable efforts to
cause each Material Operating Company to, comply with the requirements of all
applicable laws, rules, regulations and orders of any court or other
Governmental Authority, including, without limitation, the Foreign Corrupt
Practices Act, except where the failure to so comply will not have, and is not
likely to result in, a Material Adverse Effect. The Company will, will cause
each of its Subsidiaries to, and will use commercially reasonable efforts to
cause each Material Operating Company to, timely make all filings required to be
made by it with all relevant federal, state, local and/or foreign regulatory
bodies, except where the failure to so file will not have, and is not likely to
result in, a Material Adverse Effect.
5.7 USE OF PROCEEDS. The Company shall use all of the
---------------
proceeds received from the sale of the Securities pursuant to this Agreement to
fund (i) the operation and expansion of the Projects, (ii) the closing costs
associated with the Closings under this Agreement and the transactions
contemplated herein and (iii) working capital in the ordinary course of
business, in each case as set forth on Schedule 5.7 hereto; provided, however,
------------ -------- -------
that any deviation from the applications of proceeds to any of the Projects set
forth in Schedule 5.7 hereto in excess of $5,000,000 in the aggregate must be
------------
approved by Special Board Action.
5.8 ACCOUNTANTS. The Company has retained KPMG Peat Marwick
-----------
LLP to audit the Company's financial statements. In the event the services of
KPMG Peat Marwick LLP or any firm of independent public accountants hereafter so
employed by the Company are terminated, the Company will promptly thereafter
notify the Board of Directors of the Company and will request the firm of
independent public accountants whose services were terminated to deliver to the
Board of Directors of the Company a letter of such firm setting forth
12
<PAGE>
the reasons for the termination of their services. In its notice, the Company
shall state whether the change of accountants was recommended or approved by the
Board of Directors or any committee thereof. In the event of any such
termination, the Company will promptly thereafter engage a "big six" firm of
independent public accountants.
5.9 FURTHER ASSURANCES. From time to time the Company will,
------------------
and will cause each of its Subsidiaries to, execute and deliver to the Lead
Purchaser, the Significant Purchasers or the Purchasers (as set forth below),
such other instruments, certificates, agreements and documents and take such
other action and do all other things as may be reasonably requested (i) prior to
a Preferred Stock Failure Event, by the Lead Purchaser or any Significant
Purchaser, and (ii) after a Preferred Stock Failure Event, by the Lead
Purchaser, any Significant Purchaser or the holders of a majority of the
Securities, in order to implement or effectuate the terms and provisions of this
Agreement and the other Transaction Documents (including, without limitation,
the consummation of the Vanguard Exchange and the CTP Exchange).
5.10 ACCOUNTS AND RECORDS. The Company will, will cause each
--------------------
of its Subsidiaries to, and will use commercially reasonable efforts to cause
each Operating Company to, keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs.
5.11 RESERVATION OF SHARES. The Company shall at all times
---------------------
keep reserved and available for issuance the number of shares of Common Stock
for issuance upon conversion of all of the Securities (as such number may be
adjusted from time to time pursuant to the terms of the Certificate of
Incorporation).
5.12 INVESTMENT COMPANY ACT OF 1940. The Company will (i) at
------------------------------
all times prior to the first anniversary of the Initial Closing Date, conduct
the nature of its activities so that the Company would be not be considered an
"investment company" within the meaning of such term set forth in Section
3(a)(3) of the 1940 Act, and (ii) at all times after the first anniversary of
the Initial Closing Date, conduct the nature of its activities so that, without
the exemption set forth in Section 3(c)(1) of the 1940 Act, the Company would be
not be considered an "investment company" within the meaning of such term set
forth in Section 3(a)(3) of the 1940 Act.
6. NEGATIVE COVENANTS.
------------------
The Company hereby covenants from and after the date of this Agreement
through the Closings and thereafter so long as any Securities remain outstanding
as follows:
6.1 LIMITATION ON DEBT. (A) Except as set forth in an
------------------
Extraordinarily Approved Business Plan, the Company covenants that it will not,
and it will not permit any of its Subsidiaries which are not Operating Companies
to, create, incur, assume, suffer to exist or otherwise become or be liable with
respect to any Debt (i) except the existing Debt set forth on Schedule 6.1
------------
hereto; provided, however, that as such Debt is refinanced or
-------- -------
13
<PAGE>
repaid, the Company or such Subsidiary may incur additional Debt to the extent
that such existing Debt and such additional Debt does not exceed at any one time
an aggregate of $40,000,000, (ii) in excess of an additional $100,000, except
for such Debt which has been discussed and approved by a majority of the Board
of Directors of the Company, and (iii) in excess of an additional $5,000,000 in
the aggregate, except with Extraordinary Board Action. (B) Except as set forth
in an Extraordinarily Approved Business Plan, the Company covenants that it will
not permit any of its Subsidiaries which are Material Operating Companies to,
create, incur, assume, suffer to exist or otherwise become or be liable with
respect to any Debt (i) except Debt existing as of the Initial Closing Date, and
(ii) in excess of an additional $500,000 in the aggregate, except with
Extraordinary Board Action.
6.2 LIMITATION ON LIENS. Except as set forth in an Approved
-------------------
Business Plan or with Special Board Action, the Company covenants that it will
not, and will not permit any of its Subsidiaries which are not Operating
Companies to, directly or indirectly, create, incur, assume or permit to exist
any material Lien on or with respect to any of its property or assets, whether
now owned or hereafter acquired.
6.3 LIMITATION ON RESTRICTED PAYMENTS. The Company covenants
---------------------------------
that it will not, and will not permit any of its Subsidiaries to, directly or
indirectly, pay or declare or set apart for payment any Restricted Payment.
6.4 LIMITATION ON INVESTMENTS. Except as set forth in an
-------------------------
Approved Business Plan or with Special Board Action, the Company covenants that
it will not, and will not permit any of its Subsidiaries to, make or obligate
itself to make, directly or indirectly, any Investment.
6.5 TRANSACTIONS WITH AFFILIATES. The Company covenants that
----------------------------
it will not, and will not permit any of its Subsidiaries to, directly or
indirectly, purchase, acquire or lease any property to, or otherwise deal with,
in the ordinary course of business or otherwise, any Affiliate of the Company
except (i) as set forth on Schedule 6.5 hereto, (ii) transactions approved by
------------
the holders of at least 75% of the outstanding Securities (excluding the Series
F-2 Preferred Stock), (iii) transactions approved with Super Majority Board
Action, (iv) reasonable, customary and regular fees to the non-management
directors of the Company or any of its Subsidiaries, (v) any transaction among
the Company and its Wholly-Owned Subsidiaries or among such Subsidiaries in the
ordinary course of their respective businesses, (v) the Vanguard Exchange and
the CTP Exchange, or (vi) reimbursement of arms-length out-of-pocket and per
diem expenses of an Affiliate incurred in the ordinary course of providing
services to the Company or such Subsidiary; provided, however, that such
-------- -------
reimbursement of expenses shall not exceed $75,000 in any fiscal year unless
such reimbursements are otherwise approved by Super Majority Board Action.
6.6 MERGER, CONSOLIDATION, ACQUISITION OR SALE OF ASSETS. The
----------------------------------------------------
Company covenants that it shall not, and will not permit any of its Subsidiaries
to, be a party to any merger or consolidation with any Person, or acquire all or
substantially all of the assets of any Person, or sell, lease or transfer or
otherwise dispose of all or substantially all of
14
<PAGE>
its assets to any Person, except (i) that any Wholly-Owned Subsidiary of the
Company may merge into the Company or another Wholly-Owned Subsidiary of the
Company if the Company or such other Wholly-Owned Subsidiary, as the case may
be, shall be the surviving corporation, and if, immediately after giving effect
to such transaction, no condition or event shall exist which constitutes a
Preferred Stock Failure Event or Preferred Stock Failure, (ii) that any
Subsidiary of the Company may sell, lease, transfer or otherwise dispose of any
of its assets to the Company or to any other Wholly-Owned Subsidiary of the
Company, whether by dissolution, liquidation or otherwise, or (iii) for any
merger, consolidation, acquisition, sale, lease, transfer or other disposition
which has been approved by Super Majority Board Action.
6.7 SALES OF ASSETS. Except for any Subsidiary of the Company
---------------
selling or leasing its assets in the manner described in Section 6.6(ii) hereof,
the Company covenants that it will not, and will not permit any of its
Subsidiaries to, sell, lease, transfer or otherwise dispose of, in a single
transaction or a series of related transactions, any asset, directly or through
the sale of Capital Stock or other equity of a Subsidiary of the Company to any
Person in excess of $500,000 in any fiscal year, other than (a) sales of
obsolete equipment and equipment to be replaced in accordance with the capital
budget or (b) any sale, lease, transfer or other disposition which has been
approved by Super Majority Board Action.
6.8 ANNUAL BUDGET; CAPITAL EXPENDITURES. (A) The Company
-----------------------------------
covenants that it will submit an annual operating and capital expenditure budget
of the Company and its Subsidiaries when and as prepared, setting forth, on a
consolidated basis, the aggregate expenditures for capital assets and lease
expenses expected to be made by the Company and its Subsidiaries during the
fiscal year to which such budget relates, and any subsequent material
modifications thereto, to the Board of Directors and promptly deliver a copy of
the approved budgets to holders of the Securities. For purposes of this Section
6.8(A), the level of detail provided with respect to Subsidiaries which are
Operating Companies shall be the same level of detail that is provided by the
Company regarding the Company's proposed investments in Material Operating
Companies. (B) Except as set forth in an Approved Business Plan or with Special
Board Action, the Company covenants that it will not make Capital Expenditures
during any fiscal year in excess of $200,000.
6.9 NO AMENDMENT OF CERTAIN DOCUMENTS. The Company covenants
---------------------------------
that, without the prior written consent of the holders of at least 75% of the
outstanding Securities (excluding the Series F-2 Preferred Stock), it will not
permit any amendment of, or modification or supplement to the Certificates of
Incorporation or By-laws of the Company or any of its Subsidiaries, that would
have or would likely result in an adverse impact on the rights of the holders of
the Securities; provided, however, that with respect to a Subsidiary which is
-------- -------
also an Operating Company, such Subsidiary shall not be precluded from taking
such actions with Persons who are not Affiliates of it or the Company to the
same extent as if such Subsidiary had not been a Subsidiary.
6.10 CHANGE IN BUSINESS. Except with Super Majority Board
------------------
Action, neither the Company nor any of its Subsidiaries will enter into or
engage in any type of
15
<PAGE>
business other than forming, acquiring ownership interests in and providing
services to wireless communications businesses.
6.11 EXECUTIVE OFFICERS; BOARD OF DIRECTORS. (A) The Company
--------------------------------------
covenants that (i) if at any one time any of John D. Lockton, Hugh B. L.
McClung, or Douglas S. Sinclair shall cease to serve as an executive officer of
the Company, the Company will, within 180 days of such individual's ceasing to
serve as an executive officer, fill such individual's position or have such
individual's responsibilities assumed by an individual with comparable stature,
reputation and experience in the industry as the individual ceasing to serve and
who has been approved by Super Majority Board Action. (B) The Company covenants
that it will not change the number of directors of its Board of Directors or the
number of directors, including the number of designees, that the various
preferred stockholders are entitled to elect under the Certificate of
Incorporation of the Company, except, in each case, with the prior written
consent of the holders of at least 75% of the outstanding Securities (excluding
the Series F-2 Preferred Stock).
6.12 WITHHOLDING TAXES. (A) The Company covenants that it will
-----------------
not withhold United States withholding taxes from payments to be made to holders
of the Securities if such holders (i) are corporations organized under the laws
of a jurisdiction outside the United States or are otherwise persons not
resident in the United States for United States federal income tax purposes, and
(ii) provide the Company, upon the Company's reasonable request, with one or
more of Internal Revenue Service Form W-8, Form 4224 or other applicable forms,
certificates or documents certifying as to entitlement to an exemption from any
such withholding requirements.
(B) The Company covenants that it will not withhold United States
withholding taxes from payments to be made to holders of the Securities in
excess of an applicable treaty rate if such holders (i) are corporations
organized under the laws of a jurisdiction outside the United States or are
otherwise persons not resident in the United States for United States federal
income tax purposes, and (ii) provide the Company, upon the Company's reasonable
request, with one or more of certifications of their residence address, Internal
Revenue Service Form 1001 or other applicable forms, certificates or documents
certifying as to entitlement to a reduced rate of withholding under any such
withholding requirements.
(C) Neither Section 6.12(a) nor Section 6.12(b) hereof shall require
the Company to apply an exemption or reduced rate of withholding during any
period when it shall have received notice or has knowledge (i) that the
residence information previously provided on any applicable form, certificate or
document is incorrect and no corrected form, certificate or document as
applicable has been provided to the Company, or (ii) of any other information
which would render such exemption or reduced rate inapplicable.
6.13 NO PLEDGE OF SHARES. The Company covenants that it will
-------------------
not, without the prior written consent of the holders of at least 75% of the
outstanding Securities (excluding the Series F-2 Preferred Stock), mortgage,
pledge, hypothecate or create or permit to
16
<PAGE>
exist any security interest in, or Lien on, any of the Capital Stock of its
Subsidiaries, except (i) in the ordinary course of business in connection with
the securing of financing for a Project, or (ii) as set forth in an Approved
Business Plan.
6.14 CHANGE IN CONTROL. Except with (i) Extraordinary Board
-----------------
Action or (ii) the prior written consent of the holders of more than 80% of the
outstanding Securities (excluding the Series F-2 Preferred Stock), prior to the
effective date of an Initial Public Offering, there shall not occur a Change in
Control.
6.15 SALE OF EQUITY SECURITIES. The Company covenants that it
-------------------------
will not, and will not permit any of its Subsidiaries to, without the prior
written consent of the holders of at least 75% of the outstanding Securities
(excluding the Series F-2 Preferred Stock), (i) sell or otherwise dispose of, or
part with control of, any Capital Stock of the Company on a parity with or
senior to the Securities, (ii) sell any of its Capital Stock in a public
offering of securities registered pursuant to Section 5 of the Securities Act,
unless such offering shall meet the thresholds and requirements set forth in the
definition of "Initial Public Offering" herein, (iii) sell or otherwise issue
any shares of Common Stock to be issued under or pursuant to the existing stock
option plan or similar type arrangements for the benefit of the officers,
directors and employees of and consultants to the Company, other than 50,000
shares of Common Stock (as appropriately adjusted for any stock dividends,
contributions, splits or the like with respect to such shares) to be issued for
the primary purpose of soliciting or retaining their services, or (iv) sell any
of its Capital Stock of a Subsidiary, unless such Subsidiary is an Operating
Company and such sale is (a) in connection with a public offering of such
securities, or (b) to a strategic partner, other than an Affiliate of the
Company or such Subsidiary, in connection with a Project.
6.16 FISCAL YEAR; CHANGE IN ACCOUNTING PRACTICES. Except as set
-------------------------------------------
forth in an Approved any of its Subsidiaries shall change its fiscal year for
accounting or tax purposes from a period consisting of the 12-month period
ending on December 31 of each calendar year, other than Singapore Wireless
Corporation which has a June 30 year end. Other than in compliance with required
changes in GAAP and except as set forth in an Approved Business Plan or with
Special Board Action, the Company covenants that it will not, and will not
permit any of its Subsidiaries to, change the accounting practices which have
been consistently applied.
7. PREFERRED STOCK FAILURE EVENTS.
------------------------------
7.1 PREFERRED STOCK FAILURE EVENTS. If any of the following
------------------------------
events shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(i) the Company breaches any material term of its Certificate
of Incorporation, which, if capable of being cured, is not cured within 10 days
of the occurrence of such breach; or
17
<PAGE>
(ii) any representation or warranty made in writing by the
Company in this Agreement, the Disclosure Documents or in any writing furnished
to the Purchasers pursuant to this Agreement or the Transaction Documents, shall
be false or misleading in any material respect on the date as of which made; or
(iii) the Company fails to perform or observe any agreement,
term or condition contained in this Agreement or in any other Transaction
Document (other than the Certificate of Incorporation as provided in clause (i)
above), and, if such failure is capable of being remedied, such failure shall
not have been remedied within 30 days after such failure shall first have become
known to any officer of the Company or written notice shall have been received
by the Company (regardless of the source of such notice); or
(iv) Any Plan (or any employee benefit Plan of any entity
which is in the same controlled group of corporations as the Company or any
Subsidiary (the "Related Plans")) which is subject to ERISA or the Code shall
have incurred an "accumulated funding deficiency" within the meaning of Section
412 of the Code or Section 302 of ERISA, or any lien shall arise with respect to
any such Plan or any such Related Plan under Section 412(n) of the Code, which
in either case results in the imposition of liability on the Company or any
Subsidiary in an amount in excess of $100,000; or
(v) the Company, any of its Subsidiaries or any Material
Operating Company makes an assignment for the benefit of creditors or is
generally not paying its debts as such debts become due; or any order or decree
for relief in respect of the Company, any of its Subsidiaries or any Material
Operating Company is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect (herein called the "Bankruptcy
Law"), of any jurisdiction; or the Company, any of its Subsidiaries or any
Material Operating Company petitions or applies to any tribunal for, or consents
to, the appointment of, or taking possession by, a trustee, receiver, custodian,
liquidator or similar official of the Company, any of its Subsidiaries or any
Material Operating Company, or of any Substantial Part of the assets of the
Company, any of its Subsidiaries or any Material Operating Company, or commences
a voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to the Company or any of its Subsidiaries under the
Bankruptcy Law of any other jurisdiction; provided, however, that in each case
-------- -------
such action relating to a Subsidiary or a Material Operating Company would have
or would likely result in a Material Adverse Effect; or
(vi) any such petition or application is filed, or any such
proceedings are commenced, against the Company, any of its Subsidiaries or any
Material Operating Company and such petition, application or proceeding is
unstayed or undismissed within 30 days, or any such petition or application is
filed, or any such proceedings are commenced against the Company, any of its
Subsidiaries or any Material Operating Company and the Company, such Subsidiary
or such Material Operating Company by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for
18
<PAGE>
more than 30 days; provided, however, that in each case such action relating to
-------- -------
a Subsidiary or a Material Operating Company would have or would likely result
in a Material Adverse Effect; or
(vii) any order, judgment or decree is entered in any
proceedings against the Company, any of its Subsidiaries or any Material
Operating Company decreeing the dissolution of the Company, such Subsidiary or
such Material Operating Company, a split-up of the Company, such Subsidiary or
any Material Operating Company which requires the divestiture of a Substantial
Part, or the divestiture of the stock of the Company, its Subsidiary or any
Material Operating Company, as the case may be, the assets of which constitute a
Substantial Part, of the assets of the Company and its Subsidiaries or any
Material Operating Company, and such order, judgment or decree remains unstayed
and in effect for more than 30 days; provided, however, that in each case such
-------- -------
action relating to a Subsidiary or a Material Operating Company would have or
would likely result in a Material Adverse Effect; or
(viii) a judgment, in any one or series of related actions, in
an amount in excess of (a) $100,000 is rendered against the Company and/or any
of its Subsidiaries which are not Operating Companies, and (b) $500,000 is
rendered against any Material Operating Company (whether a Subsidiary or
otherwise) and, in each case, within 30 days after entry thereof, such judgment
is not discharged or execution thereof stayed pending appeal, or within 30 days
after the expiration of any such stay, such judgment is not discharged;
provided, however, that in each case such action or series of related actions
- -------- -------
relating to a Subsidiary or a Material Operating Company would have or would
likely result in a Material Adverse Effect; or
(ix) the Company or any Material Operating Company fails to
(a) pay all or any portion of any Debt when due (whether by stated maturity,
required prepayment, acceleration, demand or otherwise) after the expiration of
any applicable grace periods, or (b) perform or observe any term, covenant or
condition to be performed on its part or to be observed under any agreement or
instrument relating to any such Debt, when required to be performed or observed,
in each case, the effect of which is that the lender accelerates the Debt and,
in the case of a Material Operating Company, forecloses on the assets of any
Material Project (except to the extent that the Material Operating Company is
contesting in Good Faith in appropriate proceedings the existence of any such
default and has stayed the foreclosure actions on its assets and appropriate
reserves, in accordance with GAAP, have been established in respect of such
default); provided, however, that such acceleration and foreclosure would have
-------- -------
or would likely result in a Material Adverse Effect; or
(x) (a) there shall occur a cessation of a Substantial Part
of the business of the Company and/or any of its Subsidiaries and/or any
Material Operating Company for a period which significantly affects the
Company's and/or any of its Subsidiaries' and/or any Material Operating
Company's capacity to continue their respective businesses; provided, however,
-------- -------
that such cessation or loss would have or would likely result in a Material
Adverse Effect, or (b) the Company, any Subsidiary or any Material Operating
Company shall suffer the loss or revocation of any material license or Permit
now held or hereafter acquired by the Company, any Subsidiary or any Material
Operating Company which is necessary to the continued or lawful operation of a
Substantial Part of their respective businesses; provided,
--------
19
<PAGE>
however, that such loss would have or would likely result in a Material Adverse
- -------
Effect; or (c) the Company, any Subsidiary or any Material Operating Company
shall be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of their
respective business affairs for a period of 30 days;
then the holders of a majority of the Securities then outstanding (excluding the
Series F-2 Preferred Stock) may, at any time, by written demand to the Company,
cause the Company to increase the size of its Board of Directors and allow the
holders of the Securities (excluding the Series F-2 Preferred Stock) to elect an
additional director to the Board of Directors in the manner set forth in Section
V.B.5 of the Certificate of Incorporation until such time as the Securities are
redeemed in full. Notwithstanding the foregoing, the holders of the Securities
may only elect a single additional director to the Board of Directors of the
Company pursuant to this Section 7.1.
7.2 OTHER REMEDIES. No remedy conferred in this Agreement upon
--------------
the holder of any Securities is intended to be exclusive of any other remedy
available to such holder, and each and every such remedy shall be cumulative
and shall be in addition to every other remedy conferred herein or now or
hereafter existing at law or in equity or by statute or otherwise, provided
that any action for Damages shall be subject to the provisions of Section
11.2(b) hereof.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
-----------------------------------------
The Company hereby represents, covenants and warrants for the benefit
of each holder from time to time of the Securities and the Purchasers, as of the
Initial Closing and after giving effect to the transactions contemplated by this
Agreement and the other Transaction Documents (including, without limitation,
the consummation of the Vanguard Exchange and the CTP Exchange), as follows:
8.1 ORGANIZATION; AUTHORITY. The Company and, except as set
-----------------------
forth on Schedule 8.1 hereto, each of its Subsidiaries and the Operating
------------
Companies is a corporation or entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite corporate and other power and authority to
own or lease and operate its properties and to carry on its business as
presently conducted and as proposed to be conducted after the Initial Closing.
Each of the Company, its Subsidiaries and the Operating Companies is duly
qualified and in good standing as a foreign corporation or entity duly
authorized to do business in each jurisdiction where it owns or leases property
or in which the conduct of its existing business or its business as of the
Initial Closing Date requires it so to qualify or be licensed, except in those
jurisdictions in which the failure to qualify will not individually or in the
aggregate have a Material Adverse Effect. Schedule 8.1 hereto sets forth each
------------
jurisdiction where the Company, each of its Subsidiaries and each
Operating Company is qualified or licensed to do business. Other than as listed
on Schedule 8.1 hereto, the Company has no Subsidiaries and does not
------------
own of record or beneficially any Capital Stock or equity interest or Investment
in any corporation, association, partnership, joint venture or other entity. The
Company has furnished the Purchasers with true, correct and complete copies
20
<PAGE>
of the Certificate of Incorporation and By-laws, each as amended to date, of
itself, its Subsidiaries and each Operating Company.
8.2 AUTHORIZATION. All corporate action on the part of the
-------------
Company and its directors and stockholders necessary for the authorization,
execution, delivery and performance by (i) the Company of this Agreement, the
certificates evidencing the Securities and the other Transaction Documents, and
(ii) the consummation of the transactions contemplated herein and therein
(including, without limitation, the consummation of the Vanguard Exchange and
the CTP Exchange) shall have been taken or will be taken prior to the Initial
Closing. Each of the Transaction Documents to which the Company is a party is
the legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability. The execution, delivery and performance by the Company of each
Transaction Document to which it is a party and compliance therewith and the
issuance and sale of the shares of Securities and the Capital Stock to be issued
in connection with the Vanguard Exchange and the CTP Exchange will not result in
any violation of and will not (i) conflict with, or result in a breach of, any
of the terms of, or constitute a default under, (a) any provision of federal,
state, local or foreign law to which the Company is subject, (b) the Company's
Certificate of Incorporation or By-laws, or (c) any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation, or other
restriction to which the Company is a party or by which it is bound, or (ii)
result in the creation of any Lien upon any of the properties or assets of the
Company pursuant to any such term, or (iii) result in the suspension,
revocation, impairment, forfeiture or non-renewal of any Permit, license,
authorization or approval applicable to the Company's operations or any of its
assets or properties. Except as set forth in the Certificate of Incorporation,
the Investor Rights Agreement or Schedule 8.2 hereto, no stockholder has any
------------
preemptive rights or rights of first refusal by reason of the issuance of the
Securities or the Capital Stock to be issued in connection with the Vanguard
Exchange and the CTP Exchange. The shares of the Securities and the Capital
Stock to be issued in connection with the Vanguard Exchange and the CTP Exchange
have been duly and validly issued and are fully paid and non-assessable. The
shares of Common Stock issuable upon conversion of the Securities, have, in each
case, been duly and validly reserved and are not subject to any preemptive
rights or rights of first refusal and, upon issuance, will be validly issued,
fully paid and non-assessable.
8.3 CAPITAL STOCK AND RELATED MATTERS. At the time of the
---------------------------------
Initial Closing and after giving effect to the transactions contemplated by this
Agreement, (i) the authorized capital stock of the Company will consist of (a)
650,000 shares of Common Stock, par value $.01 per share, of which 1,902 shares
will be issued and outstanding, (b) 550,000 shares of Preferred Stock, par value
$.01 per share, of which (I) 30,000 shares of Series A Preferred Stock, par
value $.01 per share, of which 30,000 shares will be issued and outstanding,
(II) 30,731 shares of Series B Preferred Stock, par value $.01 per share, of
which 30,731 shares will be issued and outstanding, (III) 61,500 shares of
Series C Preferred Stock, par value $.01 per share, of which 44,057 shares will
be issued and outstanding, (IV) 145,000 shares
21
<PAGE>
of Series D Preferred Stock, par value $.01 per share, of which 84,450 shares
will be issued and outstanding, (V) 99,306 shares of Series E Preferred Stock,
par value $.01 per share, of which 99,306 shares will be issued to Vanguard and
outstanding, (VI) 175,000 shares of Series F-1 Preferred Stock, par value $.01
per share, of which 112,000 shares will be issued to the Purchasers set forth on
Schedule 1 hereto and outstanding at the Initial Closing, and (VII) 27,000
- ----------
shares of Series F-2 Preferred Stock, par value $.01 per share, of which 21,200
shares will be issued to Toronto Dominion Investments, Inc. and outstanding;
(ii) no shares of Common Stock will be owned or held by or for the account of
the Company; (iii) all of the outstanding Capital Stock (including without
limitation the Securities) will be validly issued and outstanding, fully paid
and non-assessable and will be owned of record and, to the knowledge of the
Company, beneficially, by the individuals and entities and in the amounts set
forth on Schedule 1 and Schedule 8.3 hereto; (iv) except as set forth in the
---------- ------------
Certificate of Incorporation, the Investor Rights Agreement, the Registration
Rights Agreement or as set forth on Schedule 8.3 hereto, the Company has no, and
------------
at the time of the Initial Closing will not have, outstanding stock or
securities convertible into or exchangeable for any of its Capital Stock, or any
outstanding rights (either preemptive or other) to subscribe for or to purchase,
or any outstanding options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any outstanding calls, commitments
or claims of any character relating to, any Capital Stock or any securities
convertible into or exchangeable for any Capital Stock of the Company, or any
outstanding demand or piggyback registration rights to register any Capital
Stock or any securities convertible into or exchangeable for the Capital Stock
of the Company; (v) except as disclosed in this Agreement, the Certificate of
Incorporation, the Investor Rights Agreement or as set forth on Schedule 8.3
------------
hereto, the Company will not be subject to any obligation (contingent or other)
to repurchase, otherwise acquire or retire any Capital Stock; and (vi) the
Company has no knowledge of any agreement restricting the transfer of any shares
of the Company's Capital Stock, except as set forth in this Agreement, the
Investor Rights Agreement or as set forth on Schedule 8.3 hereto. Schedule 8.3
------------ ------------
hereto sets forth the number of shares, warrants and other rights to acquire
Capital Stock, the holders thereof, and the percentage held by each holder of
the issued and outstanding Capital Stock of the Company, each Subsidiary and
each Operating Company at the time of the Initial Closing and after giving
effect to the transactions contemplated by this Agreement.
8.4 LITIGATION. Except as disclosed on Schedule 8.4 hereto,
---------- ------------
there is no action, suit, investigation or proceeding pending, or, to the
Company's knowledge threatened, or any basis therefor which the Company believes
is likely to be asserted, or threat thereof, in, nor is there any existing
judgment, order or decree of, any court, Governmental Authority, arbitration
board or tribunal, foreign or domestic to which the Company, any of its
Subsidiaries or any Operating Company is or may be named as a party or its
property is or may be subject, or which seeks to enjoin or contests the validity
of this Agreement, any of the Transaction Documents, any of the transactions
contemplated hereby or thereby (including, without limitation, the consummation
of the Vanguard Exchange and the CTP Exchange), or which seeks to enjoin the
operation of any Project or related Contract, or to the Company's knowledge, to
which any executive officer, executive director, executive employee or
stockholder of the Company, any of its Subsidiaries or of any Material Operating
Company (in
22
<PAGE>
each case solely in their capacity as an officer, director, employee or
stockholder of such entity) is subject; and the Company has no knowledge of any
unasserted claim, the assertion of which the Company believes is likely and
which, if asserted, would result or would likely result in damages, an
injunction or other legal, equitable, monetary or nonmonetary relief, which
claim individually or collectively with other such unasserted claims, if
granted, or actions, suits, investigations or proceedings would have or would
likely result in a Material Adverse Effect or which challenges this Agreement,
any of the other Transaction Documents, any Project or any of the transactions
contemplated hereby or thereby (including, without limitation, the consummation
of the Vanguard Exchange and the CTP Exchange).
8.5 COMPLIANCE. (a) Neither the Company, any Subsidiary nor
----------
any Operating Company is in violation of any statute, law, ordinance,
governmental rule or regulation (including environmental laws) or any judgment,
order or decree (federal, state, local or foreign) to which it is subject, nor
has it failed to obtain any, and it possesses all, licenses, Permits,
franchises, Intellectual Property or other governmental authorizations necessary
for the ownership or operation of its properties or the conduct of its business
as presently conducted and as proposed to be conducted.
(b) Neither the Company, any Subsidiary nor any Operating
Company is in violation of any term of its Certificate of Incorporation, as
amended, or By-laws, as amended.
(c) Neither the Company, any Subsidiary nor any Operating
Company is in violation of any term of any Contract, judgment, decree, order,
statute, rule or regulation to which either the Company, any Subsidiary or any
Operating Company is subject or which would permit any party to any Contract to
terminate, amend or modify such Contract. To the Company's knowledge, neither
the Company, any Subsidiary nor any Operating Company has waived any right or
default by any party under any Contract. All Contracts are in full force and
effect, and the Company, its Subsidiaries and the Operating Companies each have
no knowledge that any party to any Contract, or any parties to any Contract is
or is seeking or presently intends to seek to (i) terminate, amend or modify
such Contract or (ii) upon the expiration of such Contract, not renew such
Contract on terms substantially similar to those terms currently in such
Contract.
(d) No legislation, order, rule, ruling or regulation has
been enacted or made by or on behalf of any United States or foreign
governmental body, department or agency, nor to the Company's knowledge has
there been any legislation introduced and favorably reported for passage to, in
the United States, either House of Congress, by any committee of either such
House to which such legislation has been referred for consideration, any state
legislature in any jurisdiction in which the Company, any of its Subsidiaries or
any Operating Company operate or by any committee of such legislature to which
such legislation has been referred for consideration or, in any other country,
any legislative body, committee or instrumentality thereof, nor to the Company's
knowledge shall any decision of any court of competent jurisdiction within the
United States or any applicable foreign jurisdiction have been rendered which
would have or would likely result in a Material Adverse Effect. There shall be
no
23
<PAGE>
action, suit, investigation, or proceeding pending, or to the Company's
knowledge, threatened, against or affecting the Company, any of its Subsidiaries
or any Operating Company, the Company's, such Subsidiaries' or such Operating
Company's properties or rights, or any of the Company's, such Subsidiaries' or
such Operating Company's Affiliates, officers or directors, before any court,
arbitrator or administrative or governmental body which (i) seeks to restrain,
enjoin, prevent the consummation of or otherwise affect the transactions
contemplated by this Agreement or the other Transaction Documents, any of the
Projects or the consummation of the Vanguard Exchange and the CTP Exchange, (ii)
questions the validity or legality of any such transactions or seeks to recover
damages or to obtain other relief in connection with any such transactions, and,
to the Company's knowledge, there is no valid basis for any such action,
proceeding or investigation.
8.6 OFFERING. (i) Based upon the representations and
--------
warranties of the Purchasers set forth in Section 9 hereof, the offer, sale and
issuance of the shares of Securities and the shares of Common Stock issuable
upon the conversion of the Securities, and (ii) the consummation of the Vanguard
Exchange and the CTP Exchange and the related offer, sale and issuance of the
Capital Stock of the Company and the shares of Common Stock issuable upon the
conversion of any such Capital Stock, are, in each case, all exempt from the
registration requirements of the Securities Act and from the registration or
qualification requirements of the laws of any applicable state or other
jurisdiction, and neither the Company nor anyone acting on its behalf will take
any action hereafter that would or would likely cause the loss of such
exemption. Schedule 5.7 hereto is a true, complete and accurate list of intended
------------
use of proceeds by the Company from the offer, sale and issuance of the
Securities.
8.7 ERISA AND LABOR RELATIONS. (a) Except for the Company's
-------------------------
1994 Stock Option/Stock Issuance Plan and as set forth on Schedule 8.7 hereto,
------------
the Company, its Subsidiaries and, to the knowledge of the Company, the
Operating Companies do not have, and have not had, any employee bonus,
retirement, pension, profit sharing, savings, stock option, stock appreciation,
stock purchase, incentive, deferred compensation (whether provided by insurance
or otherwise), severance, termination or other similar plan, policy or program
of the Company, each Subsidiary and, to the knowledge of the Company, each
Operating Company, including, without limitation, any collective bargaining
agreement involving direct or indirect compensation (the "Employee Benefit
Plans"), including, without limitation, each "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (without regard to any applicable
exception from ERISA), each employee welfare benefit plan as defined in Section
3(1) of ERISA (without regard to any applicable exception from ERISA).
(b) Except as set forth in this Agreement, neither the
execution and delivery of this Agreement or the other Transaction Documents nor
the consummation of the transactions contemplated hereby or thereby (including,
without limitation, the consummation of the Vanguard Exchange and the CTP
Exchange) will (i) result in any payment to be made by the Company or any
Subsidiary (including, without limitation, severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any employee under any Employee
Benefit Plan or otherwise or (ii) increase any benefits otherwise payable under
any Employee Benefit Plan. No benefit payable or which may become payable by the
Company or
24
<PAGE>
any Subsidiary pursuant to any Employee Benefit Plan shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(l) of the Code) which is
subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code.
(c) The Company, each Subsidiary and, to the knowledge of
the Company, each Operating Company have no obligation to provide any employee
welfare benefits to retirees, including, without limitation, any medical and
life insurance benefits.
(d) (i) There are no discrimination charges (relating to
sex, age, race, national origin, handicap or veteran status or otherwise)
pending or, to the Company's knowledge, threatened, against, or involving the
Company, any Subsidiary or, to the knowledge of the Company, any Operating
Company; (ii) except as disclosed on Schedule 8.4 hereto, to the Company's
------------
knowledge, there are no grievances or disputes between the Company or
any Subsidiary and any employee; (iii) neither the Company, any Subsidiary nor,
to the knowledge of the Company, any Operating Company is delinquent in payments
to any employees for any wages, salaries, commissions, bonuses, benefits or
other direct or indirect compensation for any services performed by them, except
where the delinquency does not cause, and would not result in or would not be
likely to result in, a Material Adverse Effect; (iv) the Company, each
Subsidiary and, to the knowledge of the Company, each Operating Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment, wages, hours and benefits, except where the
failure to so comply does not cause, and is not likely to result in, a Material
Adverse Effect; (v) there is no unfair labor practice with respect to the
Company, any Subsidiary or, to the knowledge of the Company, any Operating
Company pending before the National Labor Relations Board or any comparable
state, local or foreign agency; (vi) there is no labor strike, dispute, slowdown
or stoppage actually pending or, to the Company's knowledge, threatened, against
or involving the Company, any Subsidiary or, to the knowledge of the Company,
any Operating Company; (vii) to the Company's knowledge, no labor organization
activities have occurred with respect to employees of any Subsidiaries or, to
the knowledge of the Company, any Operating Company during the past three (3)
years, and there are no collective bargaining agreements binding on the Company,
any Subsidiary or any Operating Company relating the operation of any Project.
8.8 FINANCIAL STATEMENTS; MATERIAL FACTS. (A) The Company has
------------------------------------
furnished the Purchasers with true, correct and complete copies of (i) the
audited consolidated financial statements of the Company for the years ended
December 31, 1994 and December 31, 1993 (the "Audited Financials") (ii) to the
------------------
extent available, the unaudited financial statements of the Company for each of
the months prior to the Initial Closing since December 31, 1994 (the "Interim
-------
Financials"), (iii) the pro forma consolidated balance sheet of the Company and
- ----------
its Subsidiaries as of the Initial Closing Date after giving effect to the
transactions contemplated hereby and under the Transaction Documents (including,
without limitation, the consummation of the Vanguard Exchange and the CTP
Exchange), (iv) the proposed annual operating and capital budget for the Company
and its Subsidiaries for the fiscal year ending December 31, 1995 (the
statements referred to in clauses (i) through (iv) collectively, referred to
herein as the "Financials") and (v) the financial projections contained in the
----------
Memorandum (the
25
<PAGE>
"Projections"). The Financials and the Projections, are herein collectively
-----------
called the "Financial Disclosure Documents." The Financials (a) in the case of
------------------------------
the Audited Financials and the Interim Financials, have been prepared in
conformity in all material respects with GAAP (and with respect to historical
interim periods subject only to normal year-end adjustments consistent with past
practices), except to the extent specifically identified in the Interim
Financials, (b) in the case of the Audited Financials and the Interim
Financials, disclose all liabilities, direct and contingent, required to be
shown in accordance with such principles, except to the extent specifically
identified in the Interim Financials, and (c) accurately reflect the financial
position of the respective companies at the dates indicated and results of
operations for the periods indicated. In the opinion of the Company, the
Projections reflect the reasonable estimates of the Company on the date made
and on the date hereof of the results of operations and other information
projected therein, and were prepared in Good Faith in accordance with
substantially the same accounting principles, standards and assumptions with
respect to which the Financials have been prepared (except to the extent
specifically identified in the Projections), and on estimates, information and
assumptions which are reasonable in light of current conditions on the date made
and on the date hereof. (B) The Financial Disclosure Documents, this Agreement
and the other Transaction Documents do not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein and herein, in light of the circumstances under which they
were made, not misleading.
8.9 OUTSTANDING DEBT. Except as set forth on Schedule 6.1
---------------- ------------
hereto, after giving effect to the transactions contemplated herein (including,
without limitation, the Vanguard Exchange and the CTP Exchange), the Company and
its Subsidiaries do not have any outstanding secured or unsecured Debt or
commitments for any such Debt, other than with respect to the Bridge Notes which
will be exchanged for certain Securities, as specified on Schedule 1 hereto, on
----------
the Initial Closing Date.
8.10 TAXES. (A) The Company, its Subsidiaries and each
-----
Operating Company have each timely filed such federal, state, foreign and other
tax returns required by law to be filed by it, and all Taxes, assessments and
other governmental charges which are due and payable, other than those presently
payable without penalty or interest, have been timely paid. All Taxes,
assessments and other governmental charges which are presently payable without
penalty or interest have been adequately reserved for in accordance with GAAP.
There are no tax liens upon any properties or assets of the Company or any
Subsidiary.
(B) All such tax reports or returns fairly reflect the Taxes of the
Company and its Subsidiaries for the periods covered thereby. Neither the
Company, any Subsidiary nor any Operating Company is delinquent in the payment
of any Taxes, assessments or governmental charges, there are no tax deficiencies
or delinquencies asserted against the Company, its Subsidiaries and any
Operating Company, and, except as provided above, there are no unpaid
assessments, proposals for additional Taxes, deficiencies or delinquencies in
the payment of any of the Taxes of the Company, its Subsidiaries and any
Operating Company or any violations of any federal, state, local or foreign tax
laws that could be asserted by any taxing authority. No Internal Revenue Service
audit of the Company and its Subsidiaries is pending or, to the knowledge of the
Company and its Subsidiaries, threatened, and the results of any completed
26
<PAGE>
audits are properly reflected in the financial statements. Neither the Company,
its Subsidiaries nor any Operating Company have granted any extension to any
taxing authority of the limitation period during which any tax liability may be
asserted. Neither the Company, its Subsidiaries nor any Operating Company have
committed any violation of any federal, state, local or foreign tax laws. All
monies required to be withheld by the Company, its Subsidiaries or any Operating
Company from employees or collected from customers for income taxes, social
security and unemployment insurance taxes and sales, excise and use taxes, and
the portion of any such Taxes to be paid by the Company, its Subsidiaries or any
Operating Company to governmental agencies or set aside in accounts for such
purpose have been so paid or set aside, or such monies have been approved,
reserved against and entered upon the books and financial statements of the
Company, its Subsidiaries and any Operating Company.
8.11 CONFLICTING AGREEMENTS. Except as set forth on Schedule
---------------------- --------
8.11 hereto, neither the Company nor any of its Subsidiaries is a party to or
- ----
otherwise subject to any Contract which limits the amounts of, or otherwise
imposes restrictions on, the issuance of the Securities or the Common Stock
(upon the conversion of the Securities).
8.12 POLLUTION AND OTHER REGULATIONS. Except as set forth in
-------------------------------
Schedule 8.12 hereto, the conduct of the Company, each of its Subsidiaries and
- -------------
each Operating Company as presently conducted, and as will be conducted after
the Initial Closing, complies in all material respects with all Environmental
Laws and Requirements of Environmental Laws. Specifically, and without limiting
the generality of the foregoing, except as disclosed on Schedule 8.12 hereto,
-------------
the Company, each of its Subsidiaries and each Operating Company and each
respective parcel of real property owned or leased by them are in material
compliance with all Environmental Laws and Requirements of Environmental Law;
there are no conditions existing currently or, to the knowledge of the Company,
likely to exist that would or would likely subject the Company, each of its
Subsidiaries and each Operating Company to damages, penalties, injunctive relief
or cleanup costs in an aggregate amount exceeding $50,000 under any
Environmental Matters or assertions thereof, or which require or are likely to
require cleanup, removal, remedial action or other response pursuant to
Environmental Laws by the Company, any of its Subsidiaries or any Operating
Company; neither the Company, any of its Subsidiaries nor any Operating Company
is a party to any Environmental Claim or litigation or administrative
proceedings involving an individual claim in excess of $50,000 or claims in the
aggregate in excess of $50,000, nor so far as is known by the Company, is any
such litigation or administrative proceeding threatened against the Company, any
of its Subsidiaries or any operating Company, which asserts or alleges that the
Company, any of its Subsidiaries or any Operating Company has violated or is
violating Environmental Laws or Environmental Permits in any material respect or
that the Company, any of its Subsidiaries or any Operating Company is required
to clean up, remove or take remedial or other responsive action due to the
disposal, depositing, storage, discharge, leaking or other Release of any
hazardous substances or materials; neither the Company, any of its Subsidiaries,
any Operating Company nor any respective parcel of real property owned or leased
by them is subject to any Environmental Claim or judgment, decree, order or
citation related to or arising out of Environmental Matters involving an
individual claim in excess of $50,000 or claims in the aggregate in excess of
$50,000 and neither
27
<PAGE>
the Company, any of its Subsidiaries nor any Operating Company has been named or
listed as a potentially responsible party by any Governmental Authority in a
matter arising under any Environmental Matters involving an individual claim in
excess of $50,000 or claims in the aggregate in excess of $50,000; each of the
Company, its Subsidiaries and each Operating Company has obtained all
Environmental Permits from governmental authorities required under Environmental
Laws relative to each parcel of real property owned or leased by it; each of the
Company, its Subsidiaries and each Operating Company is in compliance in any
material respect with all terms and conditions of Environmental Permits, and is
also in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any federal, state or local law or any
regulations, code, plan, order, decree or judgment relating to public health and
safety, worker health and safety and pollution or protection of the environment
or any notice or demand letter issued, entered, promulgated or approved
thereunder, except where the failure to so comply would not have or would not be
likely to result in a Material Adverse Effect; neither the Company, any of its
Subsidiaries nor any Operating Company has received notice (whether written or
oral), specifying that certain facts, events or conditions, interfere with or
prevent continued compliance with, or give rise to any liability involving an
individual claim in excess of $50,000 or claims in the aggregate in excess of
$50,000 under any law, common law or regulation, related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, Release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste; and there are not now, nor to the knowledge of the Company have there
ever been, materials stored, spilled, deposited, treated, recycled or disposed
of on, under or at any parcel of real property owned or leased by the Company,
any of its Subsidiaries or any Operating Company, or stored, spilled, deposited,
treated, recycled or disposed of at the direction of the Company, any of its
Subsidiaries or any Operating Company, present in soils or ground water, that
would require cleanup, removal or some other remedial action under Environmental
Laws.
8.13 CERTAIN ACTS. Neither the Company nor any of its
------------
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the 1940 Act, nor will it become
such by virtue of the transactions contemplated hereby or by the Transaction
Documents. Neither the Company nor any of its Subsidiaries is a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended,
nor will it become such by virtue of the transactions contemplated hereby or by
the Transaction Documents. None of the transactions contemplated by this
Agreement (including, without limitation, the use of the proceeds from the sale
of the Securities, and the consummation of the Vanguard Exchange and the CTP
Exchange) will violate or result in a violation Section 7 of the Exchange Act or
any regulation issued pursuant thereto, including, without limitation,
Regulations G, T, U, and X of the Board of Governors of the Federal Reserve
System.
8.14 GOVERNMENTAL PERMITS, CONSENTS, ETC. Except as set forth
-----------------------------------
on Schedule 8.14 hereto, no Consent, approval, authorization, exemption or other
-------------
action by,
28
<PAGE>
or notice to or filing with, any court or administrative or
governmental body which has not been obtained, taken or made is required in
connection with the execution and delivery of this Agreement or the Transaction
Documents, the consummation of the transactions contemplated hereby or thereby
(including, without limitation, the consummation of the Vanguard Exchange and
the CTP Exchange) or fulfillment of or compliance with the terms and provisions
hereof. Schedule 8.14 hereto sets forth all material Consents, permits, licenses
-------------
and use authorizations (the "Permits") issued or anticipated to be issued to the
-------
Company within the next six months, its Subsidiaries and the Operating Companies
by the appropriate federal, state, local and foreign regulatory bodies. Except
as set forth on Schedule 8.14 hereto, the Permits constitute all material
-------------
permits necessary to own and operate the Company's, its Subsidiaries' and/or
each Operating Companies' businesses as presently being conducted and as
contemplated to be conducted after the Initial Closing. Except as set forth on
Schedule 8.14 hereto, all Permits are valid and subsisting and in full force and
- -------------
effect. There are no proceedings pending, or to the Company's knowledge,
threatened, that seek the revocation, cancellation, suspension or any adverse
modification of any Permit. The Company, each of its Subsidiaries and each
Operating Company are in compliance in all material respects with the terms of
such Permits obtained as of the date hereof. The Company has received no notice
that any of the Permits will not be renewed and to the Company's knowledge,
there is no basis for non-renewal. The Company has not received any notice, not
previously complied with, and the Company does not have any knowledge of any
such notice, with respect to any alleged violation of the rules or regulations
of the any applicable Governmental Authority. If any such notices have been
received and complied with, the Company has disclosed their receipt and
disposition to the Purchasers in writing prior to the execution of this
Agreement.
8.15 FEES AND COMMISSIONS. No broker's or finder's fee or
--------------------
commission will be payable by the Company with respect to the issuance and sale
of the Securities or the transactions contemplated hereby (including, without
limitation, the consummation of the Vanguard Exchange and the CTP Exchange),
other than an investment banking fees payable to the Placement Agents.
8.16 INTELLECTUAL PROPERTY. Each of the Company, its
---------------------
Subsidiaries and the Operating Companies possesses all Intellectual Property
necessary to conduct its business as contemplated herein and in the Transaction
Documents after the Initial Closing, (i) without conflict with or infringement
upon any valid rights of others, (ii) which Intellectual Property is owned by
the Company or its Subsidiaries free and clear of any and all liabilities,
obligations, Liens or claims, and (iii) the lack of which could have a Material
Adverse Effect, and have not received any notice of infringement upon or
conflict with the asserted rights of others. Except as set forth on Schedule
--------
8.16 hereto and other than licenses for software purchased by the
- ----
Company or its Subsidiaries in retail transactions, there are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company or any Subsidiary bound by or a party to any option, license or
agreement of any kind with respect to the Intellectual Property of any other
Person or entity. No stockholder, director, officer or employee of the Company,
any Subsidiary or Operating Company has any interest in any such Intellectual
Property.
29
<PAGE>
8.17 ABSENCE OF CERTAIN CHANGES. Since December 31, 1994, and
--------------------------
as of the date hereof, there has not been any event or change of any character
which has or would reasonably be expected to have a Material Adverse Effect,
including, but not limited to a such an event or change resulting from (i) any
damage, destruction or loss of any of the properties or assets of the Company,
any its Subsidiaries and/or any Operating Company (whether or not covered by
insurance), (ii) any waiver by the Company, any its Subsidiaries and/or any
Operating Company of a valuable right (including, without limitation, in the
case of the Company, any rights under the Vanguard Exchange Documents and the
CTP Exchange Documents) or of a material debt owed to it, (iii) any material
change or amendment to a Contract or arrangement by which the Company, any of
its Subsidiaries or any Operating Company or any of their respective assets or
properties is bound or subject, (iv) any declaration, setting aside for payment
or other distribution in respect of any of the Company's, any of its
Subsidiaries' or any Operating Company's Capital Stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company, any of its Subsidiaries or any Operating Company, or (v) any labor
trouble, problem, grievance, dispute or controversy with any union or other
organization of the Company's, any of its Subsidiaries' or any Operating
Company's employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
8.18 THE EXCHANGE DOCUMENTS. (A) The Vanguard Exchange
----------------------
Documents and the CTP Exchange Documents have not been amended, modified or
supplemented, nor have any conditions precedent to closing or defaults under
such documents been waived by the Company in any material respect. Assuming the
accuracy of the representations and warranties of other parties to such
documents contained in the Vanguard Exchange Documents and the CTP Exchange
Documents, the obligations of each of the parties to such documents are the
legal, valid and binding obligations of each such party. Except as set forth on
Schedule 8.18 hereto, the Company has not waived any right or default by any
- -------------
party under the Vanguard Exchange Documents and the CTP Exchange Documents. (B)
The Company is not in violation of any term of the Vanguard Exchange Documents
and the CTP Exchange Documents which would permit any party to the Vanguard
Exchange Documents and the CTP Exchange Documents to terminate, amend or modify
any of such agreements. The Vanguard Exchange Documents and the CTP Exchange
Documents are in full force and effect, and the Company has no knowledge that
any party to any of such agreements is seeking or presently intends to seek to
terminate, amend or modify such agreement.
8.19 INSURANCE. Schedule 8.19 attached hereto sets forth all
--------- -------------
insurance policies maintained by the Company and each of its Subsidiaries. The
insurance maintained by the Company, each of its Subsidiaries and each of the
Operating Companies is in amounts and of a nature as is customarily maintained
by Persons conducting operations similar to that of the Company, its
Subsidiaries and any Operating Companies. Since December 31, 1994, neither the
business, properties nor assets of the Company, any of its Subsidiaries or any
Operating Company has suffered a loss which would have, or would be likely to
have, a Material Adverse Effect (whether or not covered by insurance) as a
result of fire, flood, act of God or any other casualty or similar event.
30
<PAGE>
8.20 RESERVATION OF SHARES. The Company has reserved for
---------------------
issuance the number of its authorized but unissued shares of Common Stock
necessary to permit the conversion in full of all the outstanding Securities.
8.21 TITLE TO PROPERTIES. (a) The Company, its Subsidiaries and
-------------------
each Operating Company have, and on the Initial Closing Date will have, (i) good
and marketable title to all of their assets and properties, real, personal and
mixed, including, without limitation, all of the other assets and properties
reflected on their respective balance sheets, in each case free and clear of any
material Liens or claims affecting any such assets or properties referred to
above (other than as contemplated under the loan documents entered into by the
Operating Companies in the ordinary course of their businesses).
(b) Schedule 8.21 hereto sets forth all of the material
-------------
real property owned or leased by the Company, its Subsidiaries and each
Operating Company, other than Corporacion Mobilcom, S.A. de C.V. All required
certificates of occupancy, certificates relating to electrical work, zoning,
building, housing, safety, fire and health approvals, and other permits,
franchises and licenses necessary to enable the Company, each Subsidiary and
each Operating Company to use or operate its facilities in the manner currently
used or operated, or as is currently anticipated to be used or operated by it,
have been issued and are in full force and effect, except where the failure to
obtain such approvals, permits, franchises or licenses would not have or would
not be likely to result in a Material Adverse Effect. There are no proceedings
pending for the material reduction of the assessed valuation of any real
property owned by the Company, each Subsidiary and each Operating Company. No
default or breach now exists and no event has occurred or is continuing which,
with notice or the passage of time or both, would constitute a default under any
of the covenants, restrictions, rights of way, easements or other agreements
affecting any of the facilities of the Company, its Subsidiaries or any
Operating Company. Under existing easements, rights at law, certificates, deeds,
leases and other applicable agreements and instruments, the Company, each
Subsidiary and each Operating Company after the Initial Closing Date shall have
access to and the same rights to utilize all access roads, utilities, and other
facilities not belonging to it which have been used in the operation of its
facilities at full capacity prior to the Initial Closing Date, on the same terms
and conditions as have been previously available. No state of facts exists
which will or the Company believes is likely to prevent the Company, each
Subsidiary and each Operating Company after the Initial Closing Date from
carrying on, or impair or restrict its ability to carry on, the business of
operating such facilities in the same manner as they have been previously
operated at full capacity prior to the Initial Closing Date, or as they are
anticipated to be operated by the Company, each Subsidiary and each Operating
Company after the Initial Closing Date. The Company does not have any knowledge
of any condemnation or eminent domain proceedings now pending nor has the
Company, its Subsidiaries or each Operating Company received notice or has any
knowledge of any such proceeding being contemplated with respect to its
facilities.
(c) The facilities, machinery, equipment, furniture,
fixtures, vehicles, any related capitalized items and other tangible property
material to the business of the Company, its Subsidiaries or each Operating
Company are, and on the Initial Closing Date will
31
<PAGE>
be in operating condition suitable for their intended use, except for (i)
maintenance in the ordinary course and (ii) normal wear and tear.
8.22 CONTRACTS; DISCONTINUED PROJECTS. (A) The Document Index
--------------------------------
is a true, complete and accurate list of all of the material Contracts relating
to the Projects. The Summary is a true, complete and accurate summary for each
Project of the material terms and provisions of (i) the ownership structure,
(ii) the respective licenses, (iii) the respective shareholders agreements and
(iv) the respective management agreements. Schedule 8.22 hereto sets forth a
-------------
list of all (i) of the Contracts relating to the Projects to which the Company,
any of its Subsidiaries or any Operating Company has any, direct or indirect,
present or future liabilities, obligations (contingent or otherwise) or rights
to, or in and (ii) of the funding requirements to which the Company, any of its
Subsidiaries or any Operating Company has any, direct or indirect, present or
future liabilities or obligations (contingent or otherwise) to make. (B) The
Company, its Subsidiaries and any Operating Company has no, direct or indirect,
present or future liabilities or obligations (contingent or otherwise) arising
out of, relating to, or in connection with any discontinued or inactive Project.
9. REPRESENTATIONS OF THE PURCHASERS. Each of the Purchasers
---------------------------------
represents, severally and not jointly, and in making its purchase hereunder it
is specifically understood and agreed, that:
9.1 PURCHASE OF SECURITIES. Such Purchaser (i) is purchasing
----------------------
the Securities set forth opposite its name on Schedule 1 and Schedule 2 hereto
---------- ----------
for its own account, for investment purposes and not with a view to or for sale
in connection with any distribution thereof, (ii) is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act, and
(iii) either (A) does not beneficially own 10% or more of the outstanding voting
Capital Stock of the Company, and/or (B) the value of all securities owned by
such Purchaser of (I) the Company and (II) all other issuers that would be
investment companies (within the meaning of the 1940 Act) but for the fact that
the outstanding securities (other than short-term paper) of such issuers are
beneficially owned by not more than one hundred persons and were not issued in a
public offering, does not exceed 10% of the value of the total assets of such
Purchaser. Such Purchaser agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any
of the Securities purchased by it hereunder (or solicit any offers to buy,
purchase, or otherwise acquire or take a pledge of any of such Securities),
except in compliance with the Securities Act, the Exchange Act, any applicable
state securities or blue sky laws and the Investor Rights Agreement.
9.2 INCORPORATION; AUTHORIZATION. Such Purchaser is a
----------------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and such Purchaser has the full legal
right, power and authority to enter into this Agreement and to perform its
obligations hereunder without the need for the consent of any other person; and
this Agreement has been duly authorized, executed and delivered and constitutes
the legal, valid and binding obligation of such Purchaser enforceable against
such Purchaser in accordance with the terms hereof.
32
<PAGE>
9.3 NO CONFLICTS. The execution, delivery and performance by
------------
such Purchaser of each Transaction Document to which it is a party and
compliance therewith and the purchase of the Securities will not result in any
violation of and will not conflict with, or result in a breach of, any of the
terms of, or constitute a default under, (a) any provision of state, federal or
foreign law to which it is subject, (b) its Certificate of Incorporation or By-
laws, or (c) any mortgage, indenture, agreement, instrument, judgment, decree,
order, rule or regulation, or other restriction to which it is a party or by
which it is bound.
9.4 NO BROKERS' FEES. Such Purchaser has not agreed or
----------------
committed to pay any broker's or finder's fee or commission with respect to the
purchase of the Securities or the transactions contemplated hereby.
9.5 LEGEND. The Company and the Purchasers agree that the
------
certificates evidencing the Securities shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS."
10. DEFINITIONS.
-----------
For the purpose of this Agreement, the following terms shall have the
meanings specified with respect thereto below:
"Affiliate" means, with respect to any Person, any other Person (i)
---------
which directly or indirectly controls, is controlled by, or is under direct or
indirect common control with, such Person, (ii) which directly or indirectly
of record or beneficially owns or holds ten percent (10%) or more of any class
of Capital Stock of such Person, or (iii) ten percent (10%) or more of such
Capital Stock of which are owned or held, directly or indirectly, of record or
beneficially, by such Person. A Person shall be deemed to control another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise; all
officers and directors of a Person shall be deemed to be an Affiliate of that
Person.
"Agreement" means this Securities Purchase Agreement, as this
---------
Agreement may be amended, modified, supplemented or restated from time to time,
together with all Exhibits and Schedules hereto.
"Approved Business Plan" means any business plan of the Company in any
----------------------
fiscal year that has been approved by a majority of the Board of Directors of
the Company in a Special
33
<PAGE>
Board .action or which has been amended, modified, supplemented or restated by a
majority of the Board of Directors of the Company in a Special Board Action.
"Bankruptcy Law" has the meaning specified in clause (vi) of Section
--------------
7.1 hereof.
"Bridge Investors" mean, collectively, all of the Purchasers listed on
----------------
Schedule 1A hereto, and, individually, a Purchaser listed on such Schedule 1A.
- ------------ -----------
"Bridge Notes" means (i) the unsecured promissory notes of the Company
------------
issued pursuant to the Securities Purchase Agreement dated July 12, 1995 among
the Company and the investors named therein, in favor of the Bridge Investors
and in the principal amounts listed on Schedule 1A hereto, (ii) the $1,485,000
-----------
unsecured promissory note of the Company issued to Vanguard pursuant to the Note
and Warrant Purchase Agreement dated July 31, 1995 between the Company and
Vanguard, (iii) the TD Bridge Note, (iv) $3,000,000 of the $5,000,000 principal
amount of the secured promissory note of the Company issued pursuant to the Loan
Agreement dated August 14, 1995 between the Company and Toronto Dominion
Investments, Inc., (v) the $100,000 unsecured promissory note of the Company
issued to Northwood Ventures pursuant to the Note Purchase Agreement dated
November 6, 1995 between the Company and Northwood Ventures, (vi) the $50,000
unsecured promissory note of the Company issued to Gateway Venture Partners III,
L.P. pursuant to the Note Purchase Agreement dated November 20, 1995 between the
Company and Gateway Venture Partners III, L.P., and (vii) the $200,000 unsecured
promissory note of the Company issued to Vanguard pursuant to the Note Purchase
Agreement dated November 20, 1995 between the Company and Vanguard.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which commercial banks in New York City are required or authorized to be
closed.
"By-laws" means for any Person all By-laws, Codes of Regulation or
-------
other equivalent organizational or charter documents in the jurisdiction of
incorporation or organization of such Person.
"Capital Expenditures" means as to any Person for any period, the
--------------------
aggregate amount of all capital expenditures which would be classified as
capital expenditures in a statement of income or operations of such Person for
such period prepared in accordance with GAAP.
"Capital Lease" means, at the time any determination thereof is to be
-------------
made, any lease of property, real or personal, in respect of which the present
value of the minimum rental commitment would be capitalized on a balance sheet
of the lessee in accordance with GAAP.
"Capital Lease Obligation" means, at the time any determination
------------------------
thereof is to be made, the amount of the liability in respect of a Capital Lease
which would at such time be so required to be capitalized on a balance sheet of
the lessee in accordance with GAAP.
"Capital Stock" means any and all shares, interests, rights to
-------------
purchase, warrants, options, participations or other equivalents of, rights to
acquire, or interests in (however
34
<PAGE>
designated) corporate stock or partnership interests, including, without
limitation, any security which is convertible into or exercisable for such
corporate stock.
"Certificate of Incorporation" means for (i) the Company, Amended and
----------------------------
Restated Certificate of Incorporation of the Company, in the form of Exhibit
-------
4A.14 hereto, and (ii) any other Person, all Certificates of Incorporation,
- -----
Articles of Incorporation or other organizational or equivalent charter
documents in the jurisdiction of incorporation or organization of such Person.
"Change of Control" shall occur if (i) prior to the second anniversary
-----------------
of the Initial Closing Date, Vanguard or any of its Affiliates Transfers any
Capital Stock of the Company and (A) immediately following such Transfer,
Vanguard and its Affiliates collectively own less than 30% of the then issued
and outstanding shares of Capital Stock of the Company and (B) the consideration
per share received by Vanguard or such Affiliate of Vanguard, as the case may
be, with respect to such Transfer is less than $375 per share (as appropriately
adjusted for stock splits, stock dividends, combinations and other
recapitalizations), (ii) after the second anniversary of the Initial Closing
Date, Vanguard or any of its Affiliates Transfers any Capital Stock of the
Company and immediately following such Transfer Vanguard and its Affiliates
collectively own less than 25% of the then issued and outstanding shares of
Capital Stock of the Company, (iii) at any time, in any transaction or series of
related transactions (other than a Non-Surviving Combination) and after giving
effect to such transaction, any one or more Persons (other than Vanguard and its
Affiliates), acting individually or as a member of a Group, beneficially owns,
directly or indirectly, in the aggregate 45% or more of the Capital Stock of the
Company on a fully diluted basis, outstanding as of the date of computation or
(iv) at any time, in any transaction or series of related transactions (other
than a Non-Surviving Combination) and after giving effect to such transaction,
Vanguard and/or its Affiliates, acting individually or as a member of a Group,
beneficially owns, directly or indirectly, in the aggregate 49% or more of the
Capital Stock of the Company on a fully diluted basis, outstanding as of the
date of computation. Notwithstanding the foregoing, it will not be a Change of
Control if Vanguard and its Affiliates (I) Transfer all or substantially all of
their respective assets (including all of the Capital Stock of the Company owned
by Vanguard and its Affiliates immediately prior to such Transfer) to any other
Person, (II) merge or are consolidated into any other Person, or (III) engage in
any other reorganization in which the surviving entity that holds the Capital
Stock of the Company that was owned by Vanguard and its Affiliates immediately
prior to the reorganization (1) can be deemed to be controlled by the same
Persons that controlled Vanguard and its Affiliates immediately prior to such
other reorganization, (2) is controlled by substantially the same key executive
officers, directors and supervisors that controlled Vanguard and its Affiliates
immediately prior to such other reorganization, and (3) has, in addition to such
Capital Stock of the Company, substantial other assets.
"Closings" has the meaning specified in Section 3(B) hereof.
--------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Commission" means the United States Securities and Exchange
----------
Commission or any governmental body or agency succeeding to the functions
thereof.
35
<PAGE>
"Common Stock" means the Company's common stock, par value $.01 per
------------
share.
"Company" means International Wireless Communication, Inc., a Delaware
-------
corporation, and its successors and assigns.
"Consents" has the meaning specified in Section 4E hereof.
--------
"Consolidated EBITDA" of any Person shall mean for any period, the sum
-------------------
of following, each calculated on a consolidated basis for such period (i) net
income, plus (ii) interest expenses paid or accrued, plus (iii) income taxes and
franchise taxes, plus (iv) amortization and depreciation deducted in determining
net income, minus (v) all non-cash gains that were added in determining net
income.
"Contracts" means any written or oral contract, agreement, commitment,
---------
note, bond, pledge, lease, sublease, deed, mortgage, guaranty, indenture,
license, option, consulting agreement, supply contract, repair contract,
distribution agreement, purchase order, joint venture agreement, partnership
agreement, shareholder agreement, franchise, technology and know-how agreement,
employment agreement, instrument or any other contractual commitment that is
binding on any Person or its property, which provide for payments (i) from or to
the Company or any Subsidiary which is not an Operating Company of $25,000 or
more after the Initial Closing Date or (ii) from or to any Operating Company of
$100,000 or more after the Initial Closing Date.
"CTP" means CTP, a general partnership formed by Hugh B. L. McClung,
---
John D. Lockton and others, and its successors and assigns.
"CTP Exchange" means the exchange of a 70% equity interest in CTP
------------
for 6,298 shares of Common Stock of the Company.
"CTP Exchange Documents" means (i) the CTP Agreement dated January 7,
----------------------
1994 among the Company, Hugh B. L. McClung, John D. Lockton, (ii) the Amendment
to CTP Agreement dated as of November 30, 1995 among the Company and the other
partners of CTP, (iii) all of the other documents, agreements and instruments
entered into in connection therewith.
"Current Assets" means current assets of the Company and its
--------------
Subsidiaries, as computed under GAAP.
"Damages" shall have the meaning set forth in Section 11.2(b)
-------
hereof.
"Debt" means, as to any Person, any indebtedness, whether or not
----
contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instrument or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to Capital Leases), if
and to the extent any of the foregoing indebtedness would appear as a liability
upon a balance sheet of such Person prepared on a consolidated basis in
accordance with GAAP, and shall also include, to the extent not otherwise
included, (a) the guarantee of items which would be included
36
<PAGE>
within this definition and any joint obligation of such Person in respect of
items which would be included in this definition, and (b) any indebtedness of a
third Person of the type that would be included in this definition which is
secured by a Lien on the property or assets of such Person; provided, however,
-------- -------
that such indebtedness of such third Person shall not be included in this
definition solely to the extent that, with respect to a Project, (i) such Person
has been required by the banks and/or financial entities providing debt
financing to such Project to grant a Lien on the stock or equity interest of an
Operating Company owned by such Person, (ii) such Person has no other
liabilities, whether direct or contingent, in connection with such debt
financing of such Project and recourse against such Person shall be limited
solely to such pledged stock or equity interest, and (iii) all other holders of
the stock or equity interests of such Operating Company shall likewise be
required to, and shall, pledge their stock or equity interests in connection
with such debt financing of such Project.
"Disclosure Documents" means each of the documents disclosed in the
--------------------
letter dated as of the date hereof from the Lead Purchaser to the Company.
"Document Index" means the Due Diligence Index of Documents Received
--------------
From International Wireless Communications, Inc. dated as of December 14, 1995
prepared by Willkie Farr in connection with the transactions contemplated in the
Memorandum and in the other Transaction Documents.
"EAI" means Electra Associates, Inc., a Delaware corporation, and
---
its successors and assigns.
"EI" means Electra Inc., a Delaware corporation, and its
--
successors and assigns.
"EIT" means Electra Investment Trust P.L.C., a corporation organized
---
under the laws of England and Wales, and its successors and assigns.
"Electra" means EIT and EAI.
-------
"Employee Benefit Plan" has the meaning specified in Section 8.7
---------------------
hereof.
"Environmental Claim" means any complaint, summons, citation, notice,
-------------------
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
Releases.
"Environmental Laws" means any and all laws, statutes, ordinances,
------------------
rules, regulations, orders, or determinations of any Governmental Authority,
foreign or domestic, pertaining to health or the environment in effect in any
and all jurisdictions in which the Company, its Subsidiaries and each Material
Operating Company are conducting or at any time have conducted business,
including, without limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended, the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation and
37
<PAGE>
Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act, as
amended, the Toxic Substances Control Act, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, and other environmental
conservation or protection laws.
"Environmental Liabilities" means any monetary obligations, losses,
-------------------------
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all reasonable out-of-pocket fees, disbursements and
expenses of counsel, out-of-pocket expert and consulting fees and out-of-pocket
costs for environmental site assessments, remedial investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any Governmental Authority or any third party which
relate to any environmental condition, remedial action, Release or threatened
Release from or onto (i) any presently or formerly owned by the Borrower or any
of its Subsidiaries or a Predecessor, or (ii) any facility which received
Hazardous Materials generated by the Borrower or any of its Subsidiaries or a
Predecessor.
"Environmental Matters" means any and all matters relating to any
---------------------
Requirement of Environmental Law, Environmental Claim or Environmental Permit.
"Environmental Permit" means any permit, license, notice, order,
--------------------
approval or other authorization under any applicable law, rule, regulation or
other requirement of the United States or Canada or of any state, municipality
or other subdivision thereof required by any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute or law thereto, and the rules and
regulations promulgated thereunder.
"Existing Indebtedness" means, as to the Company and its Subsidiaries,
---------------------
the Debt of the Company and its Subsidiaries outstanding as of the Initial
Closing Date, reflected in Schedule 6.1 hereto, other than the Bridge Notes and
------------
the TD Bridge Note.
"Extraordinarily Approved Business Plan" means any business plan of
--------------------------------------
the Company in any fiscal year that has been approved by a majority of the Board
of Directors of the Company in an Extraordinary Board Action or which has been
amended, modified, supplemented or restated by a majority of the Board of
Directors of the Company in an Extraordinary Board Action.
"Extraordinary Board Action" means the approval of at least a majority
--------------------------
of the Board of Directors of the Company, provided, however, that such action
-------- -------
must be consented to by all of the directors elected by the holders of the
Securities (other than the Series F-2 Preferred Stock) in accordance with
Section V.B.5.b of the Certificate of Incorporation of the Company.
38
<PAGE>
"Financial Disclosure Documents" has the meaning specified in Section
------------------------------
8.8 hereof.
"Financials" has the meaning set forth in Section 8.8 hereof.
----------
"Financial Fee" has the meaning set forth in Section 3 hereof.
-------------
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect at the time any determination is made or
financial statement is required hereunder as promulgated by the American
Institute of Certified Public Accountants, the Accounting Principles Board, the
Financial Accounting Standards Board or any other body existing from time to
time which is authorized to establish or interpret such principles, applied on a
consistent basis throughout any applicable period, subject to any change
required by a change in GAAP; provided, however, that if any change in generally
-------- -------
accepted accounting principles during the term of this Agreement affects the
calculation of any financial covenant or determination of value contained
herein, the parties hereto hereby agree to amend this Agreement to the effect
that each such financial covenant or determination of value is not more or less
restrictive than such covenant as in effect on the date hereof.
"Good Faith" means honesty in fact in the conduct or transaction
----------
concerned, without regard to whether standards which might be deemed reasonable
by another Person have been observed; but which does not include intentionally
unreasonable conduct.
"Governmental Authority" means any action of government, any federal,
----------------------
state, local, foreign or other political subdivision thereof and any other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to such government.
"Group" means when two or more Persons agree to act together for the
-----
purpose of acquiring, holding, voting or disposing of the Capital Stock of the
Company, other than pursuant to the Investor Rights Agreement.
"Hazardous Materials" means (a) any element, compound, or chemical
-------------------
that is defined, listed or otherwise classified by a Governmental Authority as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely
hazardous substance or chemical, hazardous waste, medical waste, biohazardous or
infectious waste, special waste, or solid waste under Environmental Laws; (b)
petroleum and its refined products; (c) polychlorinated biphenyls; (d) any
substance exhibiting a hazardous waste characteristic as defined in 40 C.F.R.
261.21-.24; and (e) any raw materials, building components, including but not
limited to asbestos-containing materials and manufactured products, containing
Hazardous Materials.
"Initial Closing" has the meaning specified in Section 3(A)
---------------
hereof.
"Initial Closing Date" has the meaning specified in Section 3(A)
--------------------
hereof.
"Initial Public Offering" shall mean an initial underwritten public
-----------------------
offering and sale consummated on or before December 31, 1998 for cash by the
Company of the Common
39
<PAGE>
Stock of the Company to an underwriter or underwriters pursuant to a "firm
commitment" underwriting agreement and a registration statement declared
effective by the Commission under the Securities Act in which (i) the public
offering per share price is at least two times the $375 per share purchase price
of the Securities, as appropriately adjusted for any stock dividends,
combinations, splits or the like with respect to such Securities in accordance
with the terms of the Certificate of Incorporation, and (ii) the Company
receives gross proceeds of at least $25,000,000. An Initial Public Offering
shall be deemed consummated upon the first sale of Common Stock under the
related registration statement. An Initial Public Offering shall not include the
registration of an offer and sale of the Common Stock (i) to the employees of or
other persons providing services to the Company pursuant to an employee benefit
or similar benefit plan registered on Form S-8 or a successor form or (ii)
relating to a merger, acquisition or other transaction of the type described in
Rule 145 or a successor rule registered on Form S-4 or a successor form.
"Intellectual Property" means, as to any Person, that Person's Patents
---------------------
and Patent Applications, Trademarks, licenses and brand names, and including,
without limitation, all logos and designs, patents, trade secrets, technical
information, engineering procedures, manufacturing processes, formulas, designs,
know-how and processes, information, software, copyrights, other intellectual
property and proprietary rights and processes and options, licenses and
agreements relating to the above.
"Investment" in any Person includes all investments made or committed
----------
to be made, whether by stock purchase, acquisition of all or substantially all
of its assets, capital contribution, loan, advance, guarantee of any
indebtedness or creation or assumption of any other liability in respect of any
indebtedness of such Person, or otherwise.
"Investor Rights Agreement" has the meaning set forth in Section 4A.12
-------------------------
hereof.
"knowledge" means, with respect to any Person, such Person's best
---------
knowledge after due inquiry.
"Lead Purchaser" means Electra, solely in its capacity as a holder of
--------------
Securities, and its successors and assigns.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including, without limitation, any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Material Adverse Change" of the Company, its Subsidiaries and any
-----------------------
Material Operating Company, taken as a whole, means a material adverse change in
the business, condition (financial or otherwise), assets, properties or
operations or prospects of such Person.
40
<PAGE>
"Material Adverse Effect" means a material adverse effect on the
-----------------------
business, condition (financial or other), assets, properties or operations or
prospects of the Company, its Subsidiaries and any Material Operating Company,
taken as a whole.
"Material Operating Company" means (a) PT Rajasa Hazanah Perkasa,
--------------------------
Mobisel, Syarikat Telefon Wireless Sdn. Bhd., Corporacion Mobilcom, S.A. de
C.V., and Universal Telecommunications Service, Inc., and (b) any entity in
which the Company, directly or indirectly, has (i) made or committed to make,
whether direct or indirect, a capital contribution or Investment (whether in the
form of debt or equity or otherwise and in the form of cash or other
consideration) of $1,500,000 or more, and (ii) the right to designate a
director, supervisor or executive officer or otherwise has any operating
influence over such entity.
"Material Projects" mean, collectively, (i) the wireless projects in
-----------------
Brazil (ECTR), Indonesia (Cellular), Malaysia (Wireless Local Loop), Mexico
(National ECTR), Philippines (ECTR), as each is discussed in the Memorandum,
Summary and Document Index, and (ii) any future Project with any Material
Operating Company.
"Memorandum" means that certain Confidential Private Placement
----------
Memorandum dated May 1995 prepared by the Placement Agents, as amended by an
Addendum dated October 23, 1995, true and correct copies of which have been
provided to the Purchasers by the Company.
"Multiemployer Plan" means any "multiemployer plan" (as such term is
------------------
defined in Section 3(37) of ERISA and Section 414(f) of the Code) to which
contributions are or have been made by the Company or any of its Subsidiaries.
"1940 Act" means the Investment Company Act of 1940, as amended from
--------
time to time, and any successor statute or law thereto, and the rules and
regulations promulgated thereunder.
"Non-Surviving Combination" means any merger, consolidation or other
-------------------------
business combination of the Company with or into one or more Persons in which
the Person other than the Company is the survivor, or a sale of all or a
Substantial Part of the assets of the Company (whether held directly by the
Company or through a Subsidiary) to one or more such other Persons (including,
but not limited to, a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company); provided, however, that if any such
-------- -------
merger, consolidation or other business combination or sale of assets, in which
the holders of Common Stock receive cash or non-cash consideration, is
structured in the form of a reverse subsidiary merger so that the Company is the
surviving entity, such transaction shall nevertheless be deemed to be a Non-
Surviving Combination.
"Officers' Certificate" means a certificate signed in the name of the
---------------------
Company, as applicable, by its chief executive officer, president or one of its
vice presidents and by its chief financial officer, treasurer or controller.
41
<PAGE>
"Operating Company" means (a) PT Rajasa Hazanah Perkasa, Mobisel,
-----------------
Syarikat Telefon Wireless Sdn. Bhd., Corporacion Mobilcom, S.A. de C.V.,
Universal Telecommunications Service, Inc., Mobilkom, PT BinaMulti Visualindo,
HFCL Mobile Radio Ltd., TeamTalk Limited, Mobilcom (Private) Limited (Pakistan)
and PeruTel SA., and (b) any Person in which the Company, directly or
indirectly, has (i) either (A) an equity interest in, or (B) made or committed
to make a capital contribution or Investment (whether in the form of debt or
equity or otherwise and in the form of cash or other consideration), formed in
connection with any Project, except for any Operating Company which ceases to be
an "Operating Company" in accordance with the provisions of Section 5.4 hereto.
"Original Investor Rights Agreement" means the Fourth Amended and
----------------------------------
Restated Investor Rights Agreement dated as of July 31, 1995 among the Company
and the other signatories thereto.
"Patents and Patent Applications" means, as to any Person, all of such
-------------------------------
Person's right, title and interest in and to all of its now owned or existing
(whether or not filed) and hereinafter acquired or arising patents and patent
applications, inventions and improvements thereto, and (a) the reissues,
divisions, continuations, renewals, extensions, and continuations-in-part
thereof, (b) all income, royalties, damages and payments now or hereafter due
and/or payable under or with respect thereto, including, without limitation,
damages and payments for past or future infringements thereof, (c) the right to
sue for past, present and future infringements thereof, (d) all rights
corresponding thereto throughout the world, and (e) all right as licensor or
licensee with respect to any of the foregoing.
"PBGC" means the Pension Benefit Guaranty Corporation or any
----
corporation or governmental body or agency succeeding to the functions thereof.
"Permits" has the meaning specified in Section 8.14 hereof.
-------
"Person" means and includes an individual, a partnership, a joint
------
venture, a corporation, a trust, an unincorporated organization, a government or
any department or agency thereof, and any other legal entity.
"Placement Agents" mean BT Securities Corporation, Toronto
----------------
Dominion Bank and Toronto Dominion Securities, Inc.
"Plan" means an employee pension benefit plan within the meaning of
----
Section 3(2) of ERISA, maintained or contributed to by the Company or any
Subsidiary, and subject to Section 412 of the Code.
"Preferred Stock Failure" shall mean any event which is, or with the
-----------------------
lapse of time or giving of notice, or both, would be, a Preferred Stock Failure
Event.
"Preferred Stock Failure Event" means any of the events specified in
-----------------------------
Section 7.1 hereof, provided that there has been satisfied any requirement set
forth therein in connection with
42
<PAGE>
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act.
"Projections" has the meaning specified in Section 8.8 hereof.
-----------
"Projects" mean (i) the wireless projects in Brazil (ECTR), China
--------
(Major City ECTR, Wireless Local Loop and Major Region ECTR), India (Wireless
Local Loop, Telecom Circle/Local Loop and ECTR), Indonesia (National ECTR, MMDS
and Cellular), Malaysia (Wireless Local Loop and ECTR), Mexico (National ECTR
and National Data Service), New Zealand (ECTR), Pakistan (ECTR, MMDS and
Wireless Local Loop), Peru (National ECTR), Philippines (ECTR) and Sir Lanka
(Wireless Local Loop), as each is discussed in the Memorandum, Summary and
Document Index, and (ii) any similar or related project that the Company has
entered into in the ordinary course of its business.
"Purchasers" has the meaning set forth in the introduction
----------
hereto, and their successors and assigns.
"Registration Rights Agreement" has the meaning set forth in
-----------------------------
Section 4A.15 hereof.
"Release" means any spilling, leaking, pumping, emitting, emptying,
-------
discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous
Materials (including the abandonment or discarding of barrels, containers or
other closed receptacles containing Hazardous Materials) into the environment.
"Requirements of Environmental Law" shall mean any and all
---------------------------------
requirements imposed by and provisions of any law, rule, regulation, order,
decision or decree of any federal, state or local executive, legislative,
judicial, regulatory or administrative agency, board or authority which relate
to (i) pollution, contamination, protection, cleanup, restoration, destruction,
loss or injury to or of the air, surface water, groundwater, land (including,
without limitation, surface and subsurface strata) or other natural resources;
(ii) solid, gaseous or liquid Waste generation, handling, transportation,
treatment, processing, clean up, storage, disposal, recycling, or reclamation;
(iii) exposure to pollutants, contaminants, hazardous materials, hazardous
substances, toxic materials or substances, or Wastes; (iv) the manufacture,
generation, processing, distribution, use, treatment, storage, disposal,
transport, recycling, reclamation or handling of chemical substances,
pollutants, contaminants, hazardous materials, hazardous substances, toxic
materials or substances, or Wastes; or (v) noise.
"Restricted Payment" means (i) any dividend on, or any distribution in
------------------
respect of, any Capital Stock of the Company or the incurrence of any liability
in respect thereof, other than (a) dividends payable to the holders of the
Securities, and (b) dividends payable on any other Capital Stock of the Company,
provided, however, that, prior to such declaration of dividends and payment
- -------- -------
thereof under this clause (b), the holders of at least 75% of the outstanding
Securities (excluding the Series F-2 Preferred Stock) shall have approved such
declaration and payments, and (ii) any payment or distribution on account of the
redemption, purchase,
43
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retirement or other acquisition of any Capital Stock of the Company, other than
(a) the redemption, purchase, retirement or other acquisition of the Securities,
(b) the redemption, purchase, retirement or other acquisition of any other
Capital Stock of the Company, provided, however, that, prior to such redemption,
-------- -------
purchase, retirement or other acquisition under this clause (b), the holders of
at least 75% of the outstanding Securities (excluding the Series F-2 Preferred
Stock) shall have approved such redemption, purchase, retirement or other
acquisition.
"Second Closing" has the meaning specified in Section 3(B) hereof.
--------------
"Second Closing Date" has the meaning specified in Section 3(B)
-------------------
hereof.
"Securities" means, collectively, (i) the Series F-1 Preferred Stock
----------
of the Company, par value $.01 per share with a stated value and a purchase
price of $375 per share (including any shares issued upon conversion of the
Series F- 2 Preferred Stock), and (ii) the Series F-2 Preferred Stock of the
Company, par value $.01 per share with a stated value and a purchase price of
$375 per share, which series have the rights, restrictions, privileges and
preferences as set forth in the Certificate of Incorporation.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, and any successor statute or law thereto, and the rules and
regulations promulgated thereunder.
"Significant Purchasers" means any Purchaser who holds Securities that
----------------------
have an aggregate value of $7,500,000, based on the original purchase price of
$375 per share.
"Special Board Action" means the approval of at least a majority of
--------------------
the Board of Directors of the Company; provided, however, that (i) if there are
-------- -------
only two directors elected by the holders of the Securities (other than the
Series F-2 Preferred Stock) in accordance with Section V.B.5.b of the
Certificate of Incorporation of the Company, then at least one of such
representative directors must consent to such action, and (ii) if there are more
than two directors elected by the holders of the Securities (other than the
Series F-2 Preferred Stock) in accordance with Section V.B.5.b of the
Certificate of Incorporation of the Company, then a majority of such
representative directors must consent to such action.
"Subsidiary" means, with respect to any Person, any corporation or
----------
similar entity, a majority of the Capital Stock or other equity of which, except
directors' qualifying shares, shall, at the time as of which any determination
is being made, be owned by such Person either directly or through Subsidiaries.
"Substantial Part" means, as of any date, assets (i) having a net book
----------------
value equal to or in excess of 10% of the consolidated assets of the Company and
its Subsidiaries (determined in accordance with GAAP), (ii) which are projected
as of the date of the initial direct or indirect Investment by the Company to
provide 10% or more of Consolidated EBITDA in any of the next five fiscal years
of the Company, or (iii) in which the Company has made an Investment or
otherwise paid an amount equal to, or in excess of, $1,000,000.
44
<PAGE>
"Summary" means the Due Diligence Summary of 20 Wireless Projects
-------
dated December 14, 1995 prepared by Willkie Farr in connection with the
transactions contemplated in the Memorandum and in the Transaction Documents.
"Super Majority Board Action" means the approval of at least 75% of
---------------------------
the Board of Directors of the Company; provided, however, that (i) if there are
-------- -------
only two directors elected by the holders of the Securities (other than the
Series F-2 Preferred Stock) in accordance with Section V.B.5.b of the
Certificate of Incorporation of the Company, then at least one of such
representative directors must consent to such action, and (ii) if there are more
than two directors elected by the holders of the Securities (other than the
Series F-2 Preferred Stock) in accordance with Section V.B.5.b of the
Certificate of Incorporation of the Company, then a majority of such
representative directors must consent to such action.
"Supplemental Letter" means the letter agreement between the Company
-------------------
and Electra dated as of September 26, 1995.
"Taxes" means, as to any Person, any present or future income, stamp
-----
or other taxes, levies, imposts, duties, charters, fees, deductions or
withholdings, of every kind and nature, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, including net
income and franchise taxes.
"TD Bridge Note" means the $4,950,000 Convertible Unsecured Promissory
--------------
Note dated August 15, 1995 made by the Company in favor of Toronto Dominion
Investments Inc.
"Trademarks" means, as to any Person, all of such Person's right,
----------
title and interest in and to all of its now owned or existing and filed, and
hereafter acquired or arising and filed, trademarks, service marks, trademark or
service mark registrations, trade names, trademark rights, trade name rights and
trademark or service mark applications, and (a) the reissues, divisions,
continuations, renewals, extensions and continuations in-part thereof, (b) all
income, royalties, damages and payments now or hereafter due and/or payable with
respect thereto, including, without limitation, damages and payment for past or
future infringements thereof, (c) the right to sue for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, (e) all rights as licensor or licensee with respect to any of the
foregoing, and (f) together in each case with the goodwill of such Person's
business connected with the use of, and symbolized by any of the foregoing.
"Transaction Documents" means this Agreement, the Securities, the
---------------------
Certificate of Incorporation, the Investor Rights Agreement, the Registration
Rights Agreement, the CTP Exchange Documents, the Vanguard Exchange Documents,
the Summary, the Memorandum, the Document Index, the Financial Disclosure
Documents and the Disclosure Documents.
"Transfer" means the direct or indirect sale, assignment, transfer
--------
(whether by gift or placement in a trust or otherwise) or voluntary or
involuntary disposition of such asset or item.
"United States" or "U.S." means the United States of America.
------------- ----
45
<PAGE>
"Vanguard" means Vanguard Cellular Operating Corp., and its successors
--------
and assigns.
"Vanguard Exchange" means the exchange of Vanguard's equity interests
-----------------
in the wireless projects in Brazil (ECTR), Indonesia (MMDS and Cellular), India
(Wireless Local Loop, Telecom Circle/Local Loop and ECTR), Pakistan (ECTR, MMDS
and Wireless Local Loop) and New Zealand (ECTR), where it has co-invested with
the Company or has the right to co-invest with the Company in exchange for
99,306 shares of Series E Preferred Stock of the Company.
"Vanguard Exchange Documents" means (i) the Agreement and Plan of
---------------------------
Reorganization dated July 28, 1995 among the Company, Vanguard International and
Vanguard, (ii) the Amendments to Agreement and Plan of Reorganization dated
August 31, 1995, September 30, 1995, October 31, 1995 and November 30, 1995 each
among the Company, Vanguard International and Vanguard, (iii) the Original
Investor Rights Agreement, (iv) the Amendment to Note Purchase Agreement dated
July 12, 1995 between the Company and Vanguard, (v) the Warrant Amendment
Agreement dated July 12, 1995 between the Company and Vanguard, (iv) Agreement
and Plan of Merger dated as of the date hereof among the Company, Vanguard
International and Vanguard, and (vii) all of the other documents, agreements and
instruments entered into in connection therewith.
"Vanguard International" means Vanguard International
----------------------
Telecommunications, Inc., and its successors and assigns.
"Willkie Farr" means Willkie Farr & Gallagher, counsel to the
------------
Placement Agents.
"Wholly Owned Subsidiary" means any Subsidiary of which 100% of the
-----------------------
total voting power of shares of stock entitled to vote in the election of
directors, managers or trustees thereof (other than directors' qualifying
shares) is at the time owned or controlled, directly or indirectly, by any
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
11. MISCELLANEOUS.
-------------
11.1 PAYMENTS. The Company agrees that, so long as any
--------
Purchaser shall hold any Securities, it will make payments in respect of such
Securities, in compliance with the terms of this Agreement and the other
Transaction Documents, by check or wire transfer of immediately available funds
in U.S. legal currency for credit to the account set forth on Schedule 1,
----------
Schedule 1A and Schedule 2 opposite such Purchaser's name, or to such other
- ----------- ----------
account or accounts as such Purchaser may designate in writing, notwithstanding
any contrary provision herein or in any Transaction Document with respect to the
place of payment. The Company agrees to afford the benefits of this Section 11.1
to any transferee which shall have made the same agreements as the Purchaser has
made in this Section 11.1.
46
<PAGE>
11.2 EXPENSES; INDEMNITY. (a) The Company hereby agrees,
-------------------
whether or not the transactions hereby contemplated shall be consummated, to
pay, and save the Lead Purchaser and any holder of Securities harmless against
liability for the payment of, the reasonable costs and expenses incurred by such
holder that the Company is required to pay under any legally binding agreement
(including, without limitation, the reasonable fees and disbursements of Pryor,
Cashman, Sherman & Flynn, special counsel engaged by the Lead Purchaser) in
connection with (i) this Agreement, the Securities, the other Transaction
Documents or the transactions contemplated hereby or thereby, (ii) any
subsequent proposed amendment to, modification of, or proposed consent under
this Agreement or any of the other Transaction Documents, whether or not such
proposed modification shall be effected or such proposed consent granted, and
(iii) the reasonable costs and expenses, including reasonable attorney's fees,
incurred by the Purchasers or any subsequent holder of the Securities in
enforcing its rights under any of this Agreement, the Securities or any other
Transaction Document or in responding to any subpoena or other legal process
issued in connection with this Agreement or the other Transaction Documents or
the transactions contemplated hereby or by reason of any Purchaser's or any
subsequent holder's of the Securities having acquired any Security, including,
without limitation, costs and expenses incurred in any bankruptcy case involving
the Company or any of its Subsidiaries; provided, however, that (A) the Company
-------- -------
shall not be obligated to pay any costs, fees or expenses incurred by any holder
solely by reason of such holder's gross negligence or willful misconduct and (B)
such counsel shall have submitted a bill including a breakdown of the hours
worked at such firm's normal applicable billing rates. The obligations of the
Company under this Section 11.2 shall survive the transfer of any Securities or
portion thereof or interest therein by any Purchaser or any subsequent holder of
the Securities and the redemption of the Securities.
(b) Notwithstanding any investigation performed by the
Lead Purchaser and the other Purchasers prior to the Closings, from and after
the Closings the Company shall indemnify, save and hold harmless, release and
discharge each holder of any Securities and all of its officers, directors,
stockholders, agents, representatives, consultants, employees, and Affiliates,
and all of its heirs, successors and permitted assigns from and against any and
all damages, obligations, losses, claims, deficiencies, penalties, interest,
expenses, fines, assessments, charges and costs (including, without limitation,
the reasonable fees and disbursements of counsel for such indemnitees incurred
in connection with any action or proceeding between the Company and any such
indemnitee or between any such indemnitee and any third party or otherwise,
whether or not relating to any investigative, administrative or judicial
proceeding and whether or not such indemnitees shall be designated a party
thereto) and other liabilities of any kind, including, without limitation,
Environmental Liabilities (collectively, "Damages"), arising from, out of or in
-------
any manner connected with or based on (i) notwithstanding any disclosure in this
Agreement (including the exhibits and schedules attached hereto) or otherwise,
the breach of any covenant of the Company or the failure by the Company to
perform any of its obligations contained herein or in any of the agreements,
documents or instruments required to be executed and delivered by the Company in
connection with the transactions contemplated hereby and in the other
Transaction Documents, (ii) any inaccuracy in or breach of any representation or
warranty of the Company under this Agreement
47
<PAGE>
or any agreement, document or instrument required to be executed and delivered
by the Company in connection with the transactions contemplated hereby and in
the other Transaction Documents, and (iii) any of the items disclosed in
Schedule 8.12 hereto; provided, however, that the Company shall not have any
- ------------- -------- -------
obligation to any such indemnitee hereunder with respect to Damages arising
solely as a result of such indemnitee's gross negligence or willful misconduct;
and provided, further, however, that the Company shall not have any liability to
-------- ------- -------
any such indemnitee for any Damages arising from, out of or in any manner
connected with or based on any and all inaccuracies in or breaches of any
representations or warranties relating to an Operating Company referred to in
clause (ii) above, unless the aggregate, cumulative Damages resulting from all
inaccuracies or breaches relating to the Company, a Subsidiary and an Operating
Company result in the Securities having a $10 or more per share diminution in
value, based on the original purchase price of $375 per share, in which event
the Company shall be liable for the full extent of such Damages (from the first
dollar).
11.3 CONSENT TO AMENDMENTS; SUBORDINATION. (a) This Agreement
------------------------------------
may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act,
of the holders of seventy five percent (75%) of the number of shares of
Securities at the time outstanding (excluding the Series F-2 Preferred Stock),
and each holder of any shares of Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 11.3;
provided, however, that this Section and Sections 6.1 and 6.14 hereof may only
- -------- -------
be amended if the Company shall have obtained the written consent to such
amendment to act, of the holders of more than eighty percent (80%) of the number
of shares of Securities at the time outstanding (excluding the Series F-2
Preferred Stock). No course of dealing between the Company and the holder of any
share of Securities nor any delay in exercising any rights hereunder or under
any share of Securities shall operate as a waiver of any rights of any holder of
such shares of Securities. As used herein, the term "this Agreement" and
--------------
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
(b) The Purchasers and the Company agree that, prior to
the Company's taking any action prohibited by Section 6 above, the Company will
deliver to the holders of the Securities, as the case may be, a written notice
(the "Company Notice") setting forth in reasonable detail the proposed action to
--------------
be taken by the Company or any of its Subsidiaries. Unless the Company receives
written authorization from the percentage of holders of the Securities, as the
case may be, required for consent in paragraph (a) above by the 20th Business
Day after delivery of the Company Notice, the Company may not proceed with the
proposed action set forth in the Company Notice.
11.4 PERSONS DEEMED OWNERS. Prior to due presentment for
---------------------
registration of transfer, the Company may treat the Person in whose name any
shares of Securities is registered as the owner and holder of such shares of
Securities for the purpose of receiving payment of the liquidation value of, and
dividends on, such shares and for all other purposes whatsoever.
48
<PAGE>
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
--------------------------------------------------
AGREEMENT. All representations and warranties contained (i) in Sections 8.4,
- ---------
8.5, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.14, 8.15, 8.16, 8.17, 8.19 and 8.22
hereof shall survive for a period of five years the execution and delivery of
this Agreement and the Securities, the transfer by any Purchaser of any
Securities or portion thereof or interest therein, or the repurchase or
redemption of the Securities and may be relied upon by any transferee regardless
of any investigation made at any time by or on behalf of any Purchaser or any
subsequent Purchaser, and (ii) in Sections 8.1, 8.2, 8.3, 8.6, 8.13, 8.18, 8.20
and 8.21 hereof and under the other Transaction Documents or made in writing by
or on behalf of the Company in connection herewith or therewith or in connection
with the transactions contemplated hereby or thereby shall, without limit as to
time, survive the execution and delivery of this Agreement and the Securities,
the transfer by any Purchaser of any Securities or portion thereof or interest
therein, or the repurchase or redemption of the Securities and may be relied
upon by any transferee regardless of any investigation made at any time by or on
behalf of any Purchaser or any subsequent Purchaser. Subject to the preceding
sentence, this Agreement, the Securities and the other Transaction Documents
embody the entire agreement and understanding among the Purchasers and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
11.6 SUCCESSORS AND ASSIGNS. All covenants and other agreements
----------------------
in this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Purchaser and subsequent
Purchaser) whether so expressed or not.
11.7 NOTICES. All notices hereunder shall be in writing and
-------
shall be conclusively deemed to have been received and shall be effective except
as explicitly noted hereinabove (i) on the day on which delivered if delivered
personally, or transmitted by telex or telegram or telecopier (followed by a
mailed written confirmation), (ii) on the next Business Day if delivered by a
nationally recognized overnight courier (such as Federal Express), or (iii) five
Business Days after the date on which the same is mailed by registered or
certified mail, return receipt requested, postage and fees prepaid, and shall be
addressed: (a) if to Electra, addressed to it at 65 Kingsway, London, England
WC2B 6QT, Telecopier No.: 011-4471-242-1806, Attention: Mr. Philip Dyke, with a
copy to Electra Inc., 70 East 55th Street, New York, New York 10022, Telecopier
No.: 212-319-3069, Attention: Ms. Diane M. Smith, Senior Vice President, with
copies to Pryor, Cashman, Sherman & Flynn, 410 Park Avenue, New York, New York
10022, Telecopier No.: 212-326-0806, Attention: Selig D. Sacks, Esq., or to such
other address or addresses as Electra shall have specified to the parties hereto
in writing, (b) if to any other holder of any Securities, addressed to such
holder at such address as such other holder shall have specified to the Company
in writing or, if any such other holder shall not have so specified an address
to the Company, then addressed to such other holder in care of the last holder
of such share of Securities which shall have so specified an address to the
Company, and (c) if to the Company, addressed to it at International Wireless
Communications, Inc., 400 South El Camino Real, Suite 1275, San Mateo,
California 94402, Telecopier No.: (415) 843-0314, Attention: President, with a
copy to: Gunderson Dettmer Stough Villeneuve Franklin &
49
<PAGE>
Hachigian, 600 Hansen Way, Second Floor, Palo Alto, California 94306, Telecopier
No.: (415) 843-0314, Attention: Brooks Stough, Esq., or to such other address or
addresses as the Company may have designated in writing to each holder of the
Securities at the time outstanding.
11.8 DESCRIPTIVE HEADINGS, ETC. The descriptive headings of the
-------------------------
several Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. References herein to a Section are, unless
otherwise specified, to one of the Sections of this Agreement and references to
an "Exhibit" or "Schedule" are, unless otherwise specified, to one of the
------- --------
Exhibits or Schedules to this Agreement.
11.9 CONFIDENTIALITY. The Purchasers shall maintain the
---------------
confidential nature of, and shall not use or disclose (including, without
limitation, to any limited partners if a Purchaser is a limited partnership) any
of the Company's confidential information or trade secrets, without first
obtaining the Company's written consent, which consent may be withheld in its
sole discretion. Nothing in this Section 11.9 shall require the Purchasers to
obtain the consent of the Company, before exercising, or in connection with the
exercise of, any of their respective rights under the Transaction Documents upon
the occurrence of a Preferred Stock Failure or a Preferred Stock Failure Event.
The obligations of the Purchasers shall in no event apply to: (i) providing
information about the Securities or any party to any Transaction Document to any
actual or potential assignee; (ii) any situation in which any of Purchasers, in
the sole discretion of the Purchasers, are required by law or required by any
governmental, regulatory or supervisory authority or official to disclose
information; (iii) providing information to counsel to the Purchasers in
connection with the transactions contemplated by the Transaction Documents; (iv)
providing information to independent auditors retained by the Purchasers; (v)
any information that is in or becomes part of the public domain, otherwise than
through a wrongful act of the Purchasers or any employees or agents thereof;
(vi) any information that is in the possession of any of the Purchasers prior to
receipt thereof from the Company or any other Person known to the Purchasers to
be acting on behalf of the Company; (vii) any information that is independently
developed by the Purchasers; and (viii) any information that is disclosed to any
of the Purchasers by a third party that has no obligation of confidentiality
with respect to the information disclosed. In the case of clauses (i), (iii) and
(iv) above, the Purchasers will obtain the agreement of all parties provided
with information on the Company to be bound by the restrictions contained in
this Section 11.9.
11.10 NO AGENCY. (A) Each Purchaser hereby irrevocably agrees
---------
that the Lead Purchaser is not, and shall not be deemed or construed to be, an
agent or trustee or fiduciary for or to any of the Purchasers under this
Agreement or under any other Transaction Document. The Lead Purchaser shall have
no duties or responsibilities to any Purchaser under this Agreement or under any
other Transaction Document and shall not be responsible to any Purchaser for any
recitals, statements, representations or warranties made by the Company or any
other party to a Transaction Document or any officer or official of the Company
or such party or any other Person contained in this Agreement or any other
Transaction 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 Transaction Document, or for the value, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other
50
<PAGE>
Transaction Document or any other document or instrument referred to or provided
for herein or therein, or for any failure by the Company or any such party to
perform any of its obligations hereunder or obligations thereunder.
(B) Each Purchaser agrees that it has, independently and without
reliance on the Lead Purchaser or any other Purchaser, and based on such
documents and information as it has deemed appropriate, made its own investment
analysis of the Company and the decision to enter into this Agreement and that
it will, independently and without reliance upon the Lead Purchaser or any other
Purchaser, 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 Transaction
Document. Each Purchaser agrees that it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Securities and the business, properties, prospects and financial
condition of the Company. Notwithstanding the foregoing, this Section 11.9 does
not in any way limit or modify the representations and warranties of the Company
in this Agreement, in any other Transaction Document or in any writing furnished
to the Purchasers in connection with or pursuant to this Agreement, the
Transaction Documents or in connection with the transactions contemplated by
this Agreement or the Transaction Documents or the right of the Purchasers
(including, without limitation, the Lead Purchaser) to rely thereon.
(C) The Lead Purchaser shall not be required to keep itself
informed as to the performance or observance by the Company or any other party
to the Transaction Documents of this Agreement or any other Transaction Document
or any other document referred to or provided for herein or therein or to
inspect the properties or books of the Company or any other party to the
Transaction Documents. The Lead Purchaser shall not have any duty or
responsibility to provide any Purchaser with any information concerning the
affairs, financial condition or business of the Company or any other party to
the Transaction Documents (or any of their Affiliates) which may come into the
possession of the Lead Purchaser, any of its officers, directors, agents,
counsel or representatives or any of its Affiliates, except that the Lead
Purchaser and the Significant Purchasers shall, at the request of any other
Purchaser, make available to such Purchaser the information that the Lead
Purchaser or such Significant Purchasers obtained in writing solely pursuant to
and in accordance with Section 5.02(i) hereof.
11.11 GOVERNING LAW: CHOICE OF FORUM. THIS AGREEMENT SHALL BE
------------------------------
DEEMED TO HAVE BEEN EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN
MADE IN NEW YORK, NEW YORK. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW RULES OR PRINCIPLES) AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THE SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT
TO ANY CONFLICTS OF LAW RULES OR PRINCIPLES). ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT HERETO AND THERETO SHALL ONLY BE BROUGHT IN THE COURTS OF THE
51
<PAGE>
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS AND IRREVOCABLY WAIVES ANY DEFENSE OR CLAIM TO SUCH
JURISDICTION WHICH EITHER OR BOTH MAY HAVE BASED, DIRECTLY OR INDIRECTLY, ON THE
GROUNDS OF FORUM NON CONVENIENS. IF ANY ACTION IS COMMENCED IN ANY OTHER
JURISDICTION, THE PARTIES HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO
THE SOUTHERN DISTRICT OF NEW YORK. THE COMPANY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE
5 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHTS OF THE
PURCHASERS, OR ANY HOLDER OF ANY OF THE SECURITIES TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
11.12 WAIVER OF JURY TRIAL. THE COMPANY AND THE PURCHASERS
--------------------
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THE RELATIONSHIP THAT IS BEING ESTABLISHED HEREUNDER.
THE COMPANY AND THE PURCHASERS ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE OTHER PARTIES.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
COMPANY AND THE PURCHASERS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT
TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE COMPANY AND THE PURCHASERS
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR
52
<PAGE>
AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
53
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS INC.
By:__________________________________________
Name: Douglas Sinclair
Title: Executive Vice President
ELECTRA INVESTMENT TRUST P.L.C.
By:__________________________________________
Name:
Title:
ELECTRA ASSOCIATES, INC.
By:__________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS INC.
By:__________________________________________
Name:
Title:
ELECTRA INVESTMENT TRUST P.L.C.
By:__________________________________________
Name: H A L H MUMFORD
Title: Authorized Signatory
ELECTRA ASSOCIATES, INC.
By:__________________________________________
Name: R. J. Lewis
Title: Director
CENTRAL INVESTMENT HOLDINGS, INC.
By:__________________________________________
Name:
Title:
TORONTO DOMINION INVESTMENTS, INC.
By:__________________________________________
Name:
Title:
VANGUARD CELLULAR OPERATING CORP.
By:__________________________________________
Name:
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
CENTRAL INVESTMENT HOLDING
(B.V. I.) CO., LTD.
---------------------------------------------
By:__________________________________________
Name: Gilbert Ma
Title: Senior Vice President
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
TORONTO DOMINION INVESTMENTS, INC.
---------------------------------------------
By:__________________________________________
Name: Frederic Hawley
Title: Asst. Vice President
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
VANGUARD CELLULAR OPERATING CORP.
---------------------------------------------
By:__________________________________________
Name: Stephen R. Leeolou
Title: Executive Vice President
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
MITSUI & CO., LTD.
---------------------------------------------
By:__________________________________________
Name: Rentaro Kohama
Title: General Manager
Information Business Development Div.
Information Business Group
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
MITSUBISHI CORPORATION
----------------------------------------------
By:___________________________________________
Name: Tsumeo Kitzura
Title: General Manager
Telecommunication & Broadcasting
Business Div.
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
MassMutual Corporate Value Partners Limited By
Massachusetts Mutual Life Insurance Company as
Investment Manager
--------------------------------------------------
By:_______________________________________________
Name: Mark A. Ahmed
Title: Second Vice President
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Massachusetts Mutual Life Insurance Company
-------------------------------------------------
By:______________________________________________
Name: Mark A. Ahmed
Title: Second Vice President
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
__________________________________________
By: IW Fund - Fred , Manager
---------------------------------------
Name:
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
___________________________________________
By: Jason Wu, December 13, 1995
----------------------------------------
Name: Jason Jenchang Wu
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
The Emerging Markets Telecommunications Fund, Inc.
--------------------------------------------------
By:___________________________________________
Name: Michael A. Pagrato
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Latin America Investment Fund, Inc.
--------------------------------------------
By:_________________________________________
Name: Rachel Manney
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Latin America Equity Fund, Inc.
---------------------------------------------
By:__________________________________________
Name: Rachel Manney
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
C.I. Global Fund
---------------------------------------------
By:__________________________________________
Name: David C. Pauli
Title: Vice President/Fund Accounting
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
C.I. Latin American Fund
---------------------------------------------
By:__________________________________________
Name: David C. Pauli
Title: Vice President/Fund Accounting
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
C.I. Emerging Markets Fund
---------------------------------------------
By:__________________________________________
Name: Ray Chang
Title: President & COO
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Latin America Capital Partners Limited
---------------------------------------------
By:__________________________________________
Name: Marie Woodall
Title: Secretary
For and on behalf of GUERNSEY
INTERNATIONAL FUND MANAGERS
LIMITED, Secretary
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Argentina Equity Investments Partnership
---------------------------------------------
By:__________________________________________
Name:
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Japan Associated Finance Co., Ltd.
---------------------------------------------
By:__________________________________________
Name: Masaki Yoshida
Title: President
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
JAFCO G-5 Investment Enterprise Partnership
---------------------------------------------
By:__________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co.,
Ltd.
Its Executive Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
JAFCO R-1(A) Investment Enterprise Partnership
----------------------------------------------
By:___________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co.,
Ltd.
Its Executive Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
JAFCO R-1(B) Investment Enterprise Partnership
----------------------------------------------
By:___________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co.,
Ltd.
Its Executive Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
JAFCO R-2 Investment Enterprise Partnership
---------------------------------------------
By:__________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co.,
Ltd.
Its Executive Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
U.S. Information Technology Investment
Enterprise Partnership
--------------------------------------------------
By:
_______________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Northwood Ventures
--------------------------------------------------
By:_______________________________________________
Name: Peter G. Schiff
Title: General Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Northwood Capital Partners LLC
--------------------------------------------------
By:_______________________________________________
Name: Peter G. Schiff
Title: Chairman and CEO
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Gateway Venture Partners III, L.P.
--------------------------------------------------
By: Gateway Associates III, L.P.,
its General Partner
By:_______________________________________________
Name: John S. McCarthy
Title: General Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
RS & Co. IV, L.P.
--------------------------------------------------
By:_______________________________________________
Name: John M. Grillos
Title: General Partner of RS & Co.
Venture Partners IV, L.P., its
General Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Bayview Investors, Ltd.
--------------------------------------------------
By:_______________________________________________
Name: John M. Grillos
Title: Managing Director of Robertson,
Stephens & Company Private Equity
Group, L.L.C., its General Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Pavey Family Partners
--------------------------------------------------
By:
_______________________________________________
Name: R.D. Pavey
Title: General Partner
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
__________________________________________________
By:_______________________________________________
Name: Brooks Stough
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
High Point Keller Limited Partnership
--------------------------------------------------
By:_______________________________________________
Name: R. B. Keller
Title: President, High Point Management Inc.
(General Partner)
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
__________________________________________________
By:_______________________________________________
Name: Richard B. Keller II
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Richard B. Keller II, IRA, DLJSC as Custodian
--------------------------------------------------
By:_______________________________________________
Name: Richard B. Keller II
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Harris Corporation
--------------------------------------------------
By:_______________________________________________
Name: Ronald R. Spoehel
Title: Vice President - Corporate
Development
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
__________________________________________________
By:_______________________________________________
Name: Gary J. Morgenthaler
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
__________________________________________________
By:_______________________________________________
Name: Dixon R. Doll
Title:
<PAGE>
(Signature Pages to the Securities Purchase Agreement Continued)
Drysdale Partners
--------------------------------------------------
By:_______________________________________________
Name: George Drysdale
Title:
<PAGE>
EXHIBIT 10.3
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
FIFTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
As of December __, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Rights ..................................................... 1
1.1 Definitions .......................................................... 1
1.2 Request for Registration ............................................. 3
1.3 Company Registration ................................................. 4
1.4 Obligations of the Company ........................................... 4
1.5 Furnish Information .................................................. 6
1.6 Expenses of Demand Registration ...................................... 6
1.7 Expenses of Company Registration ..................................... 7
1.8 Underwriting Requirements ............................................ 7
1.9 Delay of Registration ................................................ 8
1.10 Indemnification ..................................................... 8
1.11 Reports Under Securities Exchange Act of 1934 ....................... 9
1.12 Form S-3 Registration ............................................... 10
1.13 Assignment of Registration Rights ................................... 11
1.14 Limitations on Subsequent Registration Rights; Series F Registration
Rights Agreement ......................................................... 11
1.15 "Market Stand-Off" Agreement ........................................ 12
1.16 Termination of Registration Rights .................................. 12
2. Covenants of the Company ................................................ 13
2.1 Delivery of Financial Statements ..................................... 13
2.2 Inspection ........................................................... 13
2.3 Right of First Offer on Primary Sales ................................ 14
2.4 Restrictions on Sale or Other Disposition of Shares .................. 16
2.5 Right of First Offer on Certain Secondary Sales ...................... 18
2.6 Board Representation ................................................. 20
2.7 Observer Rights ...................................................... 21
2.8 Co-Sale Rights ....................................................... 22
2.9 Stock Purchases by Employees, Officers, Directors and
Consultants .............................................................. 24
2.10 Additional Liquidity Rights ......................................... 25
2.11 Termination of Certain Covenants .................................... 26
3. Miscellaneous ........................................................... 28
3.1 Successors and Assigns ............................................... 28
3.2 Governing Law ........................................................ 28
3.3 Counterparts ......................................................... 28
3.4 Titles and Subtitles ................................................. 28
3.5 Notices .............................................................. 28
3.6 Expenses ............................................................. 28
3.7 Amendments and Waivers ............................................... 28
3.8 Severability ......................................................... 29
3.9 Aggregation of Stock ................................................. 29
3.10 Entire Agreement; Amendment; Waiver ................................. 29
</TABLE>
Schedule A Schedule of Investors
<PAGE>
FIFTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
----------------------------------------------------
THIS FIFTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as
of the ____ day of December, 1995, by and among International Wireless
Communications, Inc., a Delaware corporation (the "Company"), and the investors
listed on Schedule A hereto, each of which is herein referred to as an
----------
"Investor."
RECITALS
--------
WHEREAS, certain of the Investors (the "Existing Investors") hold
shares of the Company's Preferred Stock and/or shares of Common Stock issued
upon conversion thereof and/or other securities convertible or exchangeable into
the Company's Preferred Stock and possess registration rights, information
rights, rights of first offer, and other rights pursuant to the Fourth Amended
and Restated Investor Rights Agreement dated as of July 31, 1995, among the
Company and such Investors, as amended prior to the date hereof, (the "Prior
Agreement"); and
WHEREAS, certain of the Investors are parties to the Securities
Purchase Agreement dated as of December 6, 1995 for the Series F Redeemable
Convertible Preferred Stock (the "Series F Purchase Agreement") and hold shares
of the Company's Preferred Stock and/or shares of Common Stock issued upon
conversion thereof and/or other securities convertible or exchangeable into the
Company's Preferred Stock; and
WHEREAS, the Existing Investors desire to amend and restate the Prior
Agreement and to accept the rights created pursuant hereto in lieu of the
rights granted to them under the Prior Agreement; and
WHEREAS, Vanguard Cellular Operating Corp. ("Vanguard") is party to
that certain Agreement and Plan of Reorganization effective as of July 28, 1995
between the Company and such Investor (the "Reorganization Agreement"), whereby
the Company has issued 99,306 shares of its Series E Preferred Stock to
Vanguard;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as
-------------------
follows:
1.1 Definitions. For purposes of this Agreement:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
1
<PAGE>
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof. For purposes of this Agreement, the holders of securities
which are convertible or exchangeable into Registrable Securities, or which are
convertible or exchangeable into other securities which are convertible or
exchangeable into Registrable Securities, shall be treated as Holders of such
underlying Registrable Securities, and references to Registrable Securities
held by such holders shall include such underlying Registrable Securities.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock of
the Company ("Common Stock") issuable or issued upon conversion of the Series B,
Series C, Series D, and Series E Preferred Stock of the Company, (ii) the Common
Stock issuable or issued upon conversion of Preferred Stock of the Company
issuable or issued (A) upon exercise of the warrants issued to Vanguard pursuant
to that certain Series C Preferred Stock Purchase Agreement dated as of February
24, 1994, as such warrants are amended and restated pursuant to the Warrant
Amendment Agreement dated as of July 31, 1995 (the "Vanguard Warrant Shares"),
(B) upon the exercise of warrants issued to certain Investors pursuant to that
certain Note and Warrant Purchase Agreement dated as of May 6, 1994 (the "1994
Warrant Shares"), (C) upon exercise of warrants (the "1995 Warrant Shares")
issued to certain Investors pursuant to that certain Securities Purchase
Agreement dated as of July 12, 1995 (the "Securities Purchase Agreement"), (D)
upon exercise of warrants issued to Vanguard pursuant to the Note and Warrant
Purchase Agreement dated as of July 31, 1995 (the "Additional Vanguard Warrant
Shares"), and (E) upon exercise of warrants issued to Toronto Dominion
Investments, Inc. or its Affiliates (collectively, "Toronto Dominion"), pursuant
to the Note and Warrant Purchase Agreement (the "TD Purchase Agreement") and the
Loan Agreement, each dated as of August 14, 1995 (the "TD Warrant Shares",
together with Vanguard Warrant Shares, the 1994 Warrant Shares, the 1995 Warrant
Shares, and the Additional Vanguard Warrant Shares, the "Warrant Shares"), (iii)
[intentionally left blank], (iv) the Common Stock issuable or issued upon
conversion of Preferred Stock issuable or issued upon conversion of the two
$900,000 notes issued to Vanguard pursuant to that certain Note Purchase
Agreement dated as of October 26, 1994, as amended by the Amendment to Note
Purchase Agreement dated as of July 12, 1995 between the Company and Vanguard
(collectively, the "Vanguard Notes"), (v) [intentionally left blank], (vi)
[intentionally left blank], and (vii) Common Stock issued as (or issuable upon
the conversion or exercise of any warrant, right or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares referenced in (i) above, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which the related rights under this Section 1 are not assigned pursuant to
Section 1.13.
(g) The term "SEC" shall mean the Securities and Exchange Commission.
2
<PAGE>
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
three (3) years after the date hereof, or (ii) six (6) months after the
effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a
written request from the Holders of at least forty percent (40%) of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least for forty percent
(40%) of the Registrable Securities then outstanding (or a lesser percent if
the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $2,500,000), then the Company shall:
(i) within twenty (20) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(b),
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be
reasonably acceptable to holders of a majority of the Registrable Securities
then held by Initiating Holders. In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by holders of a majority of the Registrable Securities then held by
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in usual and customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other
provision of this Section 1.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company held by each Holder;
provided, however, that, except as provided in that certain Registration Rights
Agreement dated as of December ____, 1995 among the Company and the holders of
"Registrable Securities" as defined therein (the "Series F Registration Rights
Agreement"), the number of shares of Registrable Securities to be included in
3
<PAGE>
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
4
<PAGE>
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or until the distribution contemplated in the Registration Statement has
been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
5
<PAGE>
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printing
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders selected by them) shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses on a pro rata basis
based on the number of Registrable Securities requested to be registered),
unless the Holders of a majority of the Registrable Securities requested to be
registered agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the
time of their request
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and have withdrawn the request with reasonable promptness following disclosure
by the Company of such material adverse change, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, of Registrable
Securities with respect to the registrations pursuant to Section 1.3 for each
Holder, including (without limitation) all registration, filing and
qualification fees, printing and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company (including
fees and disbursements of counsel for the Company in its capacity as counsel to
the selling Holders hereunder; if Company counsel does not make itself available
for this purpose, the Company will pay the reasonable fees and disbursements of
one counsel for the selling Holders selected by them), but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event, except as otherwise required by
the Series F Registration Rights Agreement, shall (i) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling stockholders may be excluded entirely if the underwriters make
the determination described above and no other stockholder's securities are
included or (ii) notwithstanding (i) above, any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 1.2 be excluded from such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
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1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without
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the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 1.10(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
9
<PAGE>
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders of at least 20% in the aggregate of Registrable Securities
a written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the
10
<PAGE>
Company and its stockholders for such Form S-3 registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than 60 days
after receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve month period; or (4) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company, unless the Company has within the 12-month period preceding the date
of such request paid the expenses incurred in connection with a registration
pursuant to Section 1.12, in which case the expenses shall be borne pro rata by
the Holder or Holders participating in the Form S-3 registration.
Registrations effected pursuant to this Section 1.12 shall not be counted as
demands for registration or registrations effected pursuant to Sections 1.2 or
1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the transferee or assignee receives
at least 250 shares of Registrable Securities (subject to adjustment for stock
splits, stock dividends and the like) in the transfer of such securities; (b)
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(c) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without limitation the
provisions of Section 1.15 below; and (d) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
1.14 Limitations on Subsequent Registration Rights; Series F
-------------------------------------------------------
Registration Rights Agreement. From and after the date of this Agreement, the
- -----------------------------
Company shall not, without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include such securities in
any registration filed under Section 1.2 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of either
of the dates set forth in subsection 1.2(a) or within one hundred twenty (120)
days of the effective date of any registration effected pursuant to Section 1.2.
Notwithstanding anything herein to the contrary, the holders of Registrable
Securities acknowledge the terms and provisions of the Series F Registration
Rights Agreement and agree that
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to the extent that this Agreement conflicts in any respect with the Series F
Registration Rights Agreement, the terms and provisions of the Series F
Registration Rights Agreement shall govern in all respects, including, without
limitation, the terms and provisions of Sections 2, 3, and 12 of the Series F
Registration Rights Agreement governing the priorities of inclusion of
securities of the Company in a registration, whether such registration is by the
Company for its own account or on behalf of any security holder of the Company
(including the Holders) exercising a demand or incidental registration right.
1.15 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the date of the
first sale to the public pursuant to a registration statement of the Company
filed under the Act, it shall not, to the extent requested by the Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any securities of the Company held by it at any time during
such period except common stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements;
(c) such market stand-off time period shall not exceed one hundred
and twenty (120) days; and
(d) such agreement shall not preclude transfer in a private
transaction to an institutional buyer who agrees to be bound by such agreement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a SEC Rule 145 transaction.
1.16 Termination of Registration Rights. The right of any Holder to
----------------------------------
request registration or inclusion in any registration pursuant to Section 1.3
shall terminate on the closing of the first Company-initiated registered public
offering of Common Stock of the Company if all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may immediately be
sold under Rule 144 during any 90-day period, or on such date after the closing
of the first Company-initiated registered public offering of Common Stock of
the Company as all
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shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during any 90-day period.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
including notes thereto, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles
("GAAP"), and audited and certified by independent public accountants of
nationally recognized standing selected by the Company;
(b) within thirty (30) days of the end of each month, an unaudited
income statement, a balance sheet and a statement of cash flows for and as of
the end of such month, in reasonable detail;
(c) as soon as practicable, but in any event sixty (60) days prior to
the end of each fiscal year, a budget and business plan for the next fiscal
year, prepared on a monthly basis, including income statements, balance sheets
and statements of cash flows for such months and, as soon as prepared, any other
budgets, including internally prepared quarterly budget forecasts or revised
budgets prepared by the Company;
(d) within fifteen (15) days of the end of each calendar quarter, a
quarterly operations reports summarizing activities during preceding quarter;
(e) with respect to the financial statements called for in subsection
(b) of this Section 2.1, an instrument executed by the Chief Financial Officer
or President of the Company and certifying that such financial statements were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by GAAP)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information.
2.2 Inspection. The Company will also permit each Investor and its
----------
authorized representatives, at all reasonable times and as often as reasonably
requested, to visit and inspect, at the expense of such Investor, any of the
properties of the Company, to inspect its books and records and to make
extracts therefrom, and to discuss the affairs, finances and accounts of the
Company
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with its officers and consult with and advise the officers of the Company as to
the management of the Company, provided that the Investors shall maintain the
confidentiality of any proprietary information of the Company thereby obtained
and provided further that the Investors shall conduct all such inspections in a
manner that is not disruptive to the employees or operations of the Company.
2.3 Right of First Offer on Primary Sales. Subject to the terms and
-------------------------------------
conditions specified in this Section 2.3, the Company hereby grants to each
Major Investor (as hereinafter defined) a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.3, a Major Investor shall mean (i) any Investor who
is a Holder of at least 10% of either the Registrable Securities or the Series
F Registrable Securities (as defined below) initially acquired by such
Investor, but in any event not less than 100 shares of either the Registrable
Securities or the Series F Registrable Securities and (ii) any person who
acquires at least 10% in the aggregate of any of the Series B, Series C, Series
D, Series E or Series F Preferred Stock (or the Common Stock issued or issuable
upon conversion thereof) outstanding as of the date hereof. For purposes of
this Agreement, the term "Series F Registrable Securities" and the term
"Holder" as used in relation thereto shall have the meanings given to the terms
"Registrable Securities" and "Holder" in the Series F Registration Rights
Agreement, and the term "Affiliates" shall have the meaning given to such term
in Section 2.4(e) below. For purposes of this Section 2.3, Investor includes
any general partners and Affiliates of an Investor. An Investor shall be
entitled to apportion the right of first offer hereby granted it among itself
and its partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to convertible into or exercisable for
any shares of, any class of its capital stock ("Shares"), the Company shall
first make an offering of such Shares to each Major Investor in accordance with
the following provisions:
(a) The Company shall deliver a notice by certified mail ("Section
2.3 Notice") to each Major Investor stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) By written notification received by the Company within twenty
(20) calendar days after receiving the Section 2.3 Notice, each Major Investor
may elect to purchase or obtain, at the price and on the terms specified in the
Section 2.3 Notice, up to that portion of such Shares which equals the total
number of Shares multiplied by a fraction, (a) the numerator of which is the sum
of the number of Registrable Securities referred to in clauses (i) and (iv) of
Section 1.1(f) and the number of Series F Registrable Securities then held by
such Major Investor, and (b) the denominator of which is the total number of
shares of Common Stock then outstanding (assuming full conversion of all then
outstanding convertible securities of the Company). The Company shall promptly,
in writing, inform each Major Investor which purchases all of the Shares
available to it under this Section 2.3 ("Fully-Exercising Investor") of any
other Major Investor's failure to do likewise. During the ten (10)-day period
commencing after receipt of such information, each Fully-Exercising Investor
shall be entitled to purchase up to that portion of the Shares for which Major
Investors were entitled to subscribe but which were not subscribed for by the
Major
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Investors which is equal to the total number of unsubscribed Shares multiplied
by a fraction, (a) the numerator of which is the sum of the number of
Registrable Securities referred to in clauses (i) and (iv) of Section 1.1(f) and
the number of Series F Registrable Securities, as the case may be, then held by
such Fully-Exercising Investor, and (B) the denominator of which is the total
number of Registrable Securities referred to in clauses (i) and (iv) of Section
1.1(f) and the number of Series F Registrable Securities then held by all
Fully-Exercising Investors who wish to purchase some of the unsubscribed shares.
(c) If all Shares which Investors are entitled to purchase pursuant
to subsection 2.3(b) are not elected to be purchased as provided in subsection
2.3(b) hereof, the Company may, during the ninety (90)-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer remaining
unsubscribed portion of such Shares to any person or persons at a those
specified in the Section 2.3 Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within thirty (30) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall not be
applicable (i) to the issuance or sale of up to 50,000 shares of Common Stock
(or such additional number of shares of Common Stock as may be approved in
writing by holders of a majority of the number of outstanding Registrable
Securities and holders of a majority of the Series F Registrable Securities at
the time of such approval) (in each case, as appropriately adjusted for any
stock dividends, contributions, splits, reclassifications or the like) to
officers, directors and employees of and consultants to the Company for the
primary purpose of soliciting or retaining their services, provided each such
person executes an agreement, pursuant to which such person agrees to resell to
the Company at the original purchase price thereof all shares of the Company's
Common Stock that are not vested on the date of termination of such employee's
term of service with the Company and not to transfer any unvested shares of the
Company's Common Stock to any person except to members of his or her immediate
family or to a trust for the benefit of members of his or her immediate family,
or (ii) to or after consummation of a Threshold Public Offering (as defined in
the Amended and Restated Certificate of Incorporation of the Company), (iii) the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities (including the Warrant Shares and the Common Stock
issuable upon conversion thereof), (iv) the issuance of securities in connection
with a bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise, (v) the
issuance of stock, warrants or other securities or rights to persons or entities
with which the Company has business relationships provided such issuances are
for other than primarily equity financing purposes (provided that no more than
1% of the total number of shares of Common Stock then outstanding (assuming full
conversion of all then outstanding convertible securities of the Company) may be
excluded from the right of first offer pursuant to this clause (v) during any
twelve (12)-month period), and (vi) the issuance of Shares to Vanguard upon
conversion of the Vanguard Notes.
(e) The right of first offer set forth in this Section 2.3 may not be
assigned or transferred, except that (i) such right is assignable by each Holder
and each Holder (within the
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meaning of the Series F Registration Rights Agreement) of Series F Registrable
Securities (a "Series F Holder") to any wholly owned subsidiary or parent of, or
to any corporation or entity that is, within the meaning of the Act,
controlling, controlled by or under common control with, any such Holder or
Series F Holder, and (ii) such right may be transferred to a third party who
buys (x) at least 1,000 shares of the Registrable Securities or Series F
Registrable Securities (subject to adjustment for stock splits, stock dividends
and the like) or (y) all shares held by an Investor.
2.4 Restrictions on Sale or Other Disposition of Shares. (a) No
---------------------------------------------------
Investor shall, either directly or indirectly, sell, assign, mortgage,
hypothecate, transfer, pledge, create a security interest in or lien upon,
encumber, give, place in trust, or otherwise voluntarily or involuntarily
dispose of (collectively hereinafter sometimes referred to as "Transfer") any of
the shares of capital stock then owned or controlled by such party except in
accordance with Section 2.4(b), 2.4(d), 2.4(f), 2.5 or 2.8. No Transfer of any
shares of capital stock in violation of the provisions of this Agreement shall
be made or recorded on the books of the Corporation and any such purported
transfer shall be void and of no force or effect.
(b) Notwithstanding anything to the contrary contained in this
Agreement, any Investor shall have the right at any time to Transfer any of its
shares of Capital Stock (as defined in the Series F Purchase Agreement) of the
Company to any Affiliate, upon such terms as may be agreed upon by such party
and its transferee; provided, however, that (i) any such Transfer shall be made
-------- -------
in compliance with the Securities Act and applicable state securities laws, or
pursuant to an exemption therefrom, and (ii) any such transferee shall (A)
acquire the shares so transferred subject to all the terms and conditions of
this Agreement, (B) shall agree in writing, at the time of the Transfer, to be
bound by all of the provisions of this Agreement which would be applicable to
the Investor if it continued to own the shares so transferred, and (C) shall be
an "accredited investor" within the meaning of Regulation D under the Securities
Act. In addition to and subject to compliance with the foregoing, Electra
Investment Trust P.L.C. ("EIT") and Electra Associates, Inc. (collectively,
"Electra"), shall have the right to Transfer any of its shares of Capital Stock
of the Company to Electra Fleming Equity Partners (provided that at the time of
such Transfer such entity is an Affiliate of EIT). Notwithstanding anything to
the contrary in this Agreement, each Investor other than a Section 2.5
Stockholder (as defined below) shall be permitted to Transfer such Investor's
shares of Capital Stock of the Company, subject only to compliance with clauses
(i) and (ii) of the proviso to the first sentence of this Section 2.4(b).
Notwithstanding anything to the
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contrary contained in this Agreement, Toronto Dominion Investments, Inc.
("Toronto Dominion") shall have the unrestricted right to assign or transfer any
of its shares of Capital Stock of the wholly or majority owned subsidiary of the
ultimate parent of Toronto Dominion including, without limitation, a subsidiary
established as (or which is expected by Toronto Dominion to become) a small
business investment company pursuant to the Small Business Investment Act of
1958, as amended from time to time, subject to compliance with clauses (i) and
(ii) of the proviso to the first sentence of this Section 2.4(b).
Notwithstanding anything to the contrary contained in this Agreement, Vanguard
shall have the right at any time to Transfer any shares of Capital Stock of the
Company (whether now owned or hereafter acquired by Vanguard) to the Vanguard
lenders (as defined below) pursuant to that certain Amended and Restated
Subsidiary Pledge Agreement dated as of December 23, 1994 between Vanguard and
Toronto Dominion (Texas), Inc., as Collateral Agent, as amended, subject to and
in accordance with the Prior Agreement and, Vanguard Lenders shall have the
right to Transfer any such shares acquired upon the exercise of their rights
under such Amended and Restated Subsidiary Pledge Agreement subject to and in
accordance with the Prior Agreement, in each case as if the Prior Agreement were
in full force and effect on the date of Transfer. "Vanguard Lenders" shall have
the meaning given to the term "Lenders" in that certain Amended and Restated
Loan Agreement dated as of December 23, 1994 among Vanguard, the Lenders, and
the other parties thereto. Any Transfer under this Section 2.4(b) shall not be
subject to the provisions of Section 2.5.
(c) In the event of any Transfer in accordance with the provisions of
Section 2.4(b), prompt written notice of the Transfer shall be delivered by the
Transferor to the Corporation, and, in the case of any Transfer pursuant
Section 2.4 hereof, references herein to the Investor shall include, from and
after the date of such permitted transfer, each such permitted transferee
(transferees acquiring such shares pursuant to Section 2.4(b) are hereinafter
sometimes referred to as "Permitted Transferees").
(d) For so long as any shares of Series F Preferred Stock shall
remain outstanding, neither John D. Lockton, Hugh B. L. McClung, Douglas
Sinclair, Samuel Endy, Patrick Ciganer, Conny Dolonius nor any other manager of
any Project (as defined in the Series F Purchase Agreement) or any other
managers designated to oversee operations in a country or region (collectively,
"Management") may Transfer any Capital Stock (as defined in the Series F
Purchase Agreement) of the Company owned at any time by such individual, except
that Hugh B. L. McClung ("McClung") shall have the right the Transfer (subject
to the other provisions of this Agreement) up to $500,000 in value of the
Capital Stock of the Company owned (beneficially or of record) by McClung,
provided that such shares do not constitute in excess of 10% of the Capital
Stock of the Company owned by McClung as of the date of this Agreement. The
foregoing transfer restrictions shall not (i) apply to any member of Management
(other than a director of the Company) who owns 500 or fewer shares of Capital
Stock of the Company or (ii) prevent any member of Management (other than a
director of the Company) who as of the date of this Agreement owns 500 or fewer
shares of Capital Stock of the Company and who hereafter owns more than 500
shares of Capital Stock of the Company from Transferring up to 500 shares of
Capital Stock of the Company.
(e) For purposes of this Agreement, the term "Affiliate" means, (i)
with respect to any person, any other person (A) which directly or indirectly of
record or beneficially owns or
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<PAGE>
holds fifty percent (50%) or more of the equity interest of such person, or (B)
fifty percent (50%) or more of the equity interest which is owned or held,
directly or indirectly, of record or beneficially, by such person and (ii) with
respect to any person that is an investment fund, any other person which is an
investment fund and which has as its investment managers or adviser, the same
investment manager or adviser as such a person or an investment manager or
adviser a majority of the individual investment professionals of which are the
same as the individual investment professionals of the investment manager or
adviser of such other person.
(f) Prior to the earlier of the second anniversary of the date of
this Agreement and the date on which any shares of Series F Preferred Stock no
longer remain outstanding, except as set forth in Section 2.4(b) above, neither
Vanguard nor any of its Affiliates may Transfer any of its Capital Stock of the
Company unless (i) immediately following such Transfer Vanguard and its
Affiliates collectively own not less than 30% of the then issued and outstanding
shares of Capital Stock of the Company and (ii) the consideration per share
received by Vanguard or such Affiliate of Vanguard, as the case may be, with
respect to such Transfer equals or exceeds $375 per share (as appropriately
adjusted for stock splits, stock dividends, combinations and other
recapitalizations).
2.5 Right of First Offer on Certain Secondary Sales. Subject to the
-----------------------------------------------
terms and conditions specified in this Section 2.5, each Investor who, as of the
date of this Agreement or hereafter, holds 2,500 shares of Common Stock of the
Company, including securities convertible into such number of shares of Common
Stock of the Company (as appropriately adjusted for any stock dividends,
contributions, splits, reclassifications or the like) (individually a "Section
2.5 Stockholder," and collectively the "Section 2.5 Stockholders"), hereby
grants to each other Section 2.5 Stockholder (but excluding each holder of
Series A Preferred Stock) (individually a "Section 2.5 Rights Holder," and
collectively the "Section 2.5 Rights Holders") a right of first offer with
respect to future sales of Shares by such Section 2.5 Stockholder.
Notwithstanding any other provision of this Agreement, a Section 2.5
Stockholder; (i) includes any general partners and Affiliates of such Section
2.5 Stockholder; and (ii) excludes each Investor listed on Schedule 1 attached
----------
hereto, provided that each such Investor shall be excluded only until such time
as such Investor and its Affiliates own in the aggregate in excess of 20,000
shares of the Capital Stock of the Company (as appropriately adjusted for any
stock dividends, contributions, splits, reclassifications or the like). The
Section 2.5 Stockholder, shall be entitled to a portion of the right of first
offer hereby granted it among itself and its partners and Affiliate in such
proportions as it deems appropriate.
Each time a Section 2.5 Stockholder (an "Initiating Section 2.5
Stockholder") proposes to offer any Shares, except as provided in Section 2.4(b)
above, the Section 2.5 Stockholder shall first make an offering of such shares
to each other Section 2.5 Rights Holder in accordance with the following
provisions:
(a) The Initiating Section 2.5 Stockholder shall deliver a written
notice by certified mail ("Section 2.5 Notice") to the Section 2.5 Rights
Holders stating (i) its bona fide intention to offer such Shares, (ii) the
number of Shares to be offered ("Section 2.5 Shares") and (iii) the price and
terms, if any, upon which it proposes to offer the Section 2.5 Shares.
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<PAGE>
(b) By written notification received by the Initiating Section 2.5
Stockholder within ten (10) business days after receiving the Section 2.5
Notice, each Section 2.5 Rights Holder may elect to purchase or obtain, at the
price and on the terms specified in the Section 2.5 Notice, up to that number
of the Section 2.5 Shares equal to the product of the total number of Section
2.5 shares multiplied by a fraction (A) the numerator of which is the number of
shares of Common Stock issued and held, or issuable upon conversion of the
convertible securities of the Company then held by such Section 2.5 Rights
Holder and (B) the denominator of which is the total number of shares of Common
Stock then outstanding (assuming full conversion of all then outstanding
convertible securities of the Company). The Initiating Section 2.5 Stockholder
shall promptly, in writing, inform each Section 2.5 Rights Holder which
purchases all of the Section 2.5 Shares available to it ("Fully-Exercising
Section 2.5 Rights Holder") of any other Section 2.5 Rights Holder's failure to
do likewise. During the ten (10) business day period commencing after receipt
of such information, each Fully-Exercising Section 2.5 Rights Holder shall be
entitled to purchase up to that portion of the Section 2.5 Shares that the
Section 2.5 Rights Holders were entitled to subscribe but which were not
subscribed for by the Section 2.5 Rights Holders which is equal to the
proportion of that number of shares of Common Stock issued and held, or
issuable upon conversion of convertible securities of the Company then held, by
such Fully-Exercising Section 2.5 Rights Holder bears the total number of
shares of Common Stock issued and held, or issuable upon the conversion of
convertible securities of the Company then held, by all Fully-Exercising
Section 2.5 Rights Holders who wish to purchase some of the unsubscribed Shares.
(c) If all of the Section 2.5 Shares which Section 2.5 Rights Holders
are entitled to purchase pursuant to subsection 2.5(b) hereof are not elected to
be purchased as provided in such subsection and if such purchases have not been
consummated within thirty (30) days of the expiration of the periods in such
subsection 2.5(b), the Initiating Section 2.5 Stockholder may, during the sixty
(60)-day period following the expiration of the period provided in such
subsection 2.5(b), offer the remaining unsubscribed portion of such Section 2.5
Shares to the offeree at a price not less than, and upon terms more favorable to
the offeree than those specified in the Section 2.5 Notice. If the Initiating
Section 2.5 Stockholder does not enter into an agreement for the sale of such
Section 2.5 Shares within such period, or if such agreement is not consummated
within the ninety (90)-day period following the expiration of the period
provided in such subsection 2.5(b), the right provided herein shall be deemed to
be revived in such Section 2.5 Shares shall not be offered unless first
reoffered to the Non-Initiating Section 2.5 Stockholders in accordance herewith.
(d) The Company may, at its discretion, cause any additional
purchaser of Capital Stock of the Company to agree to comply with the provisions
of this Section 2.5 as such Section 2.5 Stockholder.
(e) Notwithstanding the foregoing, the provisions of this Section 2.5
shall not apply to the sale of any Shares (i) to the public pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Act or pursuant to Rule 144 or 701 under the Act or (ii) to the Company.
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<PAGE>
Notwithstanding any other provision of this Agreement, each of
Mitsui & Co. Ltd. and its affiliates and Mitsubishi Corporation and its
affiliates (individually, a "Section 2.5A Stockholder;" collecitvely, the
"Section 2.5A Stockholders") may, at its sole discretion, elect not to be a
Section 2.5 Stockholder for purposes of this Agreement if all of the following
conditions are satisfied:
(i) the Company shall acquire a direct or indirect interest in a
United States PCS License ("License") or an entity that holds a License;
(ii) at the time of such acquisition by the Company, such Section
2.5A Stockholder holds a direct or indirect interest in a License or an entity
that holds a License;
(iii) as a result of such acquisition by the Company, such Section
2.5A Stockholder would violate applicable United States federal or state
communications laws, including the United States Federal Communications Act, or
the rules and regulations thereunder, by continuing to hold both its equity
interest in the Company and a direct or indirect interest in a License or an
entity that holds a License; and
(iv) such Section 2.5A Stockholder notifies the Company within sixty
days after receiving notice from the Company that the Company has acquired a
direct or indirect interest in a License or an entity that holds a License.
2.6 Board Representation. (a) Without limiting the right of Vanguard
--------------------
as a holder of Series E Preferred Stock to elect three (3) directors to the
Company's Board of Directors pursuant to subsection V.B.6(b) of the Company's
Amended and Restated Certificate of Incorporation ("Restated Certificate"),
Vanguard and any Affiliate thereof agrees to cast the votes represented by
shares of Series C, D and F Preferred Stock (but not any other class or series
of capital stock, including Common Stock issuable upon conversion of the Series
C, D and E Preferred Stock) for the election of directors who are both officers
and employees of the Company. The obligation of Vanguard pursuant to this
Section 2.5 shall terminate on August 31, 1996.
(b) From and after such time as the criteria set forth in Section
V.B.6(b) of the Restated Certificate with respect to the election of directors
by the Series F Holders are no longer satisfied, for so long as 20% of the
Series F Conversion Shares (as defined below) are held by Series F Holders, each
Investor covenants to vote his or its shares in favor of at least three (3)
directors (the "Series F Directors") designated by the holders of a majority of
the Series F Conversion Shares held by the Series F Holders at each annual
meeting of stockholders of the Corporation at which any director is elected or
at the time of any written consent to action in lieu of any such meeting;
provided, that (i) for so long as Electra (or its assignee) owns at least 5,334
- --------
Series F Conversion Shares (as such number may be adjusted appropriately for
stock splits, stock dividends, combinations and other recapitalizations),
Electra (or its assignee, provided such assignee is an Affiliate of Electra)
shall have the right to designate one (1) of the directors (the "Electra
Director") to be designated by the holders of the Series F Conversion Shares,
(ii) for so long as Central Investment Holdings, Inc. ("CIH") (or its assignee)
owns at least 5,334 Series F Conversion Shares (as such number may be adjusted
appropriately for stock splits, stock dividends,
20
<PAGE>
combinations and other recapitalizations), CIH (or its assignee, provided such
assignee is an Affiliate of CIH) shall have the right to designate one (1) of
the directors to be designated by the holders of the Series F Conversion Shares;
and (iii) for so long as Toronto Dominion (or its assignee) owns at least 5,334
Series F Conversion Shares (as such number may be adjusted appropriately for
stock splits, stock dividends, combinations and other recapitalizations),
Toronto Dominion (or its assignee, provided such assignee is an Affiliate) shall
have the right to designate one (1) of the directors to be designated by the
holders of the Series F Conversion Shares, provided, however, that Toronto
-------- -------
Dominion or such Affiliate shall not be entitled to so designate such director
if exercising this right would be in violation of the Bank Holding Company Act
(as defined in Section 2A.4). At least one of the Series F Directors, which
shall be the Electra Director, if any, shall have the right to be a member of
the Audit and Compensation Committees of the Board, if any, or of any committee
of the Board performing comparable functions. For purposes of this Section
2.6(b), "Series F Conversion Shares" shall mean the shares of Common Stock
issued or issuable upon conversion of the shares of Series F-1 Preferred Stock
originally issued pursuant to the Series F Purchase Agreement or shares of
Common Stock issued or issuable upon conversion of the shares of Series F-1
Preferred Stock issued upon conversion of the Series F-2 Preferred Stock
originally issued pursuant to the Series F Purchase Agreement.
No director(s) so designated by the holders of the Series F Conversion
Shares, or Electra, CIH or Toronto Dominion (or its respective assignee,
provided such assignee is Dominion), as the case may be, may be removed without
the prior consent, given in person or by proxy, either in writing or at a
special meeting called for that purpose, of the holders of such Series F
Conversion Shares, voting separately as a class. In case of the death,
resignation or other removal of any Series F Director, including the Electra
Director, the holders of a majority of the Series F Conversion Shares held by
the Series F Holders, or Electra (or its assignee), as the case may be, shall
have the right to designate a successor director to hold such office for the
unexpired term of such removed director. Each Investor covenants and agrees to
vote his or its shares, as promptly as possible, either at a special meeting
called for such purpose or by written consent in lieu of a meeting, in favor of
the election of such successor designee.
2.7 Observer Rights. Each Investor who is the Holder of not less
---------------
than either two thousand (2,000) Registrable Securities referred to in clauses
(i), (iii) and (iv) of Section 1.1(f) or the Holder (within the meaning of the
Series F Registration Rights Agreement) of not less than two thousand (2,000)
Series F Registrable Securities (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations) is entitled
to have one representative designated by such Investor attend all meetings of
its Board in the capacity of a nonvoting, observer who may participate in
discussions and, in this respect, copies of all notices, minutes, consents, and
other materials that the Company provides to its directors shall be given to
such representative; provided, however, that such representative shall agree to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information so provided; and, provided further, that the Company reserves
the right to withhold any information and to exclude such representative from
any meeting or portion thereof if access to such information or attendance at
such meeting could adversely affect the attorney-client privilege between the
Company and its counsel or would result in disclosure of trade secrets to such
representative of if such Investor or its representative is a direct competitor
of the Company. Each Investor that is an entity may designate a representative
to
21
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attend such meetings on its behalf. Each Investor (or representative thereof)
may designate an alternate to attend such meetings on its behalf if such
Investor (or representative thereof) is unable to attend. The Company
acknowledges that it is contractually required to comply with the obligations of
this Section 2.7.
2.8 Co-Sale Rights.
--------------
(a) Any Section 2.5 Rights Holder which does not elect to purchase
any of the Section 2.5 Shares available to it may elect to participate (a
Section 2.5 Rights Holder so electing being herein a "Participant") in the
Initiating Section 2.5 Stockholder's sale of Shares in accordance with this
Section 2.8
(b) Each Participant shall have the right (the "Participation Right")
to Transfer to the purchaser and any Section 2.5 Rights Holders who has
exercised the Right of First Offer set forth in Section 2.5 above a number of
Shares equal to the product of (i) the aggregate number of Section 2.5 Shares
and (ii) such Participant's Pro Rata Percentage Amount (as defined below);
provided, however, that with respect to any Participant which is a Series F
- -------- -------
Holder, until such time as such Participant shall have received proceeds upon
the Transfer of Series F Registrable Securities which equals or exceeds the
product of (x) the number of Series F Registrable Securities purchased by such
Participant, (y) $375 (as appropriately adjusted for any stock dividends,
combinations, splits or the like with respect to such shares), and (z) .50, such
Participant shall have the right to Transfer a number of Shares equal to the
product of (i) the aggregate number of Section 2.5 Shares, (ii) such
Participant's Pro Rata Percentage Amount and (iii) 150%. For purposes of this
Section 2.8, a Participant's Pro Rata Percentage Amount shall be equal to the
fraction, the numerator of which is the number of shares of Common Stock owned
by such Participant at the time of the sale or transfer (assuming the full
conversion of all convertible securities of the Company then owned by such
Participant) and the denominator of which is the total number of shares of
Common Stock owned by the Initiating Section 2.5 Stockholder and all
Participants at the time of the Transfer (assuming the full conversion of all
convertible securities of the Company then owned by the Initiating Section 2.5
Stockholder and all Participants), and rounded to the nearest whole number.
(c) Each Participant shall effect its participation in the sale by
promptly delivering to the Initiating Section 2.5 Stockholder for transfer to
the prospective purchaser one or more certificates, properly endorsed for
transfer, which represent:
(i) the type and number of shares of Common Stock which
such Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at
such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in subsection 2.8(c)(i) above. The Company agrees to
make any such conversion concurrent with the actual transfer of such shares to
the purchaser.
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(d) The stock certificate or certificates that the Participant
delivers to the Initiating Section 2.5 Stockholder pursuant to paragraph 2.8(c)
shall be transferred to the prospective purchaser in consummation of the sale of
the Shares pursuant to the terms and conditions specified in the Notice, and the
Initiating Section 2.5 Stockholder shall concurrently therewith remit to such
Participant that portion of the sale proceeds to which such Participant is
entitled by reason of its participation in such sale. To the extent that any
prospective purchaser or purchasers prohibits such assignment or otherwise
refuses to purchase shares or other securities from a Participant exercising its
rights of co-sale hereunder, the Initiating Section 2.5 Stockholder shall not
sell to such prospective purchaser or purchasers any Shares unless and until,
simultaneously with such sale, the Initiating Section 2.5 Stockholder shall
purchase such shares or other securities from such Participant.
(e) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Shares made by an Initiating
Section 2.5 Stockholder shall not adversely affect their rights to participate
in subsequent sales of Shares subject to this Section 2.8.
(f) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any pledge of Shares made pursuant to a bona
fide loan transaction that creates a mere security interest; (ii) any transfer
to the ancestors, descendants or spouse or to trusts for the benefit of such
persons of a Investor; (iii) any bona fide gift, provided that the transferring
Investor shall inform the other Investors of such pledge, transfer or gift prior
to effecting it; (iv) a transfer by an Investor that is a partnership to a
partner of such partnership or a retired partner of such partnership who retires
after the date hereof, or to the estate of any such partner or retired partner
or (v) a transfer by any Investor to any Affiliate of such Investor; provided
that in each such case the pledgee, transferee or donee, as the case may be,
shall furnish to the Company and the other Investor a written agreement to be
bound by and comply with all the provisions of this Section 2.8. Such
transferred Shares shall remain "Shares" hereunder.
(g) Notwithstanding the foregoing, the provisions of this Section 2.8
shall not apply to the sale of any Shares (i) to the public pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Act or pursuant to Rule 144 or 701 under the Act or (ii) to the Company.
(h) In the event an Initiating Section 2.5 Stockholder should sell
any Shares in contravention of the co-sale rights of the Investor under this
agreement (a "Prohibited Transfer"), the Investors, in addition to such other
remedies as may be available at law, in equity or hereunder, shall have the put
option provided below, and the Initiating Section 2.5 Stockholder shall be bound
by the applicable provisions of such option.
(i) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to the Initiating Section 2.5 Stockholder the type and number
of Shares equal to the number of shares each Investor would have been entitled
to transfer to the purchaser had the Prohibited Transfer been effected pursuant
to and in compliance with the terms hereof. Such sale shall be made on the
following terms and conditions:
23
<PAGE>
(i) The price per share at which the shares are to be
sold to the Initiating Section 2.5 Stockholder shall be equal to the price per
share paid by the purchaser to the seller in the Prohibited Transfer. The
Initiating Section 2.5 Stockholder shall also reimburse each Investor for any
and all fees and expenses, including legal fees and expenses, incurred pursuant
to the exercise or the attempted exercise of the Investor's rights under this
Section 2.8.
(ii) Within 90 days after the later of the dates on which
the Investor (A) received notice of the Prohibited Transfer or (B) otherwise
become aware of the Prohibited Transfer, each Investor shall, if exercising the
option created hereby, deliver to the Initiating Section 2.5 Stockholder the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer.
(iii) The Initiating Section 2.5 Stockholder shall, upon
receipt of the certificate or certificates for the shares to be sold by a
Investor, pursuant to this subsection 2.8(i), pay the aggregate purchase price
therefor and the amount of reimbursable fees and expense, as specified in clause
(i) of this subsection 2.8(i), in cash or by other means acceptable to the
Investor.
(iv) Notwithstanding the foregoing, any attempt by an
Initiating Section 2.5 Stockholder to transfer Shares in violation of this
Section 2.8 hereof shall be void and the Company agrees it will not effect such
a transfer nor will it treat any alleged transferee as the holder of such shares
without the written consent of a majority in interest of the Investors.
(j) Each certificate representing shares of Capital Stock of the
Company now or hereafter owned by each Investor or issued to any person in
connection with a transfer pursuant to Subsections 2.8(d) and (i) hereof shall
be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND
BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS
OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
(k) Each Investor agrees that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in subsection 2.8(j) above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
2.9 Stock Purchases by Employees, Officers, Directors and
-----------------------------------------------------
Consultants. Each employee who purchases any of the shares of the Company's
- -----------
Common Stock that are subject to vesting and are reserved for issuance to
officers and employees of the Company shall execute and
24
<PAGE>
deliver to the Company an employee stock purchase agreement committing each such
person to resell to the Company at the original purchase price thereof all
shares of the Company's Common Stock that are not vested on the date of
termination of such employee's term of employment with the Company, and
restricting each such person from transferring any unvested shares of the
Company's Common Stock to any person except to members of his or her immediate
family or to a trust for the benefit of members of his or her immediate family.
2.10 Additional Liquidity Rights. Each Investor with a representative
---------------------------
on the Board shall cause such representative to take all steps necessary to
cause the Board to maintain a committee of the Board (the "Committee")
consisting of a representative of the Board designated by Vanguard (as long as
Vanguard or Affiliate thereof owns not less than fifty percent (50%) of the
shares of Series C Preferred Stock it holds as of the date hereof (or an
equivalent amount of Common Stock issued upon conversion thereof)), a Series F
Director (but only so long as the holders of Series F -1 Preferred stock shall
be entitled to elect the Series F Directors pursuant to subsection V.B.6(b) of
the Restated Certificate), which shall be the Electra Director, if any, a
representative of the Board designated by the other outside investors and a
representative of the Company's Executive Management. (If Vanguard shall at any
time fail the ownership requirements set forth in the preceding sentence, the
Board at its sole discretion may elect to the Committee a representative of the
Board not designated by Vanguard.) The Committee shall, from time to time at the
request of any member, consult with an investment banking firm of recognized
national standing that is unaffiliated with the Committee members. The Committee
shall request such investment banking firm to thereafter make a formal
presentation to the Committee as to the commercial reasonableness of proceeding
with an initial public offering of the Company's Common Stock ("IPO") in light
of then prevailing market conditions and the condition and performance of the
Company. Based on the recommendation of such investment banking firm, the
Committee shall make a recommendation to the full Board about proceeding with an
IPO. If the Board approves proceeding with an IPO, the Company shall, subject to
the rights of the Series F Holders under the Series F Registration Rights
Agreement, use commercially reasonable efforts to proceed with an IPO unless
three directors vote to oppose proceeding with the IPO. In such event, the
Company shall submit to binding arbitration to be completed within 30 days
whether it is commercially feasible to proceed with an IPO. Such arbitration
shall be conducted in accordance with the procedures set forth in Section 8.3 of
the Reorganization Agreement. The arbitrators shall be representatives of
nationally known investment banking firms unaffiliated with the Company. Upon a
finding of commercial feasibility, the Company shall, subject to the rights of
the Series F Holders under the Series F Registration Rights Agreement, use
commercially reasonable efforts to proceed with an IPO. If no IPO occurs by
December 31, 1996, the Committee shall then explore in good faith other means to
provide liquidity for all outside investors. The Committee shall again consult
with an investment banking firm of recognized national standing that is
unaffiliated with any of the Committee members and request such investment
banking firm to submit a written report to the Committee regarding liquidity
alternatives, including the sale of the Company, the repurchase of the Company's
stock by all electing investors and any other commercially feasible liquidity
strategies.
25
<PAGE>
2.11 Termination of Certain Covenants. The covenants set forth in
--------------------------------
Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6(a), 2.7, 2.8, 2.9, and 2.10 shall
terminate and be of no further force or effect upon the consummation of a
Threshold Public Offering.
2A. Toronto Dominion Regulatory Compliance.
--------------------------------------
2A.1 Violation of BHCA or SBIA. If Toronto Dominion or an affiliate
-------------------------
of Toronto Dominion determines that is has a BHCA Issue (as defined below) or an
SBIC Issue (as defined below), the Company and all other Investors agree to take
all such actions as are reasonably requested by Toronto Dominion or such
affiliate in order to, at the option of Toronto Dominion or such affiliate,
either (a) permit Toronto Dominion or such affiliate to convert all or any
portion of any shares of Series F-1 Preferred Stock held by Toronto Dominion or
its affiliate into an equal number of shares of Series F-2 Preferred Stock
(which Series F-2 Preferred Stock shall be convertible back into Series F-1
Preferred Stock on such terms as may be permitted by regulatory considerations
then prevailing) or (b) effectuate and facilitate a Transfer by Toronto Dominion
or such affiliate of all or a part of its interest in the Company to a person or
entity designated by Toronto Dominion or such affiliate, provided that such
assignment or transfer is in compliance with applicable federal and state
securities laws and the assignee or transferee agrees to be bound by the
Agreement.
2A.2 SBIC Requirements.
-----------------
(a) The Company and each Investor hereby agree to take all action and
execute all such instruments as may be reasonably required by Toronto Dominion
or its permitted assignee or transferee, in either case which may hereafter
become (or which is expected by Toronto Dominion to become) a small business
investment company (an "SBIC") subject to the SBIC Requirements, so that such
SBIC shall be entitled to legally hold its shares of Capital Stock of the
Company as a small business investment company under the SBIC Requirements.
Such actions shall be taken at the reasonable request of Toronto Dominion or
such affiliate within a reasonable time in advance of the earlier of (i)
Toronto Dominion or such affiliate becoming an SBIC or (ii) Toronto Dominion
assigning or transferring the shares of Capital Stock in the Company held by it
to an SBIC or an affiliate of Toronto Dominion which is expected by Toronto
Dominion to become an SBIC.
(b) Such actions referred to in clause (a) above shall include,
without limitation, an amendment to this Agreement providing for (i) the
provision of financial statements and other information by the Company as
required by and on forms specified by SBIC Requirements (including information
with respect to the Company's use of proceeds and to confirm the Company's size
for purposes of eligibility under the SBIC Requirements), (ii) in the event that
the SBIC Requirements are not met for such SBIC to legally hold such Capital
Stock (including, without limitation, as a result of a diversion of the proceeds
from the reported use thereof or a change in the Company's business activities),
the SBIC's right to put its shares of Capital Stock of the Company back to the
Company for prompt payment at the original purchase price of such shares and
(iii) such other representations, warranties and covenants for the benefit of
such SBIC as may be reasonably required by the SBIC Requirements.
Notwithstanding any other provision of
26
<PAGE>
this Agreement, SBIC's right under clause (ii) of the first sentence of this
Section 2A.2(b) shall arise solely if (i) the Company shall become an ineligible
investment for SBIC (within the meaning of the SBIC Requirements) as a result of
(A) changing its business activity (within the meaning of the SBIC Requirements)
from that contemplated by the Memorandum or (B) using the proceeds from the sale
of Series F Preferred Stock pursuant to the Series F Purchase Agreement in a
manner different than that contemplated by the Memorandum (as defined in the
Series F Purchase Agreement) and the Series F Purchase Agreement and (ii) as a
result of such change in business activity or use of proceeds, SBIC would
violate the SBIC Requirements by maintaining its investment in the Company. In
addition, before exercising its rights under clause (ii) of the first sentence
of this Section 2A.2(b), SBIC shall use commercially reasonable efforts to
obtain approval of the Small Business Administration to permit it to maintain
its investment in the Company notwithstanding such change in business activity.
2A.3 Acquisition of Shares. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, Toronto Dominion shall not be entitled to
acquire any shares of Capital Stock of the Company hereunder, including, without
limitation, under Sections 2.3 and 2.5, if the acquisition of such shares would
cause Toronto Dominion to hold shares of Capital Stock in the Company in excess
of the amount permitted under the Bank Holding Company Act (as defined below).
2A.4 BHCA Issue, SBIC Issue and SBIC Requirements Defined.
----------------------------------------------------
(a) For purposes of this Agreement, a "BHCA Issue" means any facts or
circumstances under which Toronto Dominion or an affiliate of Toronto Dominion
is or may be in violation or potential violation of the Bank Holding Company
Act of 1956, as amended from time to time (and any successor law thereto), or
the rules and regulations promulgated from time to time thereunder
(collectively, the "Bank Holding Company Act"), or any assertion by any
governmental regulatory agency that Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Bank Holding
Company Act by virtue of Toronto Dominion or an affiliate of Toronto Dominion
holding, or exercising any significant right with respect to, any Capital Stock
of the Company.
(b) For purposes of this Agreement, an "SBIC Issue" means any facts
or circumstances under which Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Small Business
Investment Act of 1958, as amended from time to time (and any successor law
thereto), or the rules and regulations promulgated thereunder (collectively, the
"Small Business Investment Act"), or any assertion by the U.S. Small Business
Administration or other governmental agency that Toronto Dominion or an
affiliate of Toronto Dominion is or may be in violation or potential violation
of the Small Business Investment Act or other laws or regulations pertaining to
small business investment companies by virtue of Toronto
27
<PAGE>
Dominion or an affiliate of Toronto Dominion holding, or exercising any
significant right with respect to, any Capital Stock of the Company.
(c) For purposes of this Agreement, "SBIC Requirements" means all of
the requirements of the Small Business Investment Act relating to small business
investment companies and investments by small business investment companies as
in effect on the date hereof or as they may be amended or supplemented from time
to time.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
3.3 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 instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by at least ten (10) days' advance written notice to
the other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
seventy-five percent (75%) of the then outstanding Registrable Securities and
Holders (within the meaning of the Series F Registration Rights Agreement) of a
majority of the
28
<PAGE>
Series F Registrable Securities. Any amendment or waiver effected in accordance
with this Section 3.7 shall be binding upon each Holder of any Registrable
Securities or Series F Registrable Securities then outstanding, each future
Holder of all such Registrable Securities or the Series F Registrable
Securities, and the Company. Notwithstanding the foregoing, (i) the rights of
Section 2.5 Stockholders pursuant to Section 2.5 hereof, (ii) the rights of
Investors pursuant to Section 2.7 hereof and (iii) the rights of Investors
pursuant to Section 2.10 hereof may not be amended without the written consent
of Holders of a majority of the Registrable Securities and seventy-five percent
(75%) of the Series F Registrable Securities then held by the Section 2.5
Stockholders in the case of clause (i) hereof, each Holder of at least two
thousand (2,000) Registrable Securities in the case of clause (ii) hereof, and
Holders of a majority of the Registrable Securities and Series F Registrable
Securities in the case of clause (iii) hereof. By executing this Agreement, an
Existing Investor hereby consents to amending and restating the Prior Agreement
in its entirety as set forth herein upon the effectiveness of this Agreement and
to waive any rights that would otherwise arise under the Prior Agreement by
virtue of the offer and sale of Series F Preferred Stock pursuant to the Series
F Purchase Agreement.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities and
--------------------
Series F Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
3.10 Entire Agreement; Amendment; Waiver. This Agreement hereby
-----------------------------------
amends and restates the Prior Agreement in its entirety and any other previous
agreements among any of the parties hereto with respect to the subject matter of
this Agreement, and any such previous agreements shall be of no further force
and effect.
29
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Fifth Amended and
Restated Investor Rights Agreement as of the date first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
Address: 400 So. El Camino Real, Suite 1275
San Mateo, CA 94402
INVESTOR
By:_______________________________
Address: __________________________________
__________________________________
Solely as to Sections 2.4, 2.5, 2.8 and 3 of
the Investor Rights Agreement
__________________________________
John D. Lockton
__________________________________
Hugh B.L. McClung
Solely as to Sections 2.4(d) of the Investor
Rights Agreement
Name:_____________________________
Title:____________________________
30
<PAGE>
SCHEDULE A
----------
Schedule of Investors
---------------------
Electra Investment Trust P.L.C.
Electra Associates, Inc.
[Additional Purchasers of Series F Preferred]
The Emerging Markets Infrastructure Fund, Inc.
The Emerging Markets Telecommunications Fund, Inc.
Latin America Investment Fund, Inc.
Latin America Equity Fund, Inc.
Latin America Capital Partners
Argentina Equity Investments Partnership
JAFCO America Ventures, Inc.
Japan Associated Finance Co., Ltd.
JAFCO G-5 Investment Enterprise Partnership
JAFCO R-1(A) Investment Enterprise Partnership
JAFCO R-1(B) Investment Enterprise Partnership
JAFCO R-2 Investment Enterprise Partnership
U.S. Information Technology Investment Enterprise Partnership
Northwood Ventures
Northwood Capital Partners LLC
Henry T. Wilson
Gateway Venture Partners III, L.P.
Bayview Investors, Ltd.
R & S Co. IV, L.P.
Drysdale Partners
George M. Drysdale
Dixon R. Doll
Gary J. Morgenthaler
The Pavey Family Partnership
TSI Group/California Microwave
Brooks Stough
Vanguard Cellular Operating Corp.
Mary L. Walton
C.I. Global Fund
C.I. Emerging Markets Fund
C.I. Latin American Fund
Richard B. Keller II
Richard B. Keller II, IRA DLJSC as Custodian
Keller Enterprises, Inc.
Harris Corporation
Toronto Dominion Investments, Inc.
31
<PAGE>
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of December 18, 1995, between
International Wireless Communications, Inc., a corporation organized under the
laws of Delaware (the "Company"), Electra Investment Trust P.L.C. ("EIT"), a
corporation organized under the laws of England and Wales, and Electra
Associates, Inc., a corporation organized under the laws of Delaware ("EAI," and
together with EIT, "Electra"), and the individuals and entities listed on
Schedule 1 hereto (each such individual or entity, an "Investor," and together
with Electra, the "Stockholders").
W I T N E S S E T H:
WHEREAS, on the date hereof, each of the Stockholders has agreed to
purchase, or exchange other securities for, shares (the "Preferred Shares") of
Series F Preferred Stock (consisting of the Series F-1 Preferred Stock and the
Series F-2 Preferred Stock), par value $.01 per share, of the Company (the
"Series F Preferred Stock"), each as set forth opposite its name on Schedule I
hereto; and
WHEREAS, as a condition to the consummation of the purchase by the
Stockholders of the Preferred Shares, the Company has agreed to provide certain
registration rights pursuant to the terms of this Agreement; NOW, THEREFORE, in
consideration of the mutual covenants and obligations hereinafter set forth, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement, capitalized terms used
herein shall have the meanings set forth in the preambles hereto and in this
Section 1.
1.1 "Class A Holder" shall mean any Holder which has received, as
of the date of any registration request, aggregate proceeds (net of selling
expenses and fees and expenses of counsel), whether received by such Holder in
the form of dividends, redemption payments or other distributions from the
Company in respect of Registrable Securities, or upon the sale or other
disposition of Registrable Securities in a distribution pursuant to a
registration statement filed by the Company under the Securities Act or pursuant
to a sale under Rule 144 under the Securities Act, equal to or in excess of one-
half of the purchase price paid by such Holder for the Preferred Shares
purchased by such Holder under the Securities Purchase Agreement.
1.2 "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.3 "Common Stock" shall mean the Common Stock of the character
authorized on the date hereof or, in the case of a conversion, reclassification
or exchange of such shares of such Common Stock, shares of the stock into or for
which such shares of Common Stock shall be converted, reclassified or exchanged,
and all provisions of this Agreement shall be
<PAGE>
applied appropriately thereto and to any stock resulting from any subsequent
conversion, reclassification or exchange therefor.
1.4 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.5 "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
1.6 "Holder" shall mean any holder of Registrable Securities, and
for purposes of this Agreement holders of Series F Preferred Stock shall be
treated as Holders of the Registrable Securities underlying such Series F
Preferred Stock, and references to Registrable Securities held by such Holders
shall include such underlying Registrable Securities; provided, however, that
any Person who acquires any of the Registrable Securities in a distribution
pursuant to a registration statement filed by the Company under the Securities
Act or pursuant to a sale under Rule 144 under the Securities Act shall not be
considered a Holder with respect to such securities.
1.7 "Initiating Holders" shall mean the Holders of Registrable
Securities representing at least twenty percent (20%) of the Registrable
Securities then outstanding.
1.8 "IPO" shall mean (i) the time at which the Company becomes a
registered public company under the Exchange Act subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, or (ii) the first time
at which an offering, whether primary or secondary, of Common Stock or options,
warrants or other securities convertible into or exchangeable or exercisable for
Common Stock, is registered pursuant to an effective registration statement
(other than a registration statement on Form S-4 or Form S-8 or any successor
forms thereto) filed by the Company under the Securities Act or (iii) the merger
of the Company into a corporation or other entity which at the time of such
merger is required to file reports, proxy statements and other information with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act. An Initial Public Offering will be deemed to be consummated (i) on the date
such registration is declared effective by the Commission and (ii) in the case
of a merger, upon the effectiveness of the merger.
1.9 "Person" shall mean any individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
1.10 "Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement with the
Commission in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement by the Commission.
2
<PAGE>
1.11 "Registrable Securities" shall mean the (i) the shares of
Common Stock issued or issuable upon conversion of the Preferred Shares
(including, without limitation, any shares of Series F-1 Preferred Stock into
which any shares of Series F-2 Preferred Stock constituting Preferred Shares are
converted) and (ii) any other shares of Common Stock acquired after the date of
this Agreement, or shares of Common Stock issued or issuable upon conversion of
securities acquired after the date of this Agreement, in each case pursuant to
Section 2.3 or 2.5 of the Stockholders' Agreement and held by the Stockholders
and their Permitted Transferees (as defined in the Stockholders' Agreement) from
time to time; provided, however, that any such Registrable Securities shall
cease to be included within the definition of Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall have
been sold as permitted by Rule 144 (or any successor provision) under the
Securities Act, (c) they shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent public distribution of them shall not
require registration of them under the Securities Act or (d) they shall have
ceased to be outstanding.
1.12 "Registration Expenses" shall mean all expenses incurred by the
Company in compliance with this Agreement, excluding underwriters' discounts and
commissions but including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, the
compensation of regular employees of the Company and the fees and expenses of a
single counsel for the Holders (provided such counsel shall also be counsel to
the Company or the fees and expenses of such counsel payable by the Company in
connection with any registration hereunder shall not exceed $50,000), all blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration.
1.13 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.14 "Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, dated as of the date hereof, among the Company
and the Stockholders, as amended from time to time.
1.15 "Selling Expenses" shall mean all underwriting discounts and
commissions applicable to the sale of Registrable Securities. "Stockholders'
Agreement" shall mean that certain Fifth Amended and Restated Investor Rights
Agreement, dated as of the date hereof, among the Company and the stockholders
of the Company.
1.16 "Stockholders' Agreement" shall mean that certain Fifth Amended
and Restated Investor Right Agreement, dated as of the date hereof, among the
Company and the stockholders of the Company.
2. Requested Registration.
----------------------
2.1 Request for Registration. The Initiating Holders, by written
------------------------
request to the Company, may require the Company to effect a registration (a
"Demand Registration") with
3
<PAGE>
respect to Registrable Securities at any time after the earlier of (i) December
31, 1997 and (ii) the consummation of an IPO. If the Initiating Holders elect to
exercise their rights as permitted by clause (i) above prior to an IPO, then in
connection therewith the Company shall take (or prior thereto the Company shall
have taken) all such actions as shall be necessary to effect a stock-split with
respect to its shares of Common Stock such that, after giving effect to such
stock-split and after giving effect to the distribution of the Registrable
Securities contemplated by the IPO, the public float criteria with respect to a
NASDAQ-NMS listed company shall be satisfied. Upon any such registration
request, the Company shall:
(i) promptly give written notice of the proposed registration
to all other Holders (the "Demand Registration Notice"); and
(ii) as soon as practicable but not later than sixty (60) days
after receipt of the request from the Initiating Holders, use its best
efforts and take all appropriate action to file such registration statement
with the Commission, and shall use its best efforts and take all
appropriate action to effect such registration as soon as possible
following such filing (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualifications
under the blue sky or other state securities laws reasonably requested by
Initiating Holders (subject to the qualifications set forth in clauses (x)
through (z) of Section 6.1(e) hereof) and appropriate compliance with
applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any Holder or Holders joining in such request as are specified in a written
request given within thirty (30) days after receipt of the Demand
Registration Notice; provided, however, that the Company shall not be
-------- -------
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 2 after the second of such registrations pursuant
to this Section 2 have been declared or ordered effective.
Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting registration pursuant to this Section 2 a certificate signed Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed and it
is therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Holders; provided, that the Company may not utilize this right more
--------
than once in any twelve-month period.
2.2 Additional Shares to be Included. The registration statement
--------------------------------
filed pursuant to the request of the Initiating Holders may, subject to the
provisions of Section 2.5 below, include (a) other securities of the Company
(the "Additional Shares") which are held by Persons who by virtue of agreements
with the Company are entitled to include their securities with the Holders
referred to in Section 2.1 above (collectively, the "Other Stockholders"), and
4
<PAGE>
(b) securities of the Company being sold for the account of the Company (the
"Company Shares").
2.3 Withdrawal of Registration. If the Initiating Holders inform
--------------------------
the Company by written notice that they are withdrawing their registration
request made pursuant to Section 2.1 above and the Initiating Holders pay all of
the Company's third party Registration Expenses with respect to such
registration incurred to the date of such notice, then the registration
statement need not be filed and all efforts pursuant to this Agreement will not
count as a registration (or an exercise of rights) under this Section 2;
provided, however, that (a) if at the time of such withdrawal, the Initiating
- -------- -------
Holders have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Initiating Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Initiating Holders shall not be required to pay any of such expenses and all
efforts pursuant to this Agreement will not count as a registration (or an
exercise of rights) under this Section 2, or (b) if the Company decides to
proceed with the registration on its own behalf, or on behalf of Other
Stockholders, then the Initiating Holders shall not be required to pay any of
the Company's third party Registration Expenses and such registration will not
count as a registration (or an exercise of rights) under this Section 2.
2.4 Underwriting.
------------
(a) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2 and the Company shall include such information in the Demand
Registration Notice, and such Demand Registration Notice shall also state that
any registration pursuant to this Section 2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein and
subject to the limitations provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he holds.
(b) The Company shall (together with all Holders and Other
Stockholders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company, provided that a
majority in interest of the Initiating Holders shall approve such selection in
their sole discretion.
2.5 Limitations on Shares to be Included. Notwithstanding any other
------------------------------------
provision of this Section 2, if the representative of the underwriters advises
the Company or the Initiating Holders in writing that marketing factors require
a limitation on the number of shares to be underwritten or that the inclusion of
Additional Shares or Company Shares may adversely affect the sale price (of the
shares to be registered) that may be obtained, then, first, the Company Shares
-----
shall be excluded from such registration to the extent so required by such
limitation, second, the Additional Shares and Registrable Securities requested
------
to be included in such
5
<PAGE>
registration held by the Class A Holders and Other Stockholders, if any, shall
be excluded from such registration to the extent so required by such limitation,
pro rata based upon the number of Additional Securities or Registrable
Securities, as the case may be, which they have requested by included in such
registration at the time of filing such registration statement, and third, if a
-----
limitation of the number of shares is still required, the number of shares that
may be included in the registration and underwriting shall be allocated among
all Holders (other than the Class A Holders) in proportion, as nearly
practicable, to the respective amounts of Registrable Securities which they have
requested to be included in such registration statement; provided, however, that
-------- -------
if at the time of such registration request the Common Stock of the Company
shall be publicly traded and on each day on which the Common Stock is traded
during the three-month period immediately preceding the date on which the
Initiating Holders shall have requested such registration the Common Stock shall
have a Daily Closing Price (as defined in Section 11 below) which is equal to or
greater than $750 (as such number may be adjusted appropriately for stock
splits, subdivisions, combinations, reclassifications or other
recapitalizations), then first, the Company Shares shall be excluded from such
-----
registration to the extent so required by such limitation, and second, if a
------
limitation of the number of shares is still required, the number of shares that
may be included in the registration and underwriting shall be allocated among
all Holders and Other Stockholders, in proportion, as nearly practicable, to the
respective amounts of Registrable Securities or Additional Shares, as the case
may be, which they have requested to be included in such registration at the
time of filing such registration statement; provided, further, however, that in
-------- ------- -------
any event the Holders shall be entitled to include not less than 27.77%/1/, of
the shares being registered in such offering.
If the Company or any Holder or Other Stockholder who has requested
inclusion in such registration as provided above disapproves of the terms any
such underwriting, such Person may elect to withdraw such Person's Registrable
Securities, Additional Shares or Company Shares, as the case may be, therefrom
by written notice to the Company, the underwriter and the Initiating Holders;
provided, however, that if the Holders, in consultation with their financial and
- -------- -------
legal advisors, determines that such revocation would materially delay the
registration or otherwise require a recirculation of the prospectus contained in
the registration statement, then such Person shall have no such right to revoke
its request. If the withdrawal of any Registrable Securities, Additional Shares
or Company Shares, as the case may be, would allow, within the marketing
limitations set forth above, the inclusion in the underwriting of a greater
number of shares of Registrable Securities, Company Shares or Additional Shares,
then, to the extent practicable and without delaying the underwriting, the
Company, the Holders and the Other Stockholders shall have an opportunity to
include additional shares of Registrable Securities, Company Shares or
Additional Shares, as the case may be, in the proportions discussed above.
__________________
/1/ Subject to adjustment based upon the aggregate number of shares of Series
F Preferred Stock issued under the Securities Purchase Agreement.
6
<PAGE>
3. Company Registration.
--------------------
3.1 If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising any demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 (under the Securities Act) transaction, the Company will:
(a) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(b) the Company shall include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein (the "Piggy-back Registration"), all the
Registrable Securities specified in a written request or requests made by any
Holder within thirty (30) days after receipt of the written notice from the
Company described in clause (a) above, except as set forth in Section 3.3 below.
Such written request may specify all or a part of a Holder's Registrable
Securities.
3.2 Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.1(a). The right of any Holder to require registration
pursuant to this Section 3 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and any Other Stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company.
3.3 Limitations on Shares to be Included. With respect to Company
------------------------------------
registrations or registrations effected by the Company for the account of a
security holder or holders exercising any demand registration rights,
notwithstanding any other provision of this Section 3, if the representative of
the underwriters advises the Company in writing that marketing factors require a
limitation or elimination on the number of shares to be underwritten, the
representative may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all Holders of securities requesting
registration.
(a) The number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first, to the
-----
Company for securities being sold for its own account, second, among all Holders
------
(other than Class A Holders, if any) requesting registration and third, among
-----
all Other Stockholders (including those Stockholders exercising demand
registration rights and on whose account the Company determined to register its
securities pursuant to the exercise of such demand registration right, or
otherwise) and Class A Holders, if any, in each case in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities or Additional
Shares, as the case may be, which they had requested to be included in such
registration at the time of filing the registration statement;
7
<PAGE>
provided, however, that if at the time of such registration request the Common
- -------- -------
Stock of the Company shall be publicly traded and on each day on which the
Common Stock is traded during the three-month period immediately preceding the
date on which the Holders shall have requested such registration the Common
Stock shall have a Daily Closing Price (as defined in Section 11 below) which is
equal to or greater than $750 (as such number may be adjusted appropriately for
stock splits, subdivisions, combinations, reclassifications or other
recapitalizations), then the number of shares of securities that are entitled to
be included in the registration and underwriting shall be allocated first, to
-----
the Company for securities being sold for its own account, and second, among all
------
Holders and Other Stockholders (including those Stockholders exercising demand
registration rights and on whose account the Company determined to register its
securities pursuant to the exercise of such demand registration right, or
otherwise), in each case in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities or Additional Shares, as the case
may be, which they had requested to be included in such registration at the time
of filing the registration statement; provided, further, however, that in any
-------- ------- -------
event the Holders shall be entitled to include not less than 27.77%/2/ of the
shares (other than Company Shares) being registered in such offering.
(b) If any Holder or Other Stockholder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the underwriter.
3.4 Withdrawal from Registration. Any Holder requesting inclusion
----------------------------
of Registrable Securities pursuant to this Section 3 may, at any time prior to
the effective date of the registration statement relating to such registration,
revoke such request by delivering written notice of such revocation to the
Company. If the withdrawal of any Registrable Securities or Additional Shares
would allow, within the marketing limitations set forth above, the inclusion in
the underwriting of a greater number of shares of Registrable Securities or
Additional Shares, then, to the extent practicable and without delaying the
underwriting, the Company shall offer to the Holders and to the Other
Stockholders an opportunity to include additional shares of Registrable
Securities or Additional Shares, as the case may be, in the proportions
discussed in Section 3.3 above.
3.5 Termination or Withdrawal by Company. The Company shall have
------------------------------------
the right to terminate or withdraw any registration initiated by it under this
Section 3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
4. Registration on Form S-3. In addition to the their rights set forth in
------------------------
Sections 2 and 3 above, if at any time (i) Initiating Holders request that the
Company file a registration statement on Form S-3 (or any successor form
thereto) for a public offering of all or any portion of the Registrable
Securities held by such requesting Holder or Holders, and (ii) the Company is
__________________
/2/ Subject to adjustment based upon the aggregate number of shares of Series
F Preferred Stock issued under the Securities Purchase Agreement.
8
<PAGE>
a registrant entitled to use Form S-3 (or any successor form thereto) to
register such securities, then the Company shall use its best efforts to
register (including by means of a shelf registration pursuant to Rule 415 under
the Securities Act if so requested in such request) under the Securities Act on
Form S-3 (or any successor form thereto), for public sale in accordance with the
method of disposition specified in such notice, the number of shares of
Registrable Securities specified in such notice. Registrations effected pursuant
to this Section 4 shall not be counted as demands for registration or
registrations effected pursuant to Section 2 or 3, respectively.
5. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with the registration or qualification of, or compliance with, any
registration statement under Sections 2, 3 or 4 of this Agreement, shall be
borne by the Company. Each seller shall bear his or its own Selling Expenses
with respect to the securities sold by him or it.
6. Registration Procedures.
-----------------------
6.1 In the case of each registration to be effected by the Company
pursuant to this Agreement, the Company will keep each Holder advised in writing
as to the initiation of each registration and all amendments thereto and as to
the completion thereof, advise any such Holder, upon request, of the progress of
such proceedings, use its best efforts to effect the registration of any
Registrable Securities under the Securities Act, and will, at its expense:
(a) Prepare and file with the Commission a registration
statement covering such Registrable Securities and use its best efforts to cause
such registration statement to be declared effective by the Commission and to
keep such registration effective for a period of one hundred twenty (120) days
or until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; provided,
--------
however, that such one hundred twenty (120) day period shall be extended for a
- -------
period of time equal to the period the Holders refrain from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; provided, further, however,
-------- ------- -------
that the Company shall keep such registration effective for longer than one
hundred and twenty (120) days (or such longer period if extended in accordance
with the previous proviso), up to an additional period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs, if the direct third party costs and expenses associated with such
extended registration are borne by the selling Holders; provided, further,
-------- -------
however, that in the case of any registration of Registrable Securities on Form
- -------
S-3 which are intended to be offered on a continuous or delayed basis, such 120-
day period (or such longer period as provided above) shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, and the costs and expenses associated with such
extended registration shall be borne by the Company; provided that (1) Rule 415
--------
under the Securities Act, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis, and (2) applicable rules
and regulations under the Securities Act governing the obligation to file a
post-effective amendment permit the incorporation by reference into the
registration statement of information contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act, in lieu of filing a post-
effective amendment which (y) includes any prospectus
9
<PAGE>
required by Section 10(a)(3) of the Securities Act or (z) reflects facts or
events representing a material or fundamental change in the information set
forth in the registration statement;
(b) Subject to the provisos set forth in Section 6.1(a) above,
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement until such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(c) Furnish to each seller of Registrable Securities covered
by such registration statement and each Holder two conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller or Holder, as the case may be, may
reasonably request;
(d) Promptly notify each seller of Registrable Securities
covered by such registration statement and each Holder at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then existing;
(e) Use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such states of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (ii) to keep such registration or qualification in effect
for so long as such registration statement remains in effect and (iii) to take
any other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any such purpose
be required to (x) qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this clause
(e) be obligated to be so qualified, (y) subject itself to taxation in any such
jurisdiction or (z) consent to general service of process in any such
jurisdiction;
10
<PAGE>
(f) Use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be necessary
in the opinion of counsel to the Company and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(g) Use its best efforts to list all such Registrable
Securities registered in such registration on each securities exchange or
automated quotation system on which the Common Stock of the Company is then
listed, or, if the Common Stock of the Company is not then listed, to list all
such Registrable Securities registered in such registration on the Nasdaq
National Market, or any other securities exchange or automated quotation system
on which the Company's Common Stock then qualifies for listing;
(h) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(i) Enter into such customary agreements (including
underwriting agreements in customary form and reasonably acceptable to the
Company) and take all such other actions as the holders of a majority of the
Registration Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities;
(j) Make available for inspection by any seller of Registrable
Securities and each Holder, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney or accountant retained
by any such seller, Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such seller, Holder, underwriter,
attorney or accountant in connection with such registration statement, which
information shall be subject to reasonable restrictions concerning
confidentiality and non-disclosure;
(k) Furnish to each selling Holder upon request a signed
counterpart, addressed to the selling Holder, of
(i) an opinion of counsel for the Company, dated the
effective date of the registration statement and in form reasonably
acceptable to the Company and such Holder, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement, to
the extent permitted by the standards of the American Institute of
Certified Public Accountants,
11
<PAGE>
in the case of (i) and (ii) covering substantially the same matters with respect
to the registration statement (and the prospectus included therein) and (in the
case of the accountants' "comfort" letters) with respect to events subsequent to
the date of the financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' "comfort" letters delivered to the
underwriters in underwritten public offerings of securities;
(l) Furnish to each selling Holder upon request a copy of all
correspondence from or to the Commission in connection with any such offering;
(m) In the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration statement for sale in
any jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order; and
(n) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and, if required, make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first month after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
6.2 In connection with the preparation and filing of each
registration statement under this Agreement, the Company will give the Holders
on whose behalf such Registrable Securities are to be registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each such Holder such
access to the Company's books and records and such opportunities to discuss the
business of the Company with its officers, its counsel and the independent
public accountants who have certified the Company's financial statements, as
shall be necessary, in the opinion of such Holders or such underwriters or their
respective counsel, in order to conduct a reasonable and diligent investigation
within the meaning of the Securities Act, subject in all cases to the limitation
on reimbursement of fees and expenses of such Holders' counsel provided in
Section 1.12 hereof. Without limiting the foregoing, each registration
statement, prospectus, amendment, supplement or any other document filed with
respect to a registration under this Agreement shall be subject to review and
reasonable approval by the Holders registering Registrable Securities in such
registration and by their counsel, subject in all cases to the limitation on
reimbursement of fees and expenses of such Holders' counsel provided in Section
1.12 hereof.
7. Indemnification.
---------------
7.1 Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act, to the
extent permitted by law, the Company will indemnify and hold harmless each
Holder, each of its officers, directors, partners, employees, agents, attorneys
and consultants and each Person controlling such Holder, and each
12
<PAGE>
underwriter, if any, and each Person who controls any underwriter, against all
claims, losses, damages and liabilities, joint and several (or actions,
proceedings or settlements in respect thereof) arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based upon any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each such Holder, each of its officers, directors, partners,
employees, agents, attorneys and consultants and each Person controlling such
Holder, each such underwriter and each Person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability
or action; provided, however, that the Company will not be liable in any such
-------- -------
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission made in reliance
upon and based upon written information furnished to the Company by such Holder
or underwriter and expressly stated to be specifically for use therein.
7.2 Indemnification by the Holders. To the extent permitted by law,
------------------------------
each Holder will, if Registrable Securities held by such Holder are included in
the securities as effected, indemnify the Company, each of its officers,
directors, partners, employees, agents, attorneys and consultants, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each Person who controls the Company (other than such Holder) or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other Holder and each of their officers, directors,
partners, employees, agents, attorneys and consultants, and each Person
controlling such Holder, against all claims, losses, damages, expenses and
liabilities, joint and several (or actions in respect thereof) arising out of or
based upon any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, each of its officers,
directors, partners, employees, agents, attorneys and consultants, each
underwriter, each Person who controls the Company (other than such Holder) or
such underwriter, each other Holder and each of their officers, directors,
partners, employees, agents, attorneys and consultants and each Person
controlling such Holder for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in or omitted from such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder with respect to such
Holder and expressly stated to be specifically for use therein; provided,
--------
however, that the liability of any such Holder under this Section 7.2 shall be
- -------
limited to the amount of proceeds received by such Holder in the offering giving
rise to such liability.
13
<PAGE>
7.3 Notices of Claims, Procedures, etc. Each party entitled to
----------------------------------
indemnification under this Section 7 (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided,
--------
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at the Indemnified Party's
sole expense, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7 unless such failure is prejudicial to the
ability of Indemnifying Party to defend such claim or action. Notwithstanding
the foregoing, such Indemnified Party shall have the right to employ its own
counsel in any such litigation, proceeding or other action if (i) the employment
of such counsel has been authorized by the Indemnifying Party, in its sole and
absolute discretion, or (ii) the named parties in any such claims (including any
impleaded parties) include any such Indemnified Party and the Indemnifying Party
and the Indemnifying Party shall have been advised in writing (in suitable
detail) by counsel to the Indemnified Party either (A) that there may be one or
more legal defenses available to such Indemnified Party which are different from
or additional to those available to the Indemnifying Party, or (B) that there is
a conflict of interest by virtue of the Indemnified Party and the Indemnifying
Party having common counsel, in any of which events, the legal fees and expenses
of a single counsel for all Indemnified Parties with respect to each such claim,
defense thereof, or counterclaims thereto, shall be borne by Indemnifying Party.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement (x) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation, or (y) which requires action other than the payment of money by the
Indemnifying Party. Each Indemnified Party shall cooperate to the extent
reasonably required and furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
7.4 Contribution. If the indemnification provided for in this
------------
Section 7 shall for any reason be held by a court to be unavailable to an
Indemnified Party under Section 7.1 or 7.2 hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under Section 7.1 or 7.2, the Indemnified Party and the
Indemnifying Party under Section 7.1 or 7.2 shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the Indemnified
Party and the Indemnifying Party, with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action or proceeding
in respect thereof, as well as any other relevant equitable considerations or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as shall be appropriate to reflect the
relative benefits received by the Indemnified Party and the Indemnifying Party
from the offering of the securities covered by such registration statement;
provided, that for purposes of this
- --------
14
<PAGE>
clause (ii), the relative benefits received by a selling Holder shall be deemed
not to exceed the amount of proceeds received by such seller. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. In addition, no Person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such Person's consent, which consent shall
not be unreasonably withheld.
8. Information by Holder. Each Holder shall furnish to the Company such
---------------------
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall required in
connection with any registration, qualification or compliance referred to in
this Agreement.
9. Transfer or Assignment of Registration Rights. The rights with respect
---------------------------------------------
to any Registrable Securities to cause the Company to register such securities
granted to a Holder by the Company under this Agreement may be transferred or
assigned by a Holder, in whole or in part, to a transferee or assignee of at
least 500 Registrable Securities, and, in such case, the Company shall be given
written notice stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned. Any such transferee or assignee shall execute an
agreement whereby such transferee or assignee agrees to be bound by all of the
terms and conditions of this Agreement.
10. Reports Under Exchange Act. With a view to making available to the
--------------------------
Holders the benefits of Rule 144 under the Securities Act and any other rule or
regulation of the Commission that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after ninety (90) days (or such shorter period as may then be permitted by the
rules and regulations of the Commission in effect at such time) after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Exchange Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;
(c) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish to any Holder forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 under the Securities Act (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company, or such
shorter period as may be then permitted by the rules and regulations of the
Commission in effect at such time), the Securities Act and the Exchange Act
15
<PAGE>
(at any time after it has become subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual and quarterly reports of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the Commission
which permits the selling of any such securities without registration or
pursuant to such form.
11. Daily Closing Price. For purposes of this Agreement, the "Daily
-------------------
Closing Price" for each day shall be, as reported in The Wall Street Journal or,
if not reported therein, as reported in another newspaper of national
circulation chosen by the Board of Directors of the Corporation, the closing
sales price or, in case no such sale takes place on such day, the average of the
closing bid and asked prices regular way, on the New York Stock Exchange
Composite Tape, or if the Common Stock is not then listed or admitted to trading
on the New York Stock Exchange, on the largest principal national securities
exchange on which such stock is then listed or admitted to trading, or if not
listed or admitted to trading on any national securities exchange, then the
average of the last reported sales price for such shares in the over-the-counter
market, as reported on the National Association of Securities Dealers Automated
Quotation System, or, if such sales prices shall not be reported thereon, the
average of the closing bid and asked prices so reported, or, if such bid and
asked prices shall not be reported thereon, as the same shall be reported by the
National Quotation Bureau Incorporated, or, if such firm at the time is not
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Company or, if there is
no such firm, as furnished by any member of the National Association of
Securities Dealers, Inc., selected by the Company.
12. No Inconsistent Agreements; Agreements by Stockholders. The Company
------------------------------------------------------
will not hereafter enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the Holders in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities which grants or modifies
any existing agreement with respect to its securities to grant to the holder of
its securities (a) in connection with an incidental registration of such
securities registration rights with equal or higher priority to the rights
granted to the Holders under Sections 2 and 3 of this Agreement or (b) in
connection with a demand registration the right to require registration of any
of such holder's securities before the earlier of (i) the date on which the
Holders shall have exercised any demand registration rights under Section 2
hereof or (ii) the date on which the Company shall have consummated an IPO and a
period ending 6 months after any lock-up period applicable to the Holders of the
Registrable Securities shall have terminated.
In addition, the Company hereby covenants and agrees to cause all of
its stockholders to which it grants (or has previously granted) registration
rights to (i) acknowledge the priorities and limitations of inclusion of
securities set forth in this Agreement and (ii) agree that in connection with
any sale of securities registered on Form S-3 which includes Registrable
Securities on behalf of any Holders, such other stockholder shall provide at
least three (3) business days notice to the Holders of any intended sale of
securities registered on such Form and shall afford the Holders an opportunity
to participate in such sale, and further agree that no such sale by such other
stockholder shall be effected unless the priorities and limitations set forth
16
<PAGE>
in Section 3.3(a) of this Agreement (without reference to the first paragraph of
Section 3.3), as between the Holders and such other stockholder, are respected.
13. Benefits of Agreement; Successors and Assigns. This Agreement shall
---------------------------------------------
be binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, legal representatives and heirs. This
Agreement does not create, and shall not be construed as creating any rights
enforceable by any other Person.
14. Complete Agreement. This Agreement constitutes the complete
------------------
understanding among the parties with respect to its subject matter and
supersedes all existing agreements and understandings, whether oral or written,
among them. No alteration or modification of any provisions of this Agreement
shall be valid unless made in writing and signed, on the one hand, by holders of
at least seventy-five percent (75%) of the Registrable Securities then
outstanding and, on the other, by the Company.
15. Section Headings. The section headings contained in this Agreement are
----------------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Notices. All notices, offers, acceptances and other communications
-------
required or permitted to be given or to otherwise be made to any party to this
Agreement shall be deemed to be sufficient if contained in a written instrument
delivered by hand, first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, if to the Company, to it at 400 South El Camino Real, Ste. 1275, San
Mateo, California 94402, Attention: Mr. John D. Lockton, President, with a copy
to Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, 600 Hansen Way,
Second Floor, Palo Alto, California 94306, Attention: Brooks Stough, Esq., and
if to any Holder, to the address of such Holder as set forth in the stock
transfer books of the Corporation.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. Any party may change the address to
which each such notice or communication shall be sent by giving written notice
to the other parties of such new address in the manner provided herein for
giving notice.
17. GOVERNING LAW; CHOICE OF FORUM. THIS AGREEMENT SHALL BE DEEMED TO
------------------------------
HAVE BEEN EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW
YORK, NEW YORK. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW RULES OR PRINCIPLES). ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT HERETO SHALL ONLY BE BROUGHT IN THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION
17
<PAGE>
AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS AND IRREVOCABLY WAIVES ANY DEFENSE OR CLAIM TO SUCH
JURISDICTION WHICH EITHER OR BOTH MAY HAVE BASED, DIRECTLY OR INDIRECTLY, ON THE
GROUNDS OF FORUM NON CONVENIENS. IF ANY ACTION IS COMMENCED IN ANY OTHER
JURISDICTION, THE PARTIES HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO
THE SOUTHERN DISTRICT OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, AS THE DESIGNEE, APPOINTEE AND AGENT, OF THE COMPANY TO
RECEIVE, FOR AND ON BEHALF OF THE COMPANY, SERVICE OF PROCESS IN SUCH RESPECTIVE
JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR THE RIGHTS AND OBLIGATIONS HEREUNDER AND SUCH SERVICE SHALL BE DEEMED
COMPLETED UPON DELIVERY THEREOF TO SUCH AGENT. IT IS UNDERSTOOD THAT A COPY OF
SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY MAIL TO THE
COMPANY AT ITS ADDRESS SET FORTH IN SECTION 16, BUT THE FAILURE OF THE COMPANY
TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.
THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY
AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ELECTRA, OR ANY HOLDER OF ANY OF THE
SECURITIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
18. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same agreement.
19. Severability. Any provision of this Agreement which is determined to
------------
be illegal, prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such illegality, prohibition or
unenforceability without invalidating the remaining provisions hereof which
shall be severable and enforceable according to their terms and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
18
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first set forth above.
INTERNATIONAL WIRELESS
COMMUNICATIONS INC.
By:_______________________________________
Name: Douglas Sinclair
Title: Executive Vice President
ELECTRA INVESTMENT TRUST P.L.C.
By:_______________________________________
Name:
Title:
ELECTRA ASSOCIATES, INC.
By:______________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first set forth above.
INTERNATIONAL WIRELESS
COMMUNICATIONS INC.
By:__________________________________________
Name:
Title:
ELECTRA INVESTMENT TRUST P.L.C.
By:__________________________________________
Name: H A L H MUMFORD
Title: Authorized Signatory
ELECTRA ASSOCIATES, INC.
By:__________________________________________
Name: R. J. Lewis
Title: Director
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
CENTRAL INVESTMENT HOLDING
(B.V. I.) CO., LTD.
---------------------------------------------
By:__________________________________________
Name: Gilbert Ma
Title: Senior Vice President
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
TORONTO DOMINION INVESTMENTS, INC.
---------------------------------------------
By:__________________________________________
Name: Frederic Hawley
Title: Asst. Vice President
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
MITSUI & CO., LTD.
---------------------------------------------
By:__________________________________________
Name: Rentaro Kohama
Title: General Manager
Information Business Development
Div.
Information Business Group
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
MITSUBISHI CORPORATION
---------------------------------------------
By:__________________________________________
Name: Tsumeo Kitzura
Title: General Manager
Telecommunication & Broadcasting
Business Div.
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
MassMutual Corporate Value Partners Limited By
Massachusetts Mutual Life Insurance Company as
Investment Manager
----------------------------------------------
By:___________________________________________
Name: Mark A. Ahmed
Title: Second Vice President
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Massachusetts Mutual Life Insurance Company
---------------------------------------------
By:__________________________________________
Name: Mark A. Ahmed
Title: Second Vice President
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
__________________________________________________
By:_______________________________________________
Name:
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
__________________________________________________
By:_______________________________________________
Name: Jason Jenchang Wu
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
The Emerging Markets Telecommunications Fund, Inc.
--------------------------------------------------
By:_______________________________________________
Name:
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Latin America Investment Fund, Inc.
--------------------------------------------------
By:_______________________________________________
Name: Rachel Manney
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Latin America Equity Fund, Inc.
--------------------------------------------------
By:_______________________________________________
Name: Rachel Manney
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
C.I. Global Fund
--------------------------------------------------
By:_______________________________________________
Name: David C. Pauli
Title: Vice President/Fund Accounting
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
C.I. Latin American Fund
--------------------------------------------------
By:_______________________________________________
Name: David C. Pauli
Title: Vice President/Fund Accounting
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Argentina Equity Investments Partnership
--------------------------------------------------
By:_______________________________________________
Name:
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
C.I. Emerging Markets Fund
--------------------------------------------------
By:_______________________________________________
Name: Ray Chang
Title: President & CEO
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Latin America Capital Partners Limited
--------------------------------------------------
By:_______________________________________________
Name: Marie Woodall
Title: Secretary
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Vanguard Cellular Operating Corp.
--------------------------------------------------
By:_______________________________________________
Name: Stephen R. Leeolou
Title: Executive Vice President
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Japan Associated Finance Co., Ltd.
--------------------------------------------------
By:_______________________________________________
Name: Masaki Yoshida
Title: President
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
JAFCO G-5 Investment Enterprise Partnership
------------------------------------------------
By:_____________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
JAFCO R-1(A) Investment Enterprise Partnership
------------------------------------------------
By:_____________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
JAFCO R-1(B) Investment Enterprise Partnership
------------------------------------------------
By:_____________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
JAFCO R-2 Investment Enterprise Partnership
------------------------------------------------
By:_____________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
U.S. Information Technology Investment
Enterprise Partnership
------------------------------------------------
By:_____________________________________________
Name: Masaki Yoshida
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Northwood Ventures
------------------------------------------------
By:_____________________________________________
Name: Peter G. Schiff
Title: General Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Northwood Capital Partners LLC
------------------------------------------------
By:_____________________________________________
Name: Peter G. Schiff
Title: Chairman and CEO
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Gateway Venture Partners III, L.P.
------------------------------------------------
By: Gateway Associates III, L.P.,
its General Partner
By:_____________________________________________
Name: John S. McCarthy
Title: General Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
RS & Co. IV, L.P.
------------------------------------------------
By:_____________________________________________
Name:
Title: General Partner of RS & Co. Venture
Partners IV, L.P., its General Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Bayview Investors, Ltd.
------------------------------------------------
By:_____________________________________________
Name:
Title: Managing Director of Robertson,
Stephens & Company Private Equity
Group, L.L.C., its General Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Pavey Family Partners
------------------------------------------------
By:_____________________________________________
Name: R.D. Pavey
Title: General Partner
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
_________________________________________________
By:______________________________________________
Name: Brooks Stough
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
High Point Keller Limited Partnership
-------------------------------------------------
By:______________________________________________
Name: R. B. Keller
Title: President, High Point Management Inc.
(General Partner)
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
_________________________________________________
By:______________________________________________
Name: Richard B. Keller II
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Richard B. Keller II, IRA, DLJSC as Custodian
-------------------------------------------------
By:______________________________________________
Name: Richard B. Keller II
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Harris Corporation
-------------------------------------------------
By:______________________________________________
Name: Ronald R. Spoehel
Title: Vice President - Corporate
Development
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
_________________________________________________
By:______________________________________________
Name: Gary J. Morgenthaler
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
_________________________________________________
By:______________________________________________
Name: Dixon R. Doll
Title:
<PAGE>
(Signature pages to the Registration Rights Agreement Continued)
Drysdale Partners
-------------------------------------------------
By:______________________________________________
Name: George Drysdale
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
TOTAL NUMBER OF
STOCKHOLDER PREFERRED SHARES
- ----------- ----------------
<S> <C>
Electra Investment Trust P.L.C. 24,000
Electra Associates Inc. 2,666
Central Investment Holding (B.V.I.) Co., Ltd. 26,666
Toronto Dominion Investments, Inc. 21,200
Mitsui & Co., Ltd. 13,333
Mitsubishi Corporation 6,666
MassMutual Corporate Value Partners Limited 2,666
Massachusetts Mutual Life Insurance Company, Pension Management 1,333
Massachusetts Mutual Life Insurance Company, IFM Traditional 1,333
IW Fund 2,666
Dr. Jason Wu 1,066
The Emerging Markets Telecommunications Fund, Inc. 386
The Emerging Markets Infrastructure Fund, Inc. 386
Latin America Investment Fund, Inc. 271
Latin America Equity Fund, Inc. 271
Latin America Capital Partners 311
Argentina Equity Investments Partnership 311
C.I. Global Fund 616
C.I. Emerging Markets Fund 306
C.I. Latin America Fund 231
Vanguard Cellular Operating Corporation 10,600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF
STOCKHOLDER PREFERRED SHARES
- ----------- ----------------
<S> <C>
JAFCO 15
JAFCO G-5 Investment Enterprise 26
JAFCO R-1(A) Investment Enterprise 11
JAFCO R-1(B) Investment Enterprise 11
JAFCO R-2 Investment Enterprise 11
US Information Technology Investment Enterprise 77
Northwood Ventures 1,190
Northwood Capital Partners LLC 228
Gateway Ventures Partners III, L.P. 2,355
Bayview Investors, Ltd. 23
RS&Co. IV, L.P. 131
Drysdale Partners 107
Dixon Doll 14
Gary J. Morganthaler 7
The Pavey Family Partnership 15
Brooks Stough 2
High Point Keller Limited Partnership 5,016
Richard B. Keller II 224
Richard B. Keller II IRA, DLJSC as Custodian 39
Harris Corporation 6,600
</TABLE>
<PAGE>
EXHIBIT 10.5
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
December 15, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Shares.................................................2
1.1 Shares................................................................2
1.2 Closing...............................................................2
2. Representations and Warranties of the Company...............................2
2.1 Organization, Good Standing, and Qualification........................2
2.2 Authorization.........................................................2
2.3 Valid Issuance of Shares..............................................2
3. Representations and Warranties of the Purchaser.............................4
3.1 Ownership of Interest.................................................4
3.2 Authorization.........................................................4
3.3 Assets; Liabilities...................................................4
3.3 Purchase Entirely for Own Account.....................................4
3.4 Disclosure of Information.............................................4
3.5 Investment Experience.................................................4
3.7 Accredited Investor...................................................6
3.7 Restricted Shares.....................................................6
3.8 Further Limitations on Disposition....................................6
3.9 Legends...............................................................6
3.10 CTP Dilution.........................................................7
4. California Commissioner of Corporations.....................................7
4.1 Corporate Securities Law..............................................7
5. Conditions of Purchaser's Obligations at Closing............................7
5.1 Representations and Warranties........................................7
5.2 Performance...........................................................7
6. Conditions of the Company's Obligations at Closing..........................7
6.1 Representations and Warranties........................................7
6.2 Assignment............................................................8
7. Remedy; Liability...........................................................8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
8. Miscellaneous..............................................................8
8.1 Release of Escrow Shares.............................................8
8.2 Indemnification; Escrow Agent........................................8
8.3 Successors and Assigns...............................................8
8.4 Governing Law........................................................9
8.5 Counterparts.........................................................9
8.6 Titles and Subtitles.................................................9
8.7 Notices..............................................................9
8.8 Finder's Fee........................................................10
8.9 Expenses............................................................10
8.10 Entire Agreement; Amendments and thereby Waivers...................10
8.11 Severability.......................................................10
</TABLE>
ATTACHMENT FORM OF ASSIGNMENT
ii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 18th day of December,
1995, by and among International Wireless Communications, Inc., a Delaware
corporation (the "Company"), and John D. Lockton and Hugh B.L. McClung
(individually, a "Purchaser;" collectively, the "Purchasers").
WHEREAS, the Purchasers are general partners of CTP, a California
partnership ("CTP");
WHEREAS, the Purchasers and Nezam Tooloee (collectively, the "CTP
Parties") entered into the CTP Agreement dated January 7, 1994 (the "CTP
Agreement") with the Company;
WHEREAS, the CTP Agreement contemplated that CTP would incorporate and
the Company would issue 5,668 shares of its Common Stock (the "Common Stock") in
exchange for an effective 63% equity interest in such corporation, after giving
effect to the issuance of equity, or the grant of options to acquire equity,
representing 10% of such corporation's outstanding equity;
WHEREAS, after entering into the CTP Agreement, the Company's Board of
Directors approved issuing up to 6,298 shares of Common Stock in exchange for an
effective 70% equity interest in such corporation, without dilution for the
issuance of equity, or the grant of options to acquire equity, of such
corporation;
WHEREAS, after entering into the CTP Agreement, Mr. Tooloee
voluntarily terminated his services to CTP;
WHEREAS, the Purchasers believe that, upon such termination, Mr.
Tooloee forfeited any rights he may have had to receive shares of Common Stock
issuable pursuant to the CTP Agreement;
WHEREAS, the Company is prepared to issue to Purchasers the shares of
Common Stock that Purchasers are entitled to receive pursuant to the CTP
Agreement and pursuant to the subsequent approval of its Board of Directors to
issue additional Common Stock to acquire an effective 70% interest in such
corporation;
WHEREAS, the Company is also prepared to issue to a third party to be
held in an escrow for the benefit of the CTP Parties the shares of Common Stock
that Mr. Tooloee might have been eligible to receive had he continued service to
CTP;
1
<PAGE>
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
---------------------------
1.1 Shares. In exchange for the transfer by each Purchaser of its
------
entire right, title and interest in and to CTP, including its rights as a
general partner of CTP (collectively, an "Interest"), the Company shall issue
and sell to such Purchaser 2,582 shares of Common Stock. In addition, upon the
transfer by both Purchasers of their Interests, the Company shall issue and
transfer to the Secretary of the Company (the "Escrow Agent") to hold in escrow
(the "Escrow") for the benefit of the CTP Parties 1,134 shares of Common Stock
(the "Escrow Shares;" together with the shares of Common Stock referred to in
the first sentence of this Section 1.1, the "Shares").
1.2 Closing. The closing (the "Closing") of the purchase of Common
-------
Stock in exchange for the Interests shall take place at the offices of Pryor,
Cashman, Sherman & Flynn, 410 Park Avenue, New York, New York, at 10:00 A.M., on
December 18, 1995, or at such other time and place as the Company and the
Purchasers agree upon orally or in writing. At the Closing, the Company shall
deliver the Shares to Purchaser in exchange for the transfer by Purchaser of the
Interest to the Company.
2. Representations and Warranties of the Company. In connection
---------------------------------------------
with the transactions provided for herein, the Company hereby represents and
warrants to each Purchaser that:
2.1 Organization, Good Standing, and Qualification. The Company is a
----------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business or properties.
2.2 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors, and stockholders necessary for the authorization,
execution, and delivery of this Agreement, the performance of all obligations of
the Company hereunder, and the authorization, issuance (or reservation for
issuance), and delivery of the Shares has been taken or will be taken prior to
the Closing.
2.3 Valid Issuance of Shares. The Shares, when issued, sold, and
------------------------
delivered at the Closing in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable and, based in part upon the representations
2
<PAGE>
of Purchasers in this Agreement, will be issued in compliance with all
applicable federal and state securities laws.
3
<PAGE>
3. Representations and Warranties of Purchasers. In connection with
--------------------------------------------
the transactions provided for herein, each Purchaser hereby represents and
warrants to the Company that:
3.1 Ownership of Interest. Such Purchaser has good and marketable
---------------------
title to at least a 28% general partnership interest in CTP, free and clear of
all liens, encumbrances, equities, security interests and claims whatsoever,
with full right to deliver the same to the Company (or any subsidiary thereof).
3.2 Authorization. Purchaser has all necessary power and authority
-------------
and has taken all necessary actions to enter into this Agreement, and this
Agreement constitutes a valid and binding obligation of the Purchaser,
enforceable against Purchaser in accordance with its terms.
3.3 Assets; Liabilities. At the time of the CTP Agreement, the
-------------------
primary assets of CTP were (i) membership in the National PCS Consortium
("Consortium"), (ii) a potential pioneer's preference relating to the grant of a
U.S. PCS license, (iii) an interest in a patent issued by the U.S. Patent and
Trademark Office (No.5,448,754) relating to certain frequency sharing technology
for PCS wireless communication and (iv) knowledge and expertise relating to PCS.
Since then, (i) the Consortium has ceased to exist, (ii) CTP was not awarded a
pioneer preference and (ii) CTP has granted the Company an interim license to
its PCS frequency sharing technology to allow the Company to enter into an
interim development agreement with a third party to conduct a preliminary study
regarding the feasibility of commercializing this technology. As of the date
hereof, to the best knowledge of such Purchaser, CTP has no liabilities, direct
or contingent, required to be disclosed on CTP's financial statements in
accordance with generally accepted accounting principles.
3.4 Purchase Entirely for Own Account. Such Purchaser acknowledges
---------------------------------
that this Agreement is made with such Purchaser in reliance upon such
Purchaser's representation to the Company that the Shares will be acquired for
investment for such Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same.
3.5 Disclosure of Information. Such Purchaser acknowledges that it
-------------------------
has received all the information it considers necessary or appropriate for
deciding whether to acquire the Shares. Purchaser further represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Shares.
3.6 Investment Experience. Such Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear
4
<PAGE>
the economic risk of its investment, and has such knowledge and experience in
financial or
5
<PAGE>
business matters that it is capable of evaluating the merits and risks of the
investment in the Shares.
3.7 Accredited Investor. Such Purchaser is an "accredited investor"
-------------------
within the meaning of Rule 501 of Regulation D of the Securities and Exchange
Commission (the "SEC"), as presently in effect.
3.8 Restricted Shares. Such Purchaser understands that the Shares
-----------------
are characterized as "restricted shares" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such shares may be resold without registration under the Securities Act of 1933,
as amended (the "Act"), only in certain limited circumstances. In this
connection, such Purchaser represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed and by the
Act.
3.9 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, such Purchaser further agrees not to make
any disposition of all or any portion of the Shares unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in extraordinary circumstances.
3.10 Legends. It is understood that the Shares may bear one or all of
-------
the following legends:
(a) "These shares have not been registered under the Securities
Act of 1933. They may not be sold, offered for sale, pledged, hypothecated, or
otherwise transferred except pursuant to an effective registration statement
under the Securities Act of 1933 or an opinion of counsel satisfactory to the
Company that registration is not required under such Act or unless sold pursuant
to Rule 144 under such Act."
6
<PAGE>
(b) Any legend required by the laws of the State of California
or other states, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.
3.11 CTP Dilution. The Interest acquired by the Company pursuant to
------------
this Agreement shall not be subject to dilution for any issuance of equity or
grant of options or the rights to acquire equity in CTP, including any grant by
CTP to its management of options to acquire 10% of CTP's outstanding equity.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Purchasers' Obligations at Closing. The
------------------------------------------------
obligations of each Purchaser under this Agreement is subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against such Purchaser unless such Purchaser
consents in writing thereto :
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6. Conditions of the Company's Obligations at Closing. The
--------------------------------------------------
obligations of the Company to each Purchaser under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
such Purchaser:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of such Purchaser contained in Section 3 hereof shall be true on and
as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
7
<PAGE>
6.2 Assignment. The Company shall have received the Purchaser a duly
----------
executed and delivered assignment in substantially the form attached hereto
transferring to the Company all of the Purchaser's right, title and interest in
and to its Interest.
7. Remedy; Liability. If the Company shall fail to perform or
-----------------
observe any of the covenants, agreements or provisions set forth or incorporated
by reference in this Agreement, then and in each and every such case, the
majority in interest of the Purchaser as a group may proceed to enforce
performance of such obligations in such manner as it may elect and may proceed
to protect and enforce its rights by suit in equity, action at law and/or other
appropriate proceeding for performance of such obligations, provided that any
such default may be waived, and any provision of this Agreement may be modified
by a written waiver or agreement executed by the Company and the majority in
interest of the Purchaser. Neither Purchaser shall be liable or otherwise
responsible for the representations and warranties of the other Purchaser.
8. Miscellaneous.
--------------
8.1 Release of Escrow Shares. The Escrow Agent agrees that it shall
------------------------
release the Escrow Shares from Escrow to any person(s) pursuant to (i) written
instructions agreed to by each of the CTP Parties or their successors or assigns
and (ii) any legally binding judgment, order or decree of any court, other
governmental authority, arbitration board or similar legal body. If the Escrow
Agent shall not have released the Escrow Shares from Escrow in accordance with
the immediately preceding sentence by December 31, 1997, the Escrow Agent shall
use commercially reasonable efforts to deposit the Escrow Shares with a court of
competent jurisdiction for the purpose of determining the person(s) to whom the
Escrow Shares shall be released.
8.2 Indemnification; Escrow Agent. The Company and the Purchasers
-----------------------------
shall jointly and severally indemnify and hold harmless the Escrow Agent for any
liabilities and expenses he may incur (including reasonable legal expenses) for
serving as escrow agent hereunder, except for liabilities and expenses caused by
his reckless or intentional misconduct. Escrow Agent may resign his service as
escrow agent hereunder upon 30 days advance notice to the Company and
Purchasers. The Company shall use commercially reasonable efforts to obtain a
successor Escrow Agent with respect to the Escrow Shares.
8.3 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
8
<PAGE>
8.4 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
8.5 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 instrument.
8.6 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.7 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
If to the Company:
International Wireless Communications, Inc.
400 So. El Camino Real
Suite 1275
San Mateo, CA 94402
Attention: Douglas S. Sinclair, Executive Vice President and
Chief Financial Officer
With a copy to:
Brooks Stough, Esq.
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, CA 94304
If to a Purchaser:
John D. Lockton or Hugh B.L. McClung, as applicable
c/o International Wireless Communications, Inc.
400 So. El Camino Real
Suite 1275
9
<PAGE>
San Mateo, CA 94402
8.8 Finder's Fee. Each party represents that it neither is or will
------------
be obligated for any finders' fee or commission in connection with this
transaction.
8.9 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.10 Entire Agreement; Amendments and Waivers. This Agreement and the
----------------------------------------
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and each Purchaser. Any waiver or amendment effected in accordance
with this section shall be binding upon each holder of any shares purchased
under this Agreement at the time outstanding, each future holder of all such
shares, and the Company.
8.11 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
By: ________________________________________
Douglas S. Sinclair
Executive Vice President and Chief
Financial Officer
Address: 400 So. El Camino Real, Suite 1275
San Mateo, CA 94402
_____________________________________________
John D. Lockton
_____________________________________________
Hugh B.L. McClung
_______________________________________________
Douglas S. Sinclair, Secretary of International
Wireless Communications, Inc.
<PAGE>
ASSIGNMENT
----------
Terms not otherwise defined herein have the meanings given to them in
the Stock Purchase Agreement dated as of December 18, 1995 between International
Wireless Communications, Inc., a Delaware corporation (the "Company"), John D.
Lockton and Hugh B.L. McClung.
The undersigned Purchaser hereby assigns to CTP, Inc., a wholly owned
subsidiary of the Company, all of his right, title and interest in and to CTP,
including good and marketable title to at least a 28% general partnership
interest in CTP. Such general partnership interest is free and clear of all
liens, encumbrances, equities, security interests and claims, whatsoever.
Print Name: _________________________________
_____________________________________________
<PAGE>
EXHIBIT 10.6
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made this ____ day of August,
1996, by and between INTERNATIONAL WIRELESS COMMUNICATIONS, INC., a Delaware
corporation ("IWC" or "Assignor"), and INTERNATIONAL WIRELESS COMMUNICATIONS
HOLDINGS, INC., a Delaware corporation ("IWCH" or "Assignee").
WHEREAS, pursuant to an Agreement and Plan of Merger to be entered into
among IWC, IWCH and a wholly owned subsidiary of IWCH, IWC will become a wholly
owned subsidiary of IWCH by means of a Merger (the "Merger"); and
WHEREAS, IWCH desires to succeed to all of IWC's right, title and interest
in and to, and to assume all of IWC's obligations under, those agreements to
which IWC is a party that are listed on Schedule A attached hereto (the
"Agreements").
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, Assignor and Assignee
agree as follows:
1. IWC hereby assigns and transfers to IWCH, and IWCH hereby accepts and
assumes, all of IWC's right, title and interest in and to the
Agreements.
2. IWCH hereby accepts such assignment and assumes and agrees to perform,
satisfy and discharge all liabilities and obligations of IWC arising
pursuant to the Agreements, regardless of when the same arise.
3. The foregoing assignment and assumption with respect to each Agreement
shall be effective immediately after the effective time of the Merger.
4. This Assignment and Assumption Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of
California without regard to conflicts of laws principles. This
Assignment and Assumption Agreement may not be modified, amended or
discharged or any term or provision hereof waived, except in writing
signed by the party against whom such modification, amendment,
discharge or waiver is sought to be enforced. Waiver of any breach of
any provision of this Assignment and Assumption Agreement shall not
constitute or operate as a waiver of any other breach of such
provision or of any other provision thereof, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and
Assumption Agreement as of the date first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
Signed: _____________________________
Printed Name: _______________________
Title: ______________________________
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
Signed: _____________________________
Printed Name: _______________________
Title: ______________________________
2
<PAGE>
Schedule A to Assignment and Assumption Agreement
-------------------------------------------------
Agreements
----------
1. Securities Purchase Agreement dated as of December 6, 1995 among
International Wireless Communications, Inc. ("IWC"), Electra Investment
Trust P.L.C., Electra Associates, Inc. and the other parties thereto.
2. Fifth Amended and Restated Investor Rights Agreement dated as of December
18, 1995 among IWC and the other parties thereto.
3. Registration Rights Agreement dated as of December 18, 1995 among IWC,
Electra Investment Trust P.L.C., Electra Associates, Inc. and the other
parties thereto.
4. Letter dated December 18, 1995 from IWC to Electra Inc. re: disclosure
documents.
5. Letter dated December 18, 1995 from IWC to Electra Investment Trust P.L.C.
and Electra Associates, Inc. re: providing financial information.
6. Letter dated December 11, 1995 from IWC to Mitsubishi Corporation and
Mitsubishi International Corporation re: PCS Interest.
7. Letter dated December 11, 1995 from IWC to Mitsui & Co. Ltd. Re: PCS
Interest.
8. Stock Purchase Agreement dated as of December 18, 1995 among IWC, John D.
Lockton and Hugh B.L. McClung.
9. Letter dated July 27, 1995 from IWC to George M. Drysdale and Drysdale
Partners re: option vesting and observer rights.
10. Letter dated July 28, 1995 from IWC to Keller Enterprises, Inc. re:
assignment to affiliates.
3
<PAGE>
EXHIBIT 10.7
CONSENT, WAIVER, AMENDMENT, ASSIGNMENT AND ASSUMPTION
AGREEMENT
(INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.)
THIS CONSENT, WAIVER, AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT (the
"Consent Agreement") is entered into by and among INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("IWCH"), and the
INDIVIDUALS AND ENTITIES LISTED ON EXHIBIT A HERETO (each such individual or
---------
entity a "Stockholder").
WHEREAS, IWCH plans to offer (the "Offering") units (collectively, the
"Units"), each consisting of a $1,000 principal Senior Secured Discount Note
due 2001 (collectively, the "Notes") and a contingent warrant (collectively,
the "Warrants") to purchase shares of common stock, $0.01 par value per share
of IWCH (the "Common Stock"), as more fully described in the Offering
Memorandum of IWCH dated July 22, 1996 (the "Memorandum");
WHEREAS, prior to the Offering, IWC will be merged with and into a wholly
owned subsidiary of IWCH (the "Merger"), whereby IWC will become a wholly owned
subsidiary of IWCH and each share of IWC capital stock outstanding immediately
prior to the effective time of the Merger (the "Effective Time") will be
converted into forty (40) shares of the corresponding class and series of IWCH
capital stock; and
WHEREAS, the Stockholder wishes to grant, approve or agree to
(collectively, "Grant") to certain consents, waivers, amendments, assignments,
assumptions and agreements (collectively, the "Approvals") effective immediately
after the Effective Time.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby mutually
acknowledged, the parties agree as follows:
1. The undersigned Stockholder consents to the assignment to IWCH of
all of IWC's right, title and interest in and to each agreement listed on
Exhibit B hereto (individually, an "Assumed Agreement;" collectively, the
"Assumed Agreements"), and the assumption by IWCH of all of IWC's obligations
thereunder, whereby:
(A) IWCH shall be the successor to IWC under each Assumed
Agreement;
(B) IWCH shall be deemed to be the "Company" under each such
Assumed Agreement;
(C) IWC shall be released from all obligations under each
Assumed Agreement, regardless of when the same arose; and
<PAGE>
(D) the undersigned Stockholder shall look only to IWCH for the
performance of the obligations of the "Company" thereunder.
2. The undersigned Stockholder hereby Grants all Approvals that are
reasonably necessary in connection with the Amended and Restated Certificate of
Incorporation of IWCH, in substantially the form attached hereto as Exhibit C
---------
(the "Certificate"), and each of the Assumed Agreements, including the Series F
Redeemable Convertible Preferred Stock Securities Purchase Agreement dated as of
December 6, 1995 among IWC and the other parties thereto (the "SPA"), the Fifth
Amended and Restated Investor Rights Agreement, dated as of December 18, 1995
among IWC and the investors named therein (the "IRA"), and the Registration
Rights Agreement, dated as of December 18, 1995 among IWC and the investors
named therein (the "RRA"), in order for IWCH to:
(A) effect the transactions contemplated by the Offering (solely
to the extent described in the sections captioned "Description of Units,"
"Description of Senior Notes" and "Description of Warrants" of the Memorandum),
including without limitation (i) the offer and sale of Units (as defined in the
Memorandum), (ii) the pledge of capital stock of IWC and any Intermediate
Holding Company (as defined in the Memorandum) and all intercompany notes of IWC
or any Intermediate Holding Company to its parent (collectively, the "Pledge"),
(iii) the repurchase of the Notes as described in the Memorandum, (iv) any
negative covenants contained in the Indenture (as defined in the Memorandum),
(v) the issuance and registration of Warrant Shares (as defined in the
Memorandum), (vi) the tag-along rights granted to holders of Warrants (as
defined in the Memorandum) and Warrant Shares (but only to the extent provided
in Section 6(B) below), (vii) the issuance amount and registration of the Notes
and Exchange Notes (as defined in the Memorandum), and (viii) the repurchase of
the Warrants and Warrant Shares as described in the Memorandum, but excluding
any Investments (as defined in the SPA) contemplated by the Memorandum
(collectively, "Offering Transaction"), and
(B) the adoption and issuance or grant of options to purchase
Common Stock pursuant to the Stock Plan (as defined in the Memorandum).
3. Without limiting the generality of Section 2 hereof, the
undersigned Stockholder hereby grants any Approval required under:
(A) subsection V.B.7(a)(ii) of the Certificate to issue Warrant
Shares upon exercise of the Warrants;
(B) subsection V.B.7(c) of the Certificate to (i) permit the
pledge pursuant to Section 6.13 and (ii) permit the grant and Warrants and the
issuance of Warrant Shares pursuant to Section 6.15 of the SPA; and
(C) subsection V.B.7(d) of the Certificate to (i) permit IWCH to
issue the Notes and the Exchange Notes and to incur the other Indebtedness
permitted under the Indenture pursuant to Section 6.1 of the SPA, (ii) permit
IWCH to make Investments (as defined in the Memorandum) in IWC and to permit IWC
to make Investments in any Intermediate Holding Companies pursuant to Section
6.4 of the SPA (provided, however, that no Approval to
2
<PAGE>
make any other Investments is granted pursuant to this Consent Agreement), and
(iii) permit IWCH to enter into indemnification agreements with each of its
officers and directors, IWCH to enter into an appropriate agreement with any
Stockholder to affect the registration rights and tag-along rights described in
the Memorandum and permit Toronto Dominion Securities (USA) Inc. ("TD") to enter
to the Purchase Agreement (as defined in the Memorandum), all in accordance with
Section 6.5 of the SPA, and (iv) to permit IWCH to effect the Pledge pursuant to
Sections 6.6 and 6.7 of the SPA.
4. Without limiting the generality of Section 2 hereof, the
undersigned Stockholder hereby Grants any Approval required under:
(A) Section 6.1 of the SPA to permit IWCH to issue the Notes and
the Exchange Notes and incur any other Indebtedness permitted under the
Indenture;
(B) Section 6.3 of the SPA to repurchase the Warrants and
Warrant Shares in accordance with the Warrant Agreement;
(C) Section 6.4 of the SPA to permit IWCH to make any
Investments in IWC and to permit IWC to make any Investments in any Intermediate
Holding Company (provided, however, that no Approval to make any other
Investments is granted pursuant to this Consent Agreement);
(D) Section 6.5 of the SPA to permit IWCH to enter into
indemnification agreements with each of its officers and directors, to enter
into appropriate agreements with each Stockholder to affect the registration
rights and tag-along rights referred to in the Memorandum and to permit TD to
enter to the Purchase Agreement;
(E) Sections 6.6, 6.7 and 6.13 of the SPA to permit IWCH to
effect the Pledge;
(F) Section 6.15 of the SPA to grant the Warrants and issue the
Warrant Shares; and
(G) Section 11.3 of the SPA to permit IWCH to solicit Approvals
pursuant to this Consent Agreement and other consents and approvals with respect
to the Offering Transactions and the Stock Plan without satisfying the twenty
(20) business day notice period that otherwise applies pursuant to such Section
11.3.
5. Without limiting the generality of Section 2 hereof, the
undersigned Stockholder agrees that the SPA is amended as follows:
(A) The definition of "Certificate of Incorporation" shall mean
the Certificate;
3
<PAGE>
(B) All references to numbers of shares (but not references to
percentages) shall be deemed to refer to a number equal to forty (40) multiplied
by the original number; and
(C) All references to per share prices stated in dollar amounts
(but not references to percentages) shall be deemed to refer to a dollar amount
equal to the original amount divided by forty (40).
6. Without limiting the generality of Section 2 hereof, the
undersigned agrees to amend the RRA as follows:
(A) Section 3.1 of the RRA is amended so that it shall not
apply, and holders of Registrable Securities (as defined in the RRA) shall have
no registration rights with respect to, (i) the registration of the Exchange
Notes pursuant to the Registration Rights Agreement (as defined in the
Memorandum) and (ii) the registration of the Warrant Shares pursuant to the
Warrant Registration Statement (as defined in the Memorandum);
(B) Section 3.3 is amended so that holders of Warrant Shares
shall be entitled to particpate in all IWCH registrations or registrations
effected by ICHA for the account of others will all Holders (as defined in the
RRA) other than Class A Holders (as defined in the RRA) on a pro rata basis
based on the number of Warrant Shares owned by such holders of Warrant Shares
and the number of Registrable Securities (as defined in the RRA) owned by such
Holders; and
(C) Section 12 of the RRA is amended so that it is not violated
by the grant of registration rights to holders of Notes pursuant to the
Indenture and to holders of Warrant Shares pursuant to the Warrant Agreement (as
defined in the Memorandum).
7. Without limiting the generality of Section 2 hereof, the
undersigned Stockholder agrees to amend the IRA as follows:
(A) Section 1.3 of the IRA is amended so that it shall not apply
to, and holders of Registrable Securities (as defined in the IRA) shall not have
registration rights with respect to, (i) the registration effected pursuant to
the Exchange Registration Statement (as defined in the Registration Rights
Agreement) or the Shelf Registration Statement (as defined in the Registration
Rights Agreement) and (ii) the registration of the Warrant Shares pursuant to
the Warrant Registration Statement;
(B) Section 1.8 of the IRA is amended so that holders of Warrant
Shares shall be entitled to participate in any Company registrations pursuant to
Section 1.3 of the IRA on a pro rata basis with other Holders (as defined in the
IRA) of Registrable Securities (as defined in the IRA) on a pro rata basis based
on the number of Warrant Shares owned by such holders of Warrant Shares and the
number of Registrable Securities (as defined in the IRA) owned by such Holders;
4
<PAGE>
(C) Section 1.14 of the IRA is amended so that it is not
violated by the grant of registration rights to holders of Notes pursuant to the
Indenture and to holders of Warrant Shares pursuant to the Warrant Agreement (as
defined in the Memorandum);
(D) Section 2.3 of the IRA is amended so that the right of first
offer set forth therein shall not apply to the grant of the Warrants and the
issuance of the Warrant Shares;
(E) Section 2.3(d) is amended so that the reference to "50,000
shares" shall mean a reference to "2,400,000 shares";
(F) Except as provided in subsection 7(E) above, references to
shares (but not references to percentage) in the IRA shall be deemed to refer to
a number equal to forty (40) multiplied by the original number; and
(G) All references to share prices stated in dollar amounts (but
not references to percentages) in the IRA shall be deemed to refer to a dollar
amount equal to the original amount divided by forty (40).
8. Except as amended hereby, each of the Assumed Agreements shall
remain in full force and effect and is hereby ratified and confirmed.
9. Each Stockholder Grants its Approvals pursuant to this Consent
Agreement in its capacity as a holder of IWCH capital stock (including in its
capacity as a holder of any class or series of IWCH capital stock) and, to the
extent applicable, in its capacity as a party to each Assumed Agreement.
10. The undersigned Stockholder waives any and all notice
requirements that might otherwise apply with respect to the solicitation of its
consent to this Consent Agreement.
11. After the Merger, IWCH shall restate each of the Assumed
Agreements to reflect the assignment of such agreements to IWCH and amendment of
such agreements pursuant to this Consent Agreement.
12. The Approvals Granted by the undersigned Stockholder shall
automatically be effective only when each of the following conditions has been
satisfied:
(A) The Merger shall have occurred;
(B) The Board of Directors of IWCH (or any committee thereof)
shall have approved all of the terms and conditions of the Purchase Agreement;
(C) And all Approvals required to be obtained from holders of
IWC capital stock (including any Approvals required of any class or series of
IWC capital stock) required in order to consummate the Merger shall have been
obtained.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption Agreement.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
Signed: ________________________________________
Printed Name: __________________________________
Title: _________________________________________
Date: __________________________________________
STOCKHOLDER
Entity Name: ___________________________________
Signed: ________________________________________
Printed Name: __________________________________
Title: _________________________________________
Date: __________________________________________
Shares of Common Stock Held: ___________________
Shares of Series A Preferred Stock Held: _______
Shares of Series B Preferred Stock Held: _______
Shares of Series C Preferred Stock Held: _______
Shares of Series D Preferred Stock Held: _______
Shares of Series E Preferred Stock Held: _______
Shares of Series F-1 Preferred Stock Held: _____
Shares of Series F-2 Preferred Stock Held: _____
6
<PAGE>
EXHIBIT 10.8
CONSENT, WAIVER, AMENDMENT, ASSIGNMENT AND ASSUMPTION
AGREEMENT
(INTERNATIONAL WIRELESS COMMUNICATIONS, INC.)
THIS CONSENT, WAIVER, AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT (the
"Consent Agreement") is entered into by and among INTERNATIONAL WIRELESS
COMMUNICATIONS, INC., a Delaware corporation ("IWC"), and the INDIVIDUALS AND
ENTITIES LISTED ON EXHIBIT A HERETO (each such individual or entity a
---------
"Stockholder").
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") to be entered into among IWC, International Wireless Communications
Holdings, Inc., a Delaware corporation ("IWHC"), and a wholly owned subsidiary
of IWCH, IWC will be merged with and into such subsidiary of IWCH (the
"Merger"), whereby IWC will become a wholly owned subsidiary of IWCH and each
share of IWC capital stock outstanding immediately prior to the effective time
of the Merger (the "Effective Time") will be converted into forty (40) shares of
the corresponding class and series of IWCH capital stock; and
WHREAS, IWC has amended its 1994 Stock Option/Stock Issuance Plan (the
"Plan") to increase to 60,000 the number of shares of IWC Common Stock, $0.01
par value per share ("Common Stock"), authorized for issuance under the Plan
(the "Share Increase"); and
WHEREAS, the Stockholder wishes to grant, approve or agree to
(collectively, "Grant") certain consents, waivers, amendments, assignments,
assumptions and agreements (collectively, the "Approvals") effective immediately
before the Effective Time that are reasonably necessary to effect the Merger and
authorize the Share Increase.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby mutually
acknowledged, the parties agree as follows:
1. The undersigned Stockholder hereby Grants all Approvals that are
reasonably necessary in connection with IWC's Amended and Restated Certificate
of Incorporation, as currently in effect (the "Certificate"), and each agreement
listed on Exhibit B hereto (individually, an "Assumed Agreement;" collectively,
---------
the "Assumed Agreements"), including the Series F Redeemable Convertible
Preferred Stock Securities Purchase Agreement, dated as of December 6, 1995
among IWC and the other parties thereto (the "SPA"), and the Fifth Amended and
Restated Investor Rights Agreement, dated as of December 18, 1995 among IWC and
the investors named therein (the "IRA"), in order for IWC to effect the Merger
and the Share Increase.
2. Without limiting the generality of Section 1 hereof, the
undersigned Stockholder hereby grants any Approval required under subsections
V.B.4(d)(ii)(B), V.B.7(a)(ii) and V.B.7(c) of the Certificate to effect the
Share Increase.
<PAGE>
3. Without limiting the generality of Section 1 hereof, the
undersigned Stockholder hereby Grants the Approval required under Section 6.15
of the SPA to effect the Share Increase.
4. Without limiting the generality of Section 1 hereof, the
undersigned Stockholder agrees to amend Section 2.3(i) of the IRA so that the
right of first offer set forth therein shall not apply to the issuance and sale
of up to 60,000 shares of Common Stock pursuant to the Plan.
5. Except as amended hereby, each Assumed Agreement and all other
related documents, and all other documents, agreements, instruments or writings
entered into in connection therewith, shall remain in full force and effect and
are hereby ratified, confirmed, and acknowledged by IWC.
6. The amendments set forth above are limited precisely as written
and shall not be deemed to (i) be a consent to any waiver or modification of any
term or condition of any Assumed Agreement, or any document delivered pursuant
thereto, except in each case as expressly provided herein, or (ii) prejudice any
right or rights which the Stockholders may now or in the future have in
connection with any Assumed Agreement. The execution, delivery and effectiveness
of this Consent Agreement shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of the Stockholders under any
of the related documents or constitute a waiver or modification of any provision
of any of the related documents or a waiver of any now existing or hereafter
arising defaults of events of default.
7. Each Stockholder Grants its Approvals pursuant to this Consent
Agreement in its capacity as a holder of IWC capital stock (including in its
capacity as a holder of any class or series of IWC capital stock) and, to the
extent applicable, in its capacity as a party to each Assumed Agreement.
8. The undersigned Stockholder waives any and all notice
requirements that might otherwise apply with respect to the solicitation of the
consent contemplated by this Consent Agreement.
9. The Approvals Granted by the undersigned Stockholder shall
automatically be effective immediately prior to the Effective Time.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption Agreement.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
Signed:_______________________________________
Printed Name:_________________________________
Date:_________________________________________
Title:________________________________________
STOCKHOLDER
Entity Name:__________________________________
Signed:_______________________________________
Printed Name:_________________________________
Title:________________________________________
Shares of Common Stock Held:__________________
Shares of Series A Preferred Stock Held:______
Shares of Series B Preferred Stock Held:______
Shares of Series C Preferred Stock Held:______
Shares of Series D Preferred Stock Held:______
Shares of Series E Preferred Stock Held:______
Shares of Series F-1 Preferred Stock Held:____
Shares of Series F-2 Preferred Stock Held:____
<PAGE>
EXHIBIT 10.9
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSES OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to promote the
interests of International Wireless Communications Holdings, Inc., a Delaware
corporation, by providing a method whereby eligible individuals who provide
valuable services to the Corporation (or any Parent or Subsidiary) may be
offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation and continue to render services to the Corporation (or any Parent or
Subsidiary).
II. DEFINITIONS
For the purposes of this Plan, the following definitions shall be in
effect:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
C. COMMITTEE shall mean a committee of two (2) or more Board members
---------
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities are transferred to a person or
persons different from those who held those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean International Wireless Communications
-----------
Holdings, Inc., a Delaware corporation.
<PAGE>
G. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
------------
amended.
I. EXERCISE DATE shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing price per share
of Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market or
any successor system. If there is no closing price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ National
Market System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
K. INCENTIVE OPTION shall mean a stock option which satisfies the
----------------
requirements of Code Section 422.
L. NEWLY ISSUED SHARES shall mean shares of Common Stock drawn from
-------------------
the Corporation's authorized but unissued shares of Common Stock.
M. NON-STATUTORY OPTION shall mean a stock option not intended to
--------------------
meet the requirements of Code Section 422.
2
<PAGE>
N. OPTIONEE shall mean any person to whom an option is granted under
--------
the Option Grant Program in effect under the Plan.
O. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
P. PARTICIPANT shall mean any person who receives a direct issuance
-----------
of Common Stock under the Stock Issuance Program in effect under the Plan.
Q. PERMANENT DISABILITY shall have the meaning assigned to such term
--------------------
in Code Section 22(e)(3).
R. PLAN shall mean the Corporation's 1996 Stock Option/Stock
----
Issuance Plan, as set forth in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the Committee,
------------------
to the extent the Committee is at the time responsible for the administration of
the Plan in accordance with Section IV of Article One.
T. PREDECESSOR PLAN shall mean the Corporation's existing 1994 Stock
----------------
Option/Stock Issuance Plan.
U. SERVICE shall mean the provision of services to the Corporation
-------
or any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
contractor.
V. STOCK EXCHANGE shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
W. SUBSIDIARY shall mean each corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
X. 10% STOCKHOLDER shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation.
Y. TREASURY SHARES shall mean shares of Common Stock reacquired by
---------------
the Corporation and held as treasury shares.
3
<PAGE>
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate components: the
Option Grant Program specified in Article Two and the Stock Issuance Program
specified in Article Three. Under the Option Grant Program, eligible individuals
may, at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock in accordance with the provisions of Article Two. Under
the Stock Issuance Program, eligible individuals may be issued shares of Common
Stock directly, either through the immediate purchase of such shares at a price
not less than eighty-five percent (85%) of the fair market value of the shares
at the time of issuance or as a bonus for services rendered the Corporation
without any cash payment required of the recipient.
B. The provisions of Articles One and Four of the Plan shall apply
to both the Option Grant Program and the Stock Issuance Program and shall
accordingly govern the interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to wazzu removal by the Board at
any time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option.
V. OPTION GRANTS AND SHARE ISSUANCES
A. The persons eligible to participate in the Option Grant Program
and the Stock Issuance Program shall be limited to the following:
(i) Employees,
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent contractors who
provide valuable services to the Corporation (or any Parent or Subsidiary).
4
<PAGE>
B. The Plan Administrator shall have full authority to determine,
(i) with respect to the option grants under the Plan, which eligible individuals
are to receive option grants, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a Non-
Statutory Option, the time or times at which each option is to become
exercisable and the maximum term for which the option is to remain outstanding,
and (ii) with respect to share issuances under the Stock Issuance Program, the
number of shares to be issued to each Participant, the vesting schedule (if any)
to be applicable to the issued shares and the consideration to be paid by the
Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with Article Two or to effect share issuances in
accordance with Article Three.
VI. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock. The maximum
number of shares which may be issued over the term of the Plan shall not exceed
2,400,000 shares, subject to adjustment from time to time in accordance with the
provisions Section VI.C of this Article One. Such authorized share reserve is
comprised of the number of shares which remained available for issuance, as of
the Plan effective date, under the Predecessor Plan as last approved by the
Corporation's stockholders prior to such date, including the shares subject to
the outstanding options incorporated into the Plan and any other shares which
would have been available for future option grants under the Predecessor Plan.
B. Shares subject to outstanding options shall be available for
subsequent issuance under the Plan to the extent (i) the options (including any
options incorporated from the Predecessor Plan) expire or terminate for any
reason prior to exercise in full or (ii) the options are canceled in accordance
with the cancellation/regrant provisions of Section 4 of Article Two. All shares
issued under the Plan (including shares issued upon exercise of options
incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for issuance under the Plan.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the maximum number
and/or class of securities under the Plan and (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option (including any option incorporated from the Predecessor Plan) in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive. In
no event shall any adjustments be made for the conversion of one or more
outstanding series of the Corporation's preferred stock into shares of the
Common Stock.
5
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options. Each granted option shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator, provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. EXERCISE PRICE.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator. In no event, however, shall the exercise price per share be less
than eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the date of the option grant.
2. If the individual to whom the option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the grant date.
3. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the agreement evidencing the grant, be payable in cash or check
made payable to the Corporation. Should the Corporation's outstanding Common
Stock be registered under Section 12(g) of the Exchange Act at the time the
option is exercised, then the exercise price may also be paid as follows:
(i) in shares of Common Stock held by the Optionee for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value
on the Exercise Date, or
(ii) through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
written instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such purchase and (b) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale transaction.
6
<PAGE>
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
----------------------------
shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement. However, no option shall have a term in excess of
ten (10) years measured from the grant date. The option shall be exercisable
during the Optionee's lifetime only by the Optionee and shall not be assignable
or transferable other than by will or by the laws of descent and distribution
following the Optionee's death or pursuant to a qualified domestic relations
order as defined by the Code.
C. Effect of Termination of Service.
--------------------------------
1. Except to the extent otherwise provided pursuant to
subsection C.2 below, the following provisions shall govern the exercise period
applicable to any options held by the Optionee at the time of cessation of
Service or death:
(i) Should the Optionee cease to remain in Service for
any reason other than death or Permanent Disability, then the period during
which each outstanding option held by such Optionee is to remain
exercisable shall be limited to the three (3)-month period following the
date of such cessation of Service.
(ii) Should such Service terminate by reason of Permanent
Disability, then the period during which each outstanding option held by
the Optionee is to remain exercisable shall be limited to the twelve (12)-
month period following the date of such cessation of Service.
(iii) Should the Optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of the Optionee's death. During such limited period, the
option may be exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the option
term.
(v) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation
7
<PAGE>
of Service, terminate and cease to be outstanding with respect to any
option shares for which the option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
2. The Plan Administrator shall have full power and authority
to extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service or death from the limited period
in effect under subsection C.1 of this Article Two to such greater period of
time as the Plan Administrator shall deem appropriate; provided, that in no
--------
event shall such option be exercisable after the specified expiration date of
the option term.
D. STOCKHOLDER RIGHTS. An Optionee shall have no stockholder rights
------------------
with respect to the shares subject to the option until such individual shall
have exercised the option and paid the exercise price.
E. UNVESTED SHARES. The Plan Administrator shall have the discretion
---------------
to authorize the issuance of unvested shares of Common Stock under the Plan.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, all or (at the discretion of the Corporation and with the consent of the
Optionee) any of those unvested shares. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the agreement evidencing
such repurchase right. All outstanding repurchase rights under the Plan shall
terminate automatically upon the occurrence of any Corporate Transaction, except
to the extent the repurchase rights are expressly assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
F. FIRST REFUSAL RIGHTS. Until such time as the Corporation's
--------------------
outstanding shares of Common Stock are first registered under Section 12(g) of
the Exchange Act, the Corporation shall have the right of first refusal with
respect to any proposed sale or other disposition by the Optionee (or any
successor in interest by reason of purchase, gift or other transfer) of any
shares of Common Stock issued under the Plan. Such right of first refusal shall
be exercisable in accordance with the terms and conditions established by the
Plan Administrator and set forth in the agreement evidencing such right.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Except as modified by the provisions
of this Section II, all the provisions of Articles One, Two and Four shall be
applicable to Incentive Options. Incentive Options may only be granted to
individuals who are Employees. Options which are specifically designated as
Non-Statutory shall not be subject to such terms and conditions.
---
A. EXERCISE PRICE. The exercise price per share of the Common Stock
--------------
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the date of
grant.
8
<PAGE>
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the Common
-----------------
Stock (determined as of the respective date or dates of grant) for which one (1)
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted. Should the applicable One
Hundred Thousand Dollar ($100,000) limitation in fact be exceeded in any
calendar year, then the option shall nevertheless become exercisable for the
excess number of shares in such calendar year as a Non-Statutory Option.
C. 10% STOCKHOLDER. If any individual to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the grant date.
III. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, each option at
the time outstanding under the Plan shall terminate and cease to be exercisable,
except to the extent assumed by the successor corporation or parent thereof.
B. Each outstanding option which is assumed in connection with a
Corporate Transaction or is otherwise to remain outstanding shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been issuable
to the Optionee in the consummation of such Corporate Transaction, had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the class and number of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, and (ii) the exercise price payable per share,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same.
C. The grant of options under this Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options (including outstanding options
incorporated from the Predecessor Plan) under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but with an exercise price per share not less
than (i) one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the new grant date in the case of a grant of an Incentive Option, (ii)
one hundred ten percent (110%)
9
<PAGE>
of such Fair Market Value in the case of an option grant to a 10% Stockholder or
(iii) eighty-five percent (85%) of such Fair Market Value in the case of all
other grants.
10
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares may be issued under the Stock Issuance Program through direct
and immediate issuances without any intervening stock option grants. Each such
stock issuance shall be evidenced by a Restricted Stock Purchase Agreement
("Purchase Agreement") which complies with each of the terms and conditions of
this Article Three.
A. ISSUE PRICE
-----------
1. The purchase price per share shall be fixed by the Plan
Administrator, but in no event shall the purchase price per share of Newly
Issued Shares be less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the date of issuance.
2. If the individual to whom a share issuance is made is a 10%
Stockholder, then the purchase price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the issuance date.
3. Newly Issued Shares shall be issued under the Plan for such
consideration as the Plan Administrator shall from time to time determine,
provided that, except as set forth in Section I of Article Four, in no event
shall shares be issued for consideration other than
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation or any
Parent or Subsidiary.
4. Treasury Shares may be issued under the Plan for such
consideration (including one or more of the items of consideration specified in
subparagraph 3 above) as the Plan Administrator may deem appropriate. Treasury
Shares may, in lieu of any cash consideration, be issued subject to such vesting
requirements tied to the Participant's period of future Service or the
Corporation's attainment of specified performance objectives as the Plan
Administrator may establish at the time of issuance.
B. VESTING PROVISIONS
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
11
<PAGE>
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Purchase
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his unvested shares by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration or by reason of any Corporate Transaction shall be
issued subject to (i) the same vesting requirements applicable to the
Participant's unvested shares and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Stock Issuance
Program, then those shares shall be immediately surrendered to the Corporation
for cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares. The surrendered shares may, at the Plan Administrator's
discretion, be retained by the Corporation as Treasury Shares or may be retired
to authorized but unissued share status.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver
12
<PAGE>
may be effected at any time, whether before or after the Participant's cessation
of Service or the attainment or non-attainment of the applicable performance
objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Corporation's
--------------------
outstanding shares of Common Stock are first registered under Section 12(g) of
the Exchange Act, the Corporation shall have a right of first refusal with
respect to any proposed disposition by the Participant (or any successor in
interest by reason of purchase, gift or other transfer) of any shares of Common
Stock issued under the Plan. Such right of first refusal shall be exercisable in
accordance with the terms and conditions established by the Plan Administrator
and set forth in the agreement evidencing such right.
II. SHARE ESCROW/TRANSFER RESTRICTIONS
A. SHARE ESCROW. Unvested shares may, in the Plan Administrator's
------------
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing such unvested shares. To the
extent an escrow arrangement is utilized, the unvested shares and any securities
or other assets issued with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF
SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) DATED __________, 199__ A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. TRANSFER RESTRICTIONS. The Participant shall have no right to
---------------------
transfer any unvested shares of Common Stock issued to him or her under the
Stock Issuance Program. For purposes of this restriction, the term "transfer"
shall include (without limitation) any sale, pledge, assignment, encumbrance,
gift, or other disposition of such shares, whether voluntary or involuntary.
Upon any such attempted transfer, the unvested shares shall immediately be
cancelled in accordance with substantially the same procedure in effect under
Section I.B.3 of this Article Three, and neither the Participant nor the
proposed transferee shall have any rights with respect to such cancelled shares.
However, the Participant shall have the right to make a gift of unvested shares
acquired under the Stock Purchase Program to his or her spouse or issue,
13
<PAGE>
including adopted children, or to a trust established for such spouse or issue,
provided the donee of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Stock Issuance Program and
the Purchase Agreement applicable to the gifted shares.
III. CORPORATE TRANSACTION
All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a Corporate
Transaction, except to the extent the Corporation's outstanding repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction.
14
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
-------------
I. LOANS
A. The Plan Administrator may assist any Optionee or Participant,
other than a non-employee Board member, in the exercise of one or more options
granted to the Optionee under Article Two or the purchase of one or more shares
issued to the Participant under Article Three by:
(i) authorizing the extension of a loan from the
Corporation to the Optionee or Participant, or
(ii) permitting the Optionee or Participant to pay the
exercise price or purchase price in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. In all events, the maximum
credit available to each Optionee or Participant may not exceed the sum of (i)
---
the aggregate exercise price or purchase price payable for the purchased shares
(less the par value of such shares) plus (ii) any Federal, state and local
income and employment tax liability incurred by the Optionee or Participant in
connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this Section I shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may in its discretion deem appropriate.
II. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary) or of the Optionee or the Participant, which
rights are hereby expressly reserved by each, to terminate the Service of the
Optionee or Participant at any time for any reason, with or without cause.
III. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an Optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Plan prior to such action, unless the Optionee or
15
<PAGE>
Participant consents to such amendment. In addition, the Board shall not,
without the approval of the Corporation's stockholders, (i) increase the maximum
number of shares issuable under the Plan, except for permissible adjustments
under Section VI.C of Article One, (ii) materially modify the eligibility
requirements for participation in the Plan or (iii) otherwise materially
increase the benefits accruing to individuals who participate in the Plan.
B. Options to purchase shares of Common Stock may be granted under
Article Two and shares of Common Stock may be issued under Article Three that
are in both instances in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued are held in
--------
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the initial excess issuances are made, whether as stock option
grants or direct stock issuances, then (i) any unexercised options representing
such excess shall terminate and cease to be exercisable and (ii) the Corporation
shall promptly refund to the Optionees and Participants the exercise or purchase
price paid for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short-Term Federal Rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, then all
options previously granted under the Plan shall terminate and cease to be
outstanding, and no further options shall be granted. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after the
Plan effective date. All options outstanding under the Predecessor Plan as of
such date shall, immediately upon approval of the Plan by the Corporation's
stockholders, be incorporated into the Plan and treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options with respect
to their acquisition of shares of Common Stock.
C. The Plan shall terminate upon the earliest of (i) the expiration
--------
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued or (iii) the termination of all outstanding options under
Section III of Article Two. Each option and unvested share
16
<PAGE>
issuance outstanding under the Plan at such time shall continue to have full
force and effect in accordance with the provisions of the agreements evidencing
that option or share issuance.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
IV. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article Two or upon the purchase of any shares issued
under Article Three shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under
Article Two and the issuance of Common Stock upon (i) the exercise of any option
or (ii) a direct issuance under Article Three shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the Common Stock issued pursuant to it.
VIII. FINANCIAL REPORTS
The Corporation shall deliver at least annually to each Optionee
holding an outstanding option under the Plan and to each Participant holding a
right to purchase stock under the Plan the same financial information furnished
to holders of the Common Stock unless the Optionee or Participant is a key
employee whose duties in connection with the Corporation assure such individual
access to equivalent information.
17
<PAGE>
EXHIBIT 10.10
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this ______ day of ______, 1996 between International Wireless
Communications Holdings, Inc., a Delaware corporation (the "Company"), and
______________ ("Indemnitee").
WHEREAS, Indemnitee, a member of the Board of Directors or an officer,
employee or agent of the Company, performs a valuable service in such capacity
for the Company;
WHEREAS, the stockholders of the Company have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers and directors of the
Company to the maximum extent authorized by Section 145 of the Delaware General
Corporation Law, as amended (the "Code") and authorizing the Company to
indemnify its employees and agents in accordance with the Code as the Board of
Directors shall determine in its sole discretion;
WHEREAS, the Bylaws and the Code, by their non-exclusive nature,
permit contracts between the Company and the members of its Board of Directors,
officers, employees or agents with respect to indemnification of such directors,
officers, employees or agents;
WHEREAS, in accordance with the authorization as provided by the Code,
the Company either has purchased and presently maintains or intends to purchase
and maintain a policy or policies of Directors and Officers Liability Insurance
("D & O Insurance") covering certain liabilities which may be incurred by its
directors and officers in the performance of their duties as directors and
officers of the Company;
WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors or officers,
employees or agents by such D & O Insurance and by statutory and bylaw
indemnification provisions; and
WHEREAS, in order to induce Indemnitee to continue to serve as a
member of the Board of Directors, officer, employee or agent of the Company, the
Company has determined and agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's continued service as
a director, officer, employee or agent after the date hereof, and for other good
and valid consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Indemnification of Indemnitee. The Company hereby agrees to
-----------------------------
hold harmless and INDEMNIFY Indemnitee to the fullest extent authorized or
permitted by the provisions of the Code, as may be amended from time to time.
<PAGE>
2. Additional Indemnity. Subject only to the exclusions set forth in
--------------------
Sections 3 and 6(c) hereof, the Company hereby further agrees to hold harmless
and indemnify Indemnitee:
(a) against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Company) to which
Indemnitee is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Indemnitee is, was or at any time becomes a
director, officer, employee or agent of the Company or any subsidiary of the
Company, or is or was serving or at any time serves at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise;
and
(b) otherwise to the fullest extent as may be provided to
Indemnitee by the Company under the non-exclusivity provisions of Article VII,
Section 7 of the Bylaws of the Company and the Code.
3. Limitations on Additional Indemnity.
-----------------------------------
(a) No indemnity pursuant to Section 2 hereof shall be paid by
the Company:
i) in respect to remuneration paid to Indemnitee if it
shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
ii) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the purchase or sale
by Indemnitee of securities of the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;
iii) on account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest or to
constitute willful misconduct;
iv) on account of Indemnitee's conduct which is the
subject of an action, suit or proceeding described in Section 6(c)(ii) hereof;
v) on account of any action, claim or proceeding (other
than a proceeding referred to in Section 7(b) hereof) initiated by the
Indemnitee unless such action, claim or proceeding was authorized in the
specific case by action of the Board of Directors;
2
<PAGE>
vi) if a final decision by a Court having jurisdiction in
the matter shall determine that such indemnification is not lawful (and, in this
respect, both the Company and Indemnitee have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); and
vii) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of (a) such losses for which the
Indemnitee is indemnified pursuant to Section 1 hereof and (b) any additional
amount paid to the Indemnitee pursuant to any D & O Insurance purchased and
maintained by the Company.
(b) No indemnity pursuant to Section 1 or 2 hereof shall be paid
by the Company if the action, suit or proceeding with respect to which a claim
for indemnity hereunder is made arose from or is based upon any of the
following:
i) Any solicitation of proxies by Indemnitee, or by a
group of which he was or became a member consisting of two or more persons that
had agreed (whether formally or informally and whether or not in writing) to act
together for the purpose of soliciting proxies, in opposition to any
solicitation of proxies approved by the Board of Directors.
ii) Any activities by Indemnitee that constitute a breach
of or default under any agreement between Indemnitee and the Company.
4. Contribution. If the indemnification provided in Sections 1 and
------------
2 hereof is unavailable by reason of a Court decision described in Section
3(a)(vi) hereof based on grounds other than any of those set forth in paragraphs
(i) through (v) of Section 3 (a) hereof, then in respect of any threatened,
pending or completed action, suit or proceeding in which the Company is jointly
liable with Indemnitee (or would be if joined in such action, suit or
proceeding), the Company shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, or fines or settlement amounts. The Company agrees
that it would not be just and equitable if contribution pursuant to this Section
4 were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
5. Notification and Defense of Claim. Not later than thirty (30)
---------------------------------
days after receipt by Indemnitee of notice of the commencement of any action,
suit or proceeding, Indemnitee shall, if a claim in respect thereof is to be
made against the Company under this
3
<PAGE>
Agreement, notify the Company of the commencement thereof; but Indemnitee's
omission so to notify the Company will not relieve the Company from any
liability which it may have to Indemnitee otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Indemnitee
notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its
own expense.
(b) Except as otherwise provided below, to the extent that it
may wish, the Company shall, jointly with any other indemnifying party similarly
notified, be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee. After notice from the Company to Indemnitee of its
election to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof, other than
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ its own counsel in such action, suit or
proceeding, but the fees and expenses of such counsel incurred after notice from
the Company of the Company's assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Company; (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of the defense of such action; or (iii) the Company shall not in
fact have employed counsel to assume the defense of such action; in each of
which cases the fees and expenses of Indemnitee's separate counsel shall be paid
by the Company. The Company shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Company or as to which
Indemnitee shall have made the conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee will unreasonably withhold
its consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
-------------------------------------
(a) In the event that Indemnitee employs his or her own counsel
pursuant to Sections 5(b)(i) through (iii) above, the Company shall advance to
Indemnitee, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving from Indemnitee copies of invoices presented to Indemnitee
for such expenses.
(b) Indemnitee agrees that Indemnitee will reimburse the Company
for all reasonable expenses paid by the Company in investigating or defending
any civil or criminal action, suit or proceeding against Indemnitee in the event
and only to the extent it shall be
4
<PAGE>
ultimately determined by a final judicial decision (from which there is no right
of appeal) that Indemnitee is not entitled, under the provisions of the Code,
the Bylaws, this Agreement or otherwise, to be indemnified by the Company for
such expenses.
(c) Notwithstanding the foregoing, the Company shall not be
required to advance such expenses to Indemnitee in respect of any action arising
from or based upon any of the matters set forth in subsection (b) of Section 3
or if Indemnitee (i) commences any action, suit or proceeding as a plaintiff
unless such advance is specifically approved by a majority of the Board of
Directors or (ii) is a party to an action, suit or proceeding brought by the
Company and approved by a majority of the Board which alleges willful
misappropriation of corporate assets by Indemnitee, disclosure of confidential
information in violation of Indemnitee's fiduciary or contractual obligations to
the Company, or any other willful and deliberate breach in bad faith of
Indemnitee's duty to the Company or its shareholders.
7. Enforcement.
-----------
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on the Company
hereby in order to induce Indemnitee to continue as a director, officer,
employee or other agent of the Company, and acknowledges that Indemnitee is
relying upon this Agreement in continuing in such capacity.
(b) In the event Indemnitee is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Company shall reimburse Indemnitee for all Indemnitee's
reasonable fees and expenses, including attorney's fees, in bringing and
pursuing such action.
8. Subrogation. In the event of payment under this agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
9. Continuation of Obligations. All agreements and obligations of
---------------------------
the Company contained herein shall commence upon the date that Indemnitee first
became a member of the Board of Directors or an officer, employee or agent of
the Company, as the case may be, and shall continue during the period Indemnitee
is a director, officer, employee or agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, wazzu partnership, joint venture, trust, employee benefit
plan or other enterprise) and shall continue thereafter so long as Indemnitee
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal or investigative, by reason
of the fact that Indemnitee was a director, officer, employee agent of the
Company or serving in any other capacity referred to herein.
10. Survival of Rights. The rights conferred on Indemnitee by this
------------------
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of the Company and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.
5
<PAGE>
11. Non-Exclusivity of Rights. The rights conferred on Indemnitee by
-------------------------
this Agreement shall not be exclusive of any other right which Indemnitee may
have or hereafter acquire under any statute, provision of the Company's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office; provided, however, that this
Agreement shall supersede and replace any prior indemnification agreements
entered into by and between the Company and Indemnitee and that any such prior
indemnification agreement shall be terminated upon the execution of this
Agreement.
12. Separability. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the Company
to indemnify the Indemnitee to the full extent provided by the Bylaws or the
Code.
13. Governing Law. This Agreement shall be interpreted and enforced
-------------
in accordance with the laws of the State of Delaware.
14. Binding Effect. This Agreement shall be binding upon Indemnitee
--------------
and upon the Company, its successors and assigns, and shall inure to the benefit
of Indemnitee, his or her heirs, personal representatives and assigns and to the
benefit of the Company, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
-------------------------
termination or cancellation of this Agreement shall be effective unless it is in
writing and is signed by both parties hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
INTERNATIONALWIRELESS
COMMUNICATIONS HOLDINGS, INC.
a Delaware corporation
By: ___________________________________
INDEMNITEE
________________________________________
Address: _____________________________
_____________________________
_____________________________
1
<PAGE>
EXHIBIT 10.12A
SHAREHOLDERS' AGREEMENT
-----------------------
THIS AGREEMENT is made the 26/th/ day of March 1996 BETWEEN SHUBILA HOLDING
SDN BHD a company incorporated in Malaysia having its registered office at 1st
Floor, Lobby A, Wisma Segar, Jalan Tun Sambanthan, 50470 Kuala Lumpur
(hereinafter referred to as "the First Party") of the one part; INTERNATIONAL
WIRELESS COMMUNICATIONS, INC. a company incorporated in the United States of
America and having its registered office at 15E, North Street, Dover, Kent
County, Delaware (hereinafter referred to as "the Second Party") of the second
part AND LARANDA SDN BHD a company incorporated in Malaysia having its office at
A1-12, First Floor, PJ Industrial Park, Jalan Kemajuan, 46200 Petaling Jaya,
Selangor Darul Ehsan (hereinafter referred to as the 3rd Party") of the third
part.
RECITALS
- --------
1. The parties hereto are the Shareholders in a company known as SYARIKAT
TELEFON WIRELESS (M) SDN BHD a company incorporated in Malaysia and having
its registered office at 1st Floor, Lobby A, Wisma Segar, Jalan Tun
Sambanthan, 50470 Kuala Lumpur (hereinafter referred to as "the said
Company");
2. The objects of the Company includes the carrying on of the business of
telecommunication service and/or to do all acts and things incidental
thereto inter alia:
"to engage in the business of providing telecommunication and data
communication service, and to buy, sell, trade in (wholesale and retail),
import, export, manufacture hire and use all sorts of transmitting,
receiving and communication apparatus, equipment and systems including
telecommunication equipment, radio or mobile telephones, telephones for
domestic or business or industrial use, vision and sound receiving or
broadcasting equipment, satellite dishes, recording and reproducing
instruments and all other kinds of equipment for all kinds of communication
purposes utilizing any technology now in use or hereafter discovered, or
used in conjunction therewith or incidental or necessary thereto"
3. As at todate the authorized capital for the Company is Ringgit Fifty
Million (RM5O,000,000.00) only divided into 50,000,000 ordinary shares of
Ringgit One (RM1.00) only, each which have been issued to the respective
above named parties in the following proportions:
<PAGE>
PARTIES PERCENTAGE OF
SHAREHOLDING
First Party 60%
Second Party 30%
Third Party 10%
-----------
100%
4. The parties have injected additional share capital into the Company with a
view that the Company will eventually within five (5) years from the date
hereof be listed on the Kuala Lumpur Stock Exchange. To achieve the
aforesaid purpose the parties hereto agree that their relationship inter se
as shareholders of the said Company be regulated to the extent and in the
manner hereinafter provided.
5. The Company has on 18th day of August 1995 executed a Loan Agreement with
PERMATA MERCHANT BANK BERHAD (as the Arranger), PERMATA MERCHANT BANK
BERHAD (as Agent) and A SYNDICATE OF FINANCIAL INSTITUTIONS (as Lenders)
for a syndicated term loan of Ringgit Malaysia Ninety One Million
(RM91,000,000.00) only (hereinafter referred to as "the Loan Agreement")
for the purposes of financing the business activity of the Company as
stated in Recital 2 herein and in particular in relation to the Company's
project comprising a network of installed planned or proposed operations to
be undertaken by the Company in providing wireless telecommunication
services to subscribers of the network within Malaysia (hereinafter
referred to as "the Project").
6. In consideration of the aforesaid loan facility granted to the Company, all
the Shareholders have on 18th day of August 1995 executed Collateral
Agreement wherein each Shareholder has undertaken inter alia that it shall
ensure the solvency of the Company to meet all its financial liabilities
and ensure the completion of the Project timeously and to this end, each
Shareholder has agreed to put the Company in funds to meet costs-overrun in
respect of the Project whether by way of provision of additional loans or
subscription of additional preference shares or by way of subscription for
additional equity in the Company.
7. In consideration of the aforesaid loan facility granted to the Company, the
following persons namely [* ], [*] and [*] (hereinafter referred to as
"the Guarantors") have executed a Guarantee and Indemnity on 18th day of
August 1995 whereby they have jointly and severally agreed to inter alia,
guarantee, agree, undertake and covenant with the Agent and the Lenders
that they will ensure due and punctual payment of all indebtedness by the
Company and have agreed to indemnify the Agent and the
- ------------------
/*/ Confidential Treatment Requested.
<PAGE>
Lenders against all loss and expenses charges and damages suffered by the
Agent and the Lenders in consequence of the failure by the Company to pay
its indebtedness or resulting from any breach, non-performance or non-
observance by the Company of its obligations, terms, covenants and
agreements to be performed or observed by the Borrower and contained in the
Loan Documents.
NOW IT IS HEREBY AGREED as follows:
ARTICLE 1 - AGREEMENT
- ---------------------
1.1 In consideration of the due observance by the parties hereto of the terms
and conditions herein contained the parties hereto hereby mutually agree to
enter into this Agreement and the covenants set out herein to inter alia
regulate their relationship inter se as shareholders of the Company and the
conduct of the business and affairs of the Company in the spirit of mutual
confidence and cooperation and subject to and in accordance with the terms
and conditions hereinafter contained.
ARTICLE 2 - MEMORANDUM AND ARTICLES OF ASSOCIATION
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2.1 The parties hereby agree that they shall endeavor within ninety (90) days
from the date hereof to cause the Memorandum And Articles of Association of
the Company (hereinafter referred to as "the M & A") to be amended as far
as possible to incorporate all the relevant terms of this Agreement.
2.2 In the event of any conflict between the provisions of the Memorandum And
Articles of the Company and the provisions of this Agreement, the
provisions of this Agreement shall prevail as between the parties hereto
inter se.
2.3 Each of the parties hereto undertakes to waive any pre-emption rights which
it may have under the Articles of Association of the Company to the extent
necessary to facilitate the transfer of shares pursuant to the provisions
of this Agreement.
2.4 Any restriction in the Articles of Association of the Company to the effect
that the directors of the Company shall have the right to accept or refuse
registration or transfer of shares in the Company shall not be applicable
in respect of the transfer of any shares which are in accordance with and
have complied with the provisions of this Agreement.
2.5 Without prejudice to and notwithstanding the provisions of Article 2.2
hereof the parties hereto may at any time, if thought desirable, agree to
amend the Articles of Association of the Company by incorporating any of
the provisions of this Agreement or amending or adding any new articles so
as to reflect the intent and spirit of this Agreement.
ARTICLE ILL - EQUITY PARTICIPATION
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<PAGE>
3.1 The authorized capital of the Company has been increased to Ringgit
Malaysia Fifty Million (RM50,000,000.00) only divided into 50,000,000
shares as at the date hereof and the percentage of shareholding of the
three (3) parties to this Agreement are as follows namely:
Shareholder Percentage
----------- ----------
1. First Party and/or 60%
their nominees
2. Second Party and/or 30%
their nominees
3. Third Party and/or 10%
their nominee
-------
100%
3.2 The parties hereto agree that the share capital of the Company unless
varied by mutual consent of the parties hereto or as a result of any
transfer of shares by any party hereto pursuant to the provisions of this
Agreement shall at all times be held by the parties hereto in the
proportion as referred to in Article 3.1 herein above.
ARTICLE IV - TRANSFER OF SHARES
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4.1 Save and except for Article 4.11 hereinbelow the parties hereto hereby
agree that the sale, transfer or otherwise parting with the beneficial
ownership of any of the shares of the Company shall be in accordance with
the provisions of this Agreement.
4.2 A party intending to sell or transfer or otherwise part with the beneficial
ownership of its shares in the Company (hereinafter referred to as "the
Seller") shall in the first instance make an offer in writing to sell the
same to the other party or other parties to this agreement in the
proportion of their respective shareholding at a fair value that is
acceptable to them.
4.3 The Seller when giving notice of its intention to sell its shares referred
to in Article 4.2 hereof, shall send the written offer to the Company which
it shall constitute as its agent for the sale of such shares, and the said
notice referred to aforesaid is hereinafter referred to as "the Sale
Notice" and the company shall then circulate the said sale notice to the
other party or parties to this Agreement.
4.4 Where any party or parties to which the Sale Notice has been served accepts
part but not the whole of the shares offered then subject to consent in
writing by all the parties hereto the
<PAGE>
Company may offer the portion of the unsold shares to the remaining
shareholders who are entitle to take up the same on a pro-rata basis in
relation to their current shareholding in the Company and in the event of
the remaining shareholder's refusal to do so to a third party at the price
offered in the Sale Notice and subject to the same conditions of sale
offered to the existing parties hereto PROVIDED ALWAYS that all the
provisions hereinafter appearing in particular Articles 4.7 and 4.8 herein
in respect of a third party being a proposed transferee of any shares in
the Company shall be applicable.
4.4A If the Sale Notice is not acceptable to other party or other parties within
the period of thirty (30) days from the date of service of the Sale Notice
to the other party or parties, by reason of a dispute as to the fair value
of the said share then the Company shall appoint an internationally
recognized, independent expert in telecommunication industry, (with special
knowledge of South East Asian market) agreed to by the Buyer and the Seller
and either party's consent to such an expert shall not be unreasonably
withheld. All costs and expenses incurred in engaging the services of the
said independent expert shall be borne and paid by the Seller.
This aforesaid process of determination of the share value constituted in
the Sale Notice shall be completed within a period of two (2) weeks from
the date, of reference to the aforesaid expert by the said Company or
within an extended period to be mutually agreed by all the parties hereto.
4.5 The said expert shall then cause a certificate to be issued which would
state in his opinion the fair value of the shares to be sold as referred to
in the Sale Notice and in so doing the said expert shall be acting as an
expert and not as arbitrator and accordingly the Arbitration Ordinance will
not apply PROVIDED ALWAYS in the event the certified value of the shares is
ninety per cent (90%) or less of the original offered price in the original
Sale Notice, the selling shareholder is at liberty to cause the Company to
withdraw the said Sale Notice.
4.6 The Company shall then cause an offer to be made to all the existing
parties to this Agreement proportional to their respective shareholdings
based on the certified fair value of the said share of the Seller and in
the event the said offer has not been accepted within the period of
fourteen (14) days from the date of circulation of the offer by the said
Company referred to aforesaid then the Seller shall be at liberty to offer
the aforesaid shares for sale to a third party approved by all parties to
this Agreement hereto in writing (such approval shall not be unreasonably
withheld) PROVIDED ALWAYS that all conditions of sale to the said third
party are the same as those offered to the existing parties to this
Agreement save and except for the price which would now be based on the
certified fair value referred to aforesaid. The seller shall also
undertake to cause the proposed third party to be bound by the provisions
of this
<PAGE>
Agreement. Any offer to a third party not accepted by the said
third party within the period of thirty (30) days of such offer shall
render such offer as lapsed and any fresh offer to be made must be subject
to all the provision of these articles hereinbefore appearing save an
except as to the offer price of the shares.
4.7 In the event any third party offers to purchase shares from any
shareholder(s) or party (ies) hereto, the offeree party shall notify the
Company which shall then give notice of such offer to purchase to each
party to this Agreement and the offer to the respective shareholder shall
be in the proportion of their respective shareholding in the Company, not
withstanding anything to the contrary contained in this agreement.
4.8 Notwithstanding anything to the contrary contained in the foregoing
provisions, no shares shall be sold to a third party and no transfer of any
shares to a third party shall be registered by the Company prior to such
transferee having entered into an Agreement with all the other shareholders
of the Company (other than the transferor) undertaking thereby in a form
satisfactory to the other shareholders all the obligations of the
transferor and agreeing to be bound by the provisions of this Agreement as
if such allottee or transferee were a party hereto.
4.9 Notwithstanding anything to the contrary in the foregoing provisions a
third party who has by virtue of abovementioned Article become a party to
this Agreement shall be entitled to a proportionate representation on the
Board of Directors of the Company the proportion of which shall be
reflected by the remaining parties to this Agreement as a condition of
their consent to the sale.
4.10 For the purposes of this Agreement the parties hereto agree that all share
certificates in respect of the issued and paid-up capital of the Company
issued or to be issued to the parties hereto shall hence forth bear the
following endorsement:
"Transferability of shares represented by this Certificate is subject
to the terms and conditions of a Shareholders Agreement dated the
day of 199 made between the First Party of the first part
the Second Party of the second part and the Third Party of the third
part and subject to any other agreement to be entered into between the
shareholders of the Company in respect of any transfer of shares in
the Company, a copy of which is lodged at the registered office of the
Company".
4.11 The parties hereto agree that the provisions of Article 4 hereto shall not
apply if the proposed transferee is a subsidiary company of the proposing
transferor or a party under the control of the said shareholder within the
meaning of the Companies Act. In such cases the other shareholders shall
forthwith consent in writing to the transfer PROVIDED ALWAYS that if at any
time after
<PAGE>
such a transfer the transferee shall cease to be a subsidiary or under the
control of the transferor the transferor shall procure that the transferee
shall within one month thereafter re-transfer the shares comprised therein
to the transferor.
4.12 The parties hereto further agree that in the event of any of the nominee(s)
of the parties hereto desiring to sell or transfer or otherwise part with
its beneficial ownership of its shares in the Company notwithstanding the
provisions of the abovementioned Article the principal of the said nominee
from whom the nominee(s) shares were derived shall be given the first
option to purchase the said shares at a price ascertained in the manner as
is reserved in the abovementioned Articles.
4.13 If any of the parties hereto shall become or be declared insolvent,
bankrupt or have a receiver appointed in respect of the whole or any part
of his/its assets or undertaking or in the case of the parties hereto which
are corporate bodies (hereinafter referred to as "the Corporate Parties")
have steps taken for its winding up (otherwise than for the purpose of a
bona fide amalgamation or reconstruction) or have made a general assignment
for the benefit of Creditors then such affected party shall be deemed to
have made an offer in writing to sell its shares in the Company to the
other parties hereto and accordingly the provisions of Article 4 hereto
shall apply mutatis mutandis to the sale of such shares at the Sales Price
as defined in Articles hereinabove. A change of control of any of the
shareholders shall not constitute a transfer of shares for the purposes of
Article 4 or a change of assignment for the purposes of Article 10.
ARTICLE V - BOARD OF DIRECTORS
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5.1 The Company shall have a Board of Directors consisting of directors made up
as follows:
(a) A maximum of two (2) directors to be appointed by the First Party;
(b) A maximum of two (2) directors to be appointed by the Second Party;
(c) A maximum of one (1) director to be appointed by the Third Party;
and the aforesaid proportions shall (subject to Article 4.8 herein above
stated) not be changed (save and except by mutual agreement between the
parties hereto) notwithstanding any change in the proportions of the
shareholdings of the parties hereto. The Parties hereto shall with respect
to their own respective appointee or appointees be entitled to determine
the period they will hold office and may at any time remove either any or
all of such persons and nominate and appoint and another or others in his
or their place. Any such appointment and removal shall be
<PAGE>
made by notice in writing signed by or on behalf of the party making the
same and sent to the Secretary of the Company. The respective parties
hereto shall have a similar power to appoint and remove any alternate
director or alternate directors that may from time to time be appointed to
act as an alternate director or alternate directors to their respective
appointee directors.
5.2 The Directors need not be shareholders of the Company.
5.3 The Chairman of the Board of Directors shall always be a nominee of the
First Party.
5.4 The quorum for all meetings of the Board of Directors shall be in the
presence of three (3) Directors in person, one from each party and that the
quorum Director representing the Second Party will be appointed in writing
by the Second Party.
5.5 All the resolutions of the Board of Directors except for matters stipulated
in Article 5.6 hereunder shall be resolved by a simple majority vote of the
Directors present PROVIDED ALWAYS that in the event simple majority vote
cannot be reached at the said board meeting then the matter should be
referred to the shareholders to be resolved pursuant to Article 5.6.
5.6 Notwithstanding the foregoing provision a shareholder resolution would be
required approving all major decisions and/or policy matters more
particularly set out hereunder, which shall be only deemed as passed if it
has received a minimum of 70% of the votes (measured against the total
shareholding in the Company) at any meeting of shareholders needed for
approval of following matters namely:
5.6.1 Notwithstanding wider powers contained in the objects clause of the
M & A of the Company an engagement by the Company to any material
extension in activities other than those expressly contemplated in
this Agreement;
5.6.2 the creation of any charge over any or all of the Company assets;
5.6.3 the disposal of the whole of the undertaking, property or assets of
the Company or a part thereof being substantial in relation to the
total undertaking, property and assets of the Company and its
subsidiaries, if any, or the making of any contract which may not
be terminated within one year of its commencement (other than in
the ordinary course of business);
5.6.4 the capitalization of profits or reserves or the allotment, issue
or placing under option of shares or convertible loan stock or
debentures of the Company;
5.6.5 the appropriation and/or utilization of surplus funds;
<PAGE>
5.6.6 the formation or dissolution of any subsidiary or branch of the
Company or the acquisition of any shares of or participation in any
other joint venture or partnership arrangements;
5.6.7 the registration of any shares transfers save pursuant to this
Agreement;
5.6.8 any matter relating to the issuance of bonds and/or debentures, and
acquisitions of shares and/or securities of other corporations or
corporate bodies;
5.6.9 the entering into an agreement or contract involving an amount in
excess of Malaysian Ringgit One Hundred Thousand (RM100,000.00)
only or binding the Company for one year or more;
5.6.10 any monetary lending by the Company;
5.6.11 the entering into any contract by the Company with any of the
shareholders of the Company or their related companies. In this
case the majority vote of disinterested Shareholders is required
for approval;
5.6.12 to vary the capital structure including the reduction or increase
of capital;
5.6.13 to amend the M & A of the Company;
5.6.14 to go into voluntary liquidation or the acquisition of any other
entity or be taken over by any other entity or merged, amalgamated
or reconstructed with any other entity;
5.6.15 to establish any new company or enter into any new field of
business;
5.6.16 to change the number of Directors of the Company;
5.6.17 to determine dividend policy and payment of dividends, if any;
5.6.18 to determine remuneration for the Directors of the Company
5.6.19 to approve any matter which by the Companies Act 1965 or the
Articles of Association of the Company requires a special
resolution; and
5.6.20 to approve the operating budget for the Company, if any,
<PAGE>
ARTICLE VI - MANAGEMENT OF THE COMPANY
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6.1 The management and conduct of the operations of the Company shall
henceforth be vested in the Board of Directors of the Company. The
executive Directors appointed by the Board of Directors shall generally
manage and co-ordinate the day to day administration of the Company subject
to such directives decisions and/or restrictions as may from time to time
be determined or issued by the Board of Directors.
6.2 The Board of Directors of the Company shall cause proper accounts to be
prepared and kept of the assets and liabilities of the Company, all sums of
monies received and expended, sales and purchases and such other accounting
records as may be recommended by the auditors of the Company in compliance
with international accounting standards. Such records shall be kept at the
registered office of the Company and shall be available for inspection by
any of the parties hereto and any of the parties hereto shall be entitled
to at its own expense employ an independent auditor to audit the accounts
of the Company in addition to the audit carried out by the Company's
official auditors.
6.3 Subject to Section 7.1, the parties hereto agree and covenant with each
other as follows:
a) to be jointly responsible for the capital requirements of the Company
and respectively contribute towards the working capital credit
facilities loans and other facilities that may be required by the
Company from time to time in proportion to their respective
shareholdings in the Company. The Company shall issue capital calls to
the shareholders in such proportionate shareholdings . Each
shareholder shall be given a period of forty five (45) days commencing
from its acceptance to pay up its capital calls.
b) to hold in complete confidence all confidential information acquired
by the Company. Any party hereto shall not divulge such information
Which is obtained or communicated to it directly or indirectly
pursuant to this Agreement or during the course of or in connection
with any and all discussions negotiations or exchange of information
relating to this Agreement to any party whatsoever.
c) to use its best efforts to ensure that such information acquired is
used solely for the purpose of the Company and shall likewise use its
best efforts to ensure that its directors, officers employees
consultants and/or sub-contractors receiving such information shall
consider and hold it confidentially. For this purpose the parties
hereby agree that the above obligations shall remain in full force and
effect during the term of this Agreement and thereafter.
<PAGE>
6.4 The first Named Party hereby agrees with the other parties that they shall
utilize their good offices and goodwill to assist the Company in
particular;
a) to assist the Company in applying for and/or procuring the necessary
telecommunications license(s) that are required for the running of the
Company's business and to ensure that the said licenses will be
renewed on the due dates.
b) to liase with the relevant authorities whenever necessary in order to
achieve the smooth running of the business of the Company;
c) to assist the Company obtaining whatsoever approvals as may be
necessary for the aforesaid purposes;
d) to assist the Company in obtaining work permits for any foreign
experts that may be needed for the smooth running of the business; and
e) generally to give such advice and assistance as may be necessary to
ensure that the Company does abide by the policies of the government.
6.5 The Second Named Party shall be responsible
a) for procuring the necessary expertise in telecommunications services
for putting into effect the Company's projects inclusive of the
provisions for training of the Company's Personnel.
b) A services agreement will be made between the Company and the Second
Party for reimbursement of costs for the services provided.
ARTICLE VII - LOANS AND FINANCE
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7.1 The shareholders shall each use reasonable endeavors to procure and ensure
that any additional finances required for the Company are met as far as
practicable by borrowings from banks and other similar sources on the most
favorable terms reasonably obtainable as to interest repayment and
security.
ARTICLE VIII - FORCE MAJEURE
- ----------------------------
8.1 No party hereto shall be liable in any manner for failure to perform or
delay in performing all or any part of this Agreement which is directly or
indirectly due to any cause or circumstances beyond the control of such
party, including, without limitation, acts of God, fire, flood, storms,
earthquake, typhoon, tidal wave, plague or other epidemics, governmental
laws, orders, regulations, sanctions or restrictions, war (whether declared
or not), armed conflict, or the serious threat of the same, hostilities,
mobilization, blockade, embargo, detention, revolution, riot, looting,
lockout, strike or other labor
<PAGE>
dispute, unavailability of transportation or severe economic dislocation.
ARTICLE IX - ARBITRATION
- ------------------------
9.1 Any dispute controversy claim or difference arising out of or in connection
with this Agreement or the implementation of any of the provisions hereof
which cannot be settled amicably within sixty (60) days upon the same being
raised by one party to the other shall be referred to for settlement by way
of arbitration in accordance with the Rules for Arbitration at the Kuala
Lumpur Regional Center for Arbitration under the UNCITRAL Arbitration Rules
1976.
9.2 The appointing authority shall be the Kuala Lumpur Regional Arbitration
Center of 576, Jalan Sultan Salahuddin, 50480 Kuala Lumpur, Malaysia.
9.3 The place of arbitration shall be Kuala Lumpur.
9.4 The language to be used in the arbitral proceedings shall be English.
9.5 The decision of the arbitrators shall be final.
ARTICLE X - ASSIGNMENT
- ----------------------
10.1 This Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns.
10.2 Neither party shall assign, transfer or otherwise dispose of any of its
rights or obligations under this Agreement, in whole or in part, without
the prior written consent of the other party.
ARTICLE XI - MUTUAL TRUST & VARIATIONS OF AGREEMENT
- ---------------------------------------------------
11.1 In entering into this Agreement the parties hereto recognize that it is
impracticable to make provision for every contingency that may arise in the
course of performance hereof and accordingly the parties hereto declare it
to be their intention that this Agreement shall operate between them with
fairness and without detriment to any of them.
If by reason of any unforeseen occurrence or development the operation of
this Agreement is likely to cause any inequitable hardship to one or more
parties contrary to the spirit of this Agreement, the parties hereto shall
negotiate immediately in good faith and use their endeavors to agree upon
such action as may be necessary and equitable to resolve the cause or
causes of the same, The Agreement may be varied by mutual agreement between
the parties hereto. All such variations shall be in writing signed by the
duly authorized representatives of the parties.
<PAGE>
ARTICLE XII - NOTICES
- ---------------------
12.1 All notices, requests or other communications required or permitted to be
given hereunder shall be in writing in the English language and shall be
sent by either party by registered letter, postage prepaid, or facsimile
transmission or telex to the other party at its address given herein or to
such other address or facsimile number(s) as may from to time be notified
by either party to the other.
12.2 Notice shall be deemed to have been received when duly transmitted on the
same working day and if dispatched by mail is deemed to have been received
by the next three working days.
ARTICLE XIII - WAIVER
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13.1 Any waiver by any party hereto of a breach of any term or condition in this
Agreement shall not constitute a waiver of subsequent breach of the same or
any other term or condition.
ARTICLE XIV - EFFECT OF HEADINGS RECITALS SCHEDULE AND ANNEXURES
- ----------------------------------------------------------------
14.1 The headings to the Articles of this Agreement are for convenience of
reference only and do not form part of this Agreement and shall not in any
way affect the interpretation hereof.
14.2 All the Recitals Schedules and Annexures (if any) to this Agreement shall
be taken read and construed as an essential part of this Agreement.
ARTICLE XV - SOLE CONTRACT
- --------------------------
15.1 This Agreement constitutes the only agreement between the parties hereto
with respect to any and all subject matters hereof and shall wholly cancel
and supersede all previous negotiations, understandings and agreements,
made orally or in writing, with respect to the subject matter hereof.
ARTICLE XVI - COSTS AND FEES
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16.1 All reasonable costs including legal charges or solicitors stamp duties and
other incidental expenses incurred in connection with the preparation of
this Agreement other than such incidental matters shall be borne and paid
by the Company.
ARTICLE XVII - LAW
- ------------------
17.1 This Agreement shall be construed, governed and endorsed in accordance with
the laws of Malaysia and subject to the provisions of Article 9 hereof the
parties hereto submit themselves to the jurisdiction of the Court of
Malaysia.
ARTICLE XVIII - EXTENT OF AGREEMENT
- -----------------------------------
18.1 This Agreement shall be binding on the successors-in-title and assigns of
the parties hereto.
<PAGE>
ARTICLE XIX - AGREEMENT NOT TO CREATE PARTNERSHIP
- -------------------------------------------------
19.1 It is hereby declared by the parties hereto that this Agreement shall not
create any form of partnership whatsoever between the parties hereto and
nothing in this Agreement shall be construed to make any party hereto the
representative or agent of any other party.
ARTICLE XX - SPIRIT OF AGREEMENT AND INTENTION
- ----------------------------------------------
20.1 The Shareholders hereby declare it to be a cardinal principle of this
Agreement and it is to be common intention that they will at all times, use
their best endeavors to further the interests of the Company and that they
shall not use, either while a Shareholder to this Agreement or thereafter,
in a manner prejudicial or detrimental to the interests of the Company, any
information concerning the business, affairs or financial position of the
Company which information which shall come to a Shareholder's knowledge.
20.2 The Shareholders hereby agree at all times to negotiate in good faith on
matters not provided for in this Agreement. Each of the Shareholders
covenants to use its best endeavors to promote and develop the Business of
the Company to the best advantage.
ARTICLE XXI - TERMINATION
- -------------------------
21.1 This Agreement shall continue in full force and effect until terminated in
accordance with the provisions of this Clause PROVIDED THAT the termination
of this Agreement for any cause shall not release a party from any
liability which at the time of termination has already accrued to another
party or which thereafter may accrue in respect of any act or omission
prior to such termination AND FURTHER PROVIDED that the provisions of
Clause 9 and Clause 11 shall continue without point in time.
In the event that:
a Shareholder shall commit any material breach of its obligations
under this Agreement and shall fail to remedy such breach (if capable
of remedy) within 30 days being given notice by the other shareholder
so to do;
(a) dispose of all its shares to the non-defaulting Shareholder and
thereupon the defaulting Shareholder shall dispose of its shares
in the Company in accordance with the Articles and upon the
completion of the Sale and Purchase thereof, the Director
appointed by the defaulting Shareholder shall cease to hold
office in the Company; or
(b) purchase all the shares of the non-defaulting Shareholder in the
Company at a price to be determined
<PAGE>
[in accordance with the Articles] and upon completion the sale
and purchase thereof, the Director appointed by the non-
defaulting Shareholder shall cease to hold office in the Company;
or
(c) join with the non-defaulting Shareholders to cause the Company to
sell the whole of its undertaking as a going concern and
thereafter to wind up the Company and to distribute the proceeds
of the sale to both Shareholders hereto prescribed by law.
Notwithstanding (a) to (c) hereinabove, the Shareholder in committing such
breach shall be liable to the other Shareholders for any loss and damages
suffered by the other Shareholders in respect thereof.
For the purposes of this Clause, the term "material breach" is defined as any
breach by any party of those obligations only under this Agreement owed to each
other that goes to the root and substance of their respective obligations
hereunder owed to each other as Shareholders in the company and under this
Agreement.
ARTICLE XXII - MISCELLANEOUS
- ----------------------------
22.1 Each of the parties hereto hereby represents to the other that the
execution and delivery of this Agreement has been duly authorized by its
respective board of directors if applicable and the performance thereof
will not contravene or constitute a default under its constitution, by-laws
or any other agreement, instrument or other form of commitment to which the
patty hereto is also bound.
22.2 No failure or delay on the part of any party hereto in exercising any power
or right hereunder shall operate as a waiver thereof nor shall any single
or partial exercise of such right or power preclude any other or further
exercise of any other right or power hereunder provided however that
nothing in this Article shall extend time or be construed to extend time
for the performance of any right or obligation under this Agreement if a
time period is imposed for the performance of such right or obligation.
22.3 The termination of this Agreement howsoever arising shall not affect such
of the provisions hereof as are expressed or intended to survive, operate
or have effect thereafter or to continue to survive, operate or have effect
thereafter in particular Clauses 6.3, 6.4 and 7.1 herein and shall be
without prejudice to any right of action which may have accrued to any
party in respect of any breach of this Agreement by any other party.
22.4 In the event that any provision or provisions of this Agreement shall be
held invalid or unenforceable for any reason the invalidity or
unenforceability of such provision or provisions shall not operate to
invalidate the remainder of this Agreement,
<PAGE>
each Article and paragraph of this Agreement being considered as a separate
and divisible agreement.
22.5 No modification future representation promise or agreement in connection
with the subject matter of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
22.6 In this Agreement unless the context otherwise requires:
(a) words importing the singular shall include the plural and vice
versa, words importing the masculine gender shall include the
feminine and neuter genders, and words importing a person shall
include a company or corporation and vice versa;
(b) the expression "this Agreement" or any similar expression shall
mean these presents and any supplemental or ancillary agreement
thereto as may be in force from time to time or at any time;
(c) the expression "the parties hereto" with its grammatical
variations and cognate expressions shall mean parties to this
Agreement and include any other person, company, corporation or
entity, if any, who becomes a member of the Company resulting
from any allotment or transfer of any shares in the Company
pursuant to the provisions of this Agreement and who is by virtue
of the provisions of this Agreement bound by this Agreement.
<PAGE>
IN WITNESS WHEREOF the parties hereto have hereunto set their hands the day
and year first above written.
The Common Seal of )
SHUBILA HOLDING SDN BHD ) /s/
--------------------------
was hereunto affixed ) Director/Secretary
in the presence of: )
The Execution of this Agreement by )
CLARENCE EARL ENDY JR ) For and on behalf of:
International Wireless
(Passport No. 051388348) ) Communications, Inc.
for and on behalf of ) /s/
---------------------
Authorized Signature(s)
INTERNATIONAL WIRELESS )
COMMUNICATION INC. )
in the presence of: )
The Common Seal of )
LARANDA SDN BHD )
was hereunto affixed ) /s/
--------------------------
in the presence of: ) Director/Secretary
<PAGE>
EXHIBIT 10.15
-----------------------------------------------
SHAREHOLDERS' AGREEMENT
among
MAINSTREAM LIMITED
(TO BE RENAMED STAR TELECOM OVERSEAS
(CAYMAN ISLANDS) LIMITED
and
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
and
STAR TELECOM HOLDING LIMITED
_________________________________
Dated as of August 30, 1996
_________________________________
-----------------------------------------------
<PAGE>
SHAREHOLDERS AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of August 30, 1996 (this "Agreement"),
among MAINSTREAM LIMITED (to be renamed STAR TELECOM OVERSEAS (CAYMAN ISLANDS)
LIMITED), a Cayman Islands exempted company with its principal offices at 6th
Floor, Star Telecom Tower, 414 Kwun Tong Road, Kwun Tong, Kowloon (the
"Company"), INTERNATIONAL WIRELESS COMMUNICATIONS, INC., a Delaware corporation
with its principal offices at 400 South El Camino Real, San Mateo, California
94402, U.S.A. ("IWC"), and STAR TELECOM HOLDING LIMITED, a Hong Kong corporation
with its registered offices at 6/F, Star Telecom Tower, 414 Kwun Tong Road, Kwun
Tong, Kowloon, Hong Kong ("STHL").
As of the date hereof, STHL is the registered and beneficial owner of all
of the issued ordinary shares, par value US$1.00 per share of the Company
("Shares"). The Company's sole direct subsidiary is Star Paging India Limited,
a Mauritius company ("Star India"), which holds a minority interest of 10.989%
in RPG Paging Services Limited, an Indian company that provides paging services
("RPG"), and it also has developed opportunities to enter into joint ventures
with paging license holders or paging license tenders in Thailand, Taiwan,
Indonesia, the Philippines and Cambodia to provide paging services in each of
those countries.
STHL desires to reduce its shareholding and equity interest in the Company
from 100% to 30%, whereas IWC desires to acquire up to a 70% shareholding and
equity interest in the Company subject to the STHL Option (as defined in Section
8). The Company, IWC and STHL have entered into a Subscription Agreement dated
as of August 30, 1996 (the "Subscription Agreement") pursuant to which, among
other things, the Company has agreed to issue and allot to IWC, and IWC has
agreed to subscribe for, 12,600 Shares for the consideration specified in the
Subscription Agreement.
The parties hereto wish to provide for certain matters relating to the
transfer of Shares and the management and operation of the Company and its
existing and future subsidiaries. This Agreement is entered into as a condition
precedent to the subscription for Shares by IWC under the Subscription
Agreement.
In consideration of the foregoing and of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
-----------
1.1 Certain Definitions. The following capitalized terms shall have
-------------------
the following meanings for purposes of this Agreement:
"Affiliate" means, in relation to any Shareholder, a Person
---------
controlling, controlled by or under common control with such Shareholder. For
purposes of this Agreement, "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 securities, by
contract or otherwise.
<PAGE>
"Basic Documents" means this Agreement, the Charter Documents, the
---------------
Subscription Agreement, the Technical Services Agreement, the Management
Services Agreement, the Noncompetition Agreement and the License Agreement.
"Board" means the board of directors of the Company.
-----
"Charter Documents" means, collectively, the Memorandum of Association
-----------------
and the Articles of Association of the Company.
"Company Projects" means (i) the projects listed in Exhibit A and (ii)
----------------
any other projects approved by the Board as provided in Section 5.4.
"Director" mean a director of the Company (including any duly appointed
--------
alternate director).
"Financial Year" means the financial year of the Company, which shall
--------------
end on December 31.
"License Agreement" means the technology and trademark license
-----------------
agreement entered into between the Company and STHL as of the date hereof.
"Management Services Agreement" means the Management Services Agreement
-----------------------------
entered into as of the date hereof between the Company and IWC.
"Noncompetition Agreement" means the Noncompetition Agreement entered
------------------------
into as of the date hereof between STHL and IWC.
"Person" means any natural person, corporation, partnership, firm,
------
joint venture, association, joint stock company, trust, unincorporated
association, governmental authority or other legal entity.
"Securities" means shares in the share capital of the Company and any
----------
options, warrants or other securities that are directly or indirectly
convertible into, or exercisable or exchangeable for, such share capital.
"Shareholder" means (i) each of IWC and STHL, for so long as they
-----------
remain shareholders of the Company, and (ii) any other Person who becomes a
shareholder of the Company in accordance with the terms of this Agreement and
executes a Deed of Adherence substantially in the form attached hereto as
Exhibit B, for so long as such Person remains a shareholder of the Company.
"Subsidiary" means (i) Star India, (ii) RPG and (iii) any other
----------
corporation, partnership or other entity in which the Company directly or
indirectly holds a majority interest in the form of shares, membership,
partnership interests or otherwise in the future.
"Technical Services Agreement" means the Technical Services Agreement
----------------------------
entered into as of the date hereof between the Company and STHL.
"US dollars," "US$" or "$" means United States dollars, the
------------------------
<PAGE>
lawful currency of the United States of America.
1.2 Principles of Interpretation. (a) Any reference herein to any
----------------------------
Article, Section, Exhibit or Schedule shall refer to such Article or Section of,
or Exhibit or Schedule to, this Agreement. The words "herein," "hereof" and
"hereunder," and words of like import, shall refer to this Agreement as a whole
and not to any particular provision hereof.
(b) All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the antecedent Person or Persons may require.
(c) The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the interpretation of
this Agreement.
2. Business of the Company. The business of the Company shall be to
-----------------------
engage in radio paging businesses, directly or indirectly through the
Subsidiaries.
3. Restrictions on Transfer of Shares.
----------------------------------
3.1 Limitation on Transfer. No Shareholder shall sell, give, assign,
----------------------
hypothecate, pledge, encumber, grant a security interest in or otherwise dispose
of (whether by operation of law or otherwise) (each, a "Transfer") any
Securities, or any right, title or interest therein or thereto, except as
expressly permitted by this Article 3. Any attempt to Transfer any Securities
or any rights therein or thereto in violation of the preceding sentence shall be
null and void ab initio, and the Company shall not register any such Transfer.
-- ------
3.2 Transfers in Compliance with Law. Notwithstanding any other
--------------------------------
provision of this Agreement, no Transfer may be made pursuant to this Article 3
unless (a) the transferee has agreed in writing to be bound by the terms and
conditions of this Agreement pursuant to a Deed of Adherence substantially in
the form attached hereto as Exhibit B, (b) the Transfer complies in all respects
with the applicable provisions of this Agreement and (c) the Transfer complies
in all respects with applicable securities laws. If requested by the Company in
its reasonable discretion, an opinion of counsel to such transferring
Shareholder shall be supplied to the Company, at such transferring Shareholder's
expense, to the effect that such Transfer complies with applicable securities
laws.
3.3 Affiliate Transfers.
-------------------
3.3.1 Permitted Transferees. Any Shareholder may Transfer some
---------------------
or all of the Securities held by such Shareholder to an Affiliate of such
Shareholder without compliance with the provisions of Section 3.4.
3.3.2 Change in Status. If Securities are Transferred by a
----------------
Shareholder to an Affiliate of such Shareholder and such transferee shall at any
time cease to be an Affiliate of such Shareholder, such Securities shall be
transferred (i) back to the original Shareholder or (ii) to another Affiliate of
that Shareholder.
<PAGE>
3.3.3 Combined Holdings. The Securities held by a Shareholder
-----------------
and such Shareholder's Affiliates shall for all purposes of this Agreement be
treated as Securities held by a single Shareholder. Notwithstanding a Transfer
to an Affiliate, the Shareholder shall remain liable for any and all of its
obligations under this Agreement and the Subscription Agreement.
3.4 Right of First Refusal and Right of Co-Sale. Each Shareholder (a
-------------------------------------------
"Transferor") who proposes to Transfer Securities to a third party (a "Third
Party Purchaser") grants to each other Shareholder (a "Section 3.4 Rightholder")
a right of first refusal ("Right of First Refusal") to purchase such Section 3.4
Rightholder's pro-rata share of such Securities and a pro-rata right of co-sale
to participate in such Transfer ("Right of Co-Sale") at the option of each
Section 3.4 Rightholder in accordance with Section 3.4(b).
(a) Each Transferor shall furnish to each Section 3.4 Rightholder
written notice (the "Transferor Notice") of the intended disposition, including
the identity of the Third Party Purchaser, the price at which the Securities are
proposed to be Transferred and the general terms upon which such Transfer is
proposed to be made.
(b) Each Section 3.4 Rightholder shall have 21 calendar days after
the receipt of the Transferor Notice (i) to agree to purchase its pro-rata share
of such Securities for the price and upon the general terms specified in the
notice by giving written notice to the Transferor and stating therein the
quantity of Securities to be purchased or (ii) to agree to participate in the
Transfer at the price and upon the general terms specified in the notice by
giving written notice to the Transferor and stating therein the number of the
Section 3.4 Rightholder's Securities to be sold. A Section 3.4 Rightholder may
exercise either its Right of First Refusal or its Right of Co-Sale pursuant to
this Section 3.4, but may not exercise both such rights with respect to any
single proposed Transfer of Securities.
(c) For purposes of this Section 3.4, if a Section 3.4 Rightholder
elects to exercise its pro-rata Right of Co-Sale, the number of Securities it
may sell to the Third Party Purchaser shall be equal to the product of the total
number of Securities proposed to be sold by the Transferor to the Third Party
Purchaser multiplied by a fraction, the numerator of which shall be the total
number of Securities owned by the Section 3.4 Rightholder and the denominator of
which shall be the total number of Securities owned by the Transferor and all of
the Section 3.4 Rightholders.
(d) In the event the Section 3.4 Rightholders waive or fail to
exercise in full the Right of First Refusal or if any Section 3.4 Rightholders
exercise their Right of Co-Sale within the above-mentioned time periods, then
the Transferor and such exercising Section 3.4 Rightholders shall have 120
calendar days thereafter to transfer Securities to the Third Party Purchaser at
the price and upon the terms specified in the Transferor Notice. The total
number of Securities permitted to be Transferred to the Third Party Purchaser by
the Transferor hereunder shall be equal to the number of Securities with respect
to which the Section 3.4 Rightholders waived or failed to exercise their Right
of First Refusal less that number of Securities to
<PAGE>
be sold to the Third Party Purchaser by Section 3.4 Rightholders pursuant to the
exercise of their Right of Co-Sale. In the event the Transferor does not
Transfer such Securities to the Third Party Purchaser within such 120-day
period, the Transferor shall not thereafter Transfer such Securities without
again complying with the Right of First Offer and Right of Co-Sale provisions in
this Section 3.4.
(e) The exercise or non-exercise of the Right of First Refusal and
the Right of Co-Sale by a Section 3.4 Rightholder with respect to a Transfer of
Securities by a Transferor shall not affect such Section 3.4 Rightholder's Right
of First Refusal or Right of Co-Sale with respect to subsequent transfers of
Securities.
(f) A change in the beneficial ownership of any Shareholder or any
Person that controls a Shareholder shall not constitute a Transfer of Securities
that causes the Right of First Refusal and the Right of Co-Sale to arise
hereunder so long as such Shareholder's ownership interest in the Company does
not constitute the primary asset of such Shareholder or other Person in respect
of which such change in beneficial ownership occurs.
(g) Any Section 3.4 Rightholder may assign its Right of First
Refusal or Right of Co-Sale hereunder to (i) any other Section 3.4 Rightholder,
(ii) any Affiliate of such Section 3.4 Rightholder or (iii) a nominee of such
Section 3.4 Rightholder, insofar as such Section 3.4 Rightholder is unable to
reap the benefit of this Section 3.4 because the Transfer of Securities to such
Section 3.4 Rightholder as provided herein is not permitted by any governmental
authority or is not possible for any other reason.
3.5 Veto Rights. If a Shareholder proposes to Transfer Securities to
-----------
a Third Party Purchaser that is engaged in the paging business or any other
business in which the Company is directly or indirectly engaged at the time of
the proposed Transfer, non-Transferring Shareholders holding in the aggregate at
least 25% of the issued Shares shall each have the right to prohibit such
Transfer, notwithstanding compliance by the Transferor with Section 3.4.
4. Right of First Offer. The Company hereby grants to each Shareholder a
--------------------
right of first offer ("Right of First Offer") to subscribe for such
Shareholder's pro-rata share of any New Securities (as defined in Section 4(e)
below) that the Company may from time to time propose to issue.
(a) In the event that the Company proposes to undertake an issuance of
New Securities, the Company shall give written notice (the "Company Notice") of
its intention to so issue such New Securities to each Shareholder. The Company
Notice shall include the type and number of such New Securities, the price and
the general terms upon which such New Securities are proposed to be issued, the
number of such New Securities for which each Shareholder is entitled to
subscribe pursuant to this Section 4 and the identity of the Person(s) to whom
such New Securities are proposed to be issued (the "Proposed Acquirers").
(b) Each Shareholder shall have 21 calendar days after the receipt of
the Company Notice to agree to subscribe for its pro-rata
<PAGE>
share of such New Securities for the price and upon the general terms specified
in the notice by giving written notice to the Company and stating therein the
number of New Securities for which such Shareholder shall subscribe. If any
Shareholder fails to exercise or waives its Right of First Offer hereunder (a
"Non-Exercising Shareholder"), the Company shall give notice to all Shareholders
who do exercise their Right of First Offer (the "Exercising Shareholders") of
such failure or waiver.
(c) Each Exercising Shareholder shall have a right of over allotment to
subscribe for its pro-rata portion of any New Securities not subscribed for by a
Non-Exercising Shareholder hereunder. Each Exercising Shareholder may exercise
such right of over allotment by giving written notice to the Company within
seven calendar days of receipt of the notice of non-exercise or waiver from the
Company described in clause (b) above and stating therein the number of New
Securities for which such Exercising Shareholder shall subscribe.
(d) In the event the Shareholders waive or fail to exercise in full the
Right of First Offer set forth in clauses (b) and (c) of this Section 4 within
the above-mentioned time periods, then the Company shall have 120 calendar days
thereafter to sell any New Securities with respect to which the Shareholders did
not exercise their Right of First Offer at a price and upon general terms no
more favorable to the Proposed Acquirers than those specified in the Company
Notice. In the event the Company does not sell the New Securities within such
120-day period, the Company shall not thereafter issue or sell such New
Securities without first offering such New Securities to the Shareholders in
accordance with this Section 4.
(e) For the purposes of this Section 4, the term "New Securities" shall
mean any Securities, whether now authorized or authorized in the future, that
are offered for subscription or sale by the Company.
(f) The exercise or non-exercise of the Right of First Offer by a
Shareholder hereunder with respect to an issuance of New Securities shall not
affect such Shareholder's Right of First Offer with respect to subsequent
issuances of New Securities.
(g) Any Proposed Acquirer to whom New Securities are issued pursuant to
this Section 4 shall become a party to and shall be bound by the restrictions on
Transfer and the other restrictions and obligations set forth in this Agreement
to the same extent and with the same force and effect as if such person were an
original signatory hereto. Each Proposed Acquirer shall, as a condition to
subscribing for such New Securities, execute a Deed of Adherence substantially
in the form of Exhibit B upon or before the consummation of the issuance of such
New Securities.
(h) The Right of First Offer shall not apply with respect to New
Securities issued to STHL upon exercise of the STHL Option.
5. Management.
----------
5.1 General. From and after the date hereof, each Shareholder shall
-------
vote its Shares at any ordinary general meeting or extraordinary
<PAGE>
general meeting of Shareholders (a "Shareholders' Meeting") or in any written
resolution executed in lieu of such a meeting of Shareholders (a "Written
Resolution"), and shall take all other actions necessary, to give effect to the
provisions of this Agreement (including, without limitation, Section 5.2.2) and
to ensure that the Charter Documents do not, at any time hereafter, conflict in
any respect with the provisions of this Agreement. In addition, each Shareholder
shall vote its Shares at any Shareholders' Meeting, or act by Written Resolution
with respect to such Shares, upon any matter submitted for action by the
Shareholders or with respect to which such Shareholder may vote or act by
Written Resolution, in conformity with the specific terms and provisions of this
Agreement and the Charter Documents.
5.2 Board of Directors.
------------------
5.2.1 Authority of Board. Subject only to the provisions of this
------------------
Agreement and the Charter Documents, the Board shall have ultimate
responsibility for management and control of the Company.
5.2.2 Number and Composition. The number of Directors
----------------------
constituting the entire Board shall be five members. Each Shareholder shall vote
its Shares at any Shareholders' Meeting called for the purpose of filling the
positions on the Board or in any Written Resolution executed for such purpose to
elect, and shall take all other actions necessary to ensure the election to the
Board of, (i) three nominees of IWC and (ii) two nominees of STHL.
5.2.3 Removal and Replacement of Directors.
------------------------------------
(a) A Director shall be removed from the Board, with or
without cause, upon, and only upon, the affirmative vote of the Shareholders in
accordance with this Section 5.2.3. Each Shareholder shall vote its Shares for
the removal of a Director upon the request of the Shareholder that nominated
such Director. Otherwise, no Shareholder shall vote for the removal of a
Director.
(b) In the event any Director resigns or is removed in
accordance with Section 5.2.3(a), the Shareholders shall, before the transaction
of any other business by the Shareholders or the Board, elect a successor or
replacement nominated by the Shareholder that nominated such Director. Such
successor or replacement Director shall be elected on or as soon as possible
after the date of such resignation or removal.
5.2.4 Chairman of the Board. The Chairman of the Board shall be
---------------------
nominated by IWC. The Chairman of the Board shall have no casting vote.
5.2.5 Alternate Directors. A Director may at any time appoint
-------------------
another person (including another Director) to be his alternate Director, and
may at any time terminate such appointment. Any person so appointed shall be
entitled to receive notices of and to attend and vote at meetings of the Board
and count towards a quorum and shall automatically vacate his office on the
expiration of the term for, or the happening of the event, until which he is by
the terms of his appointment to hold office or if the appointor in writing
terminates the appointment or if the appointor himself ceases for any reason to
hold office as a
<PAGE>
Director. An appointment of an alternate Director shall not prejudice the right
of the appointor to receive notices of and to attend and vote at meetings of the
Board, and the powers of the alternate Director shall automatically be suspended
during such time as the Director appointing him is himself present in person at
a meeting of the Board.
5.3 Board Meetings.
--------------
5.3.1 Notice. Meetings of the Board may be called by the of
------
Chairman the Board or any two Directors. Not less than 14 days' notice of any
Board meeting shall be given to all Directors; provided, however, that such
-------- -------
notice period may be reduced if approved by all of the Directors in writing. The
venue for Board meetings shall be the principal offices of the Company unless
otherwise approved by the Board.
5.3.2 Quorum. All meetings of the Board shall require a quorum
------
consisting of at least three Directors, including at least one Director
nominated by IWC and at least one Director nominated by STHL. Notwithstanding
the foregoing, if such a quorum is not present within one hour from the time
appointed for the meeting, the meeting shall adjourn to such place and time
(which is at least 14 days later) as those Directors who did attend shall decide
or, if no such decision is reached, at the same place and time 14 days later, at
which time the Directors present shall constitute a quorum.
5.3.3 Proxies. Any Director may, by written notice to the
-------
Company Secretary, authorize another Director to attend and vote by proxy for
such Director at any Board meeting.
5.3.4 Telephonic Meetings. Directors may participate in a
-------------------
meeting of the Board by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each other
at the same time.
5.3.5 Voting. Except as set forth in Section 5.3.6 or Section
------
5.4, the adoption of any resolution of the Board shall require the affirmative
vote of Directors holding a majority of the votes held by Directors present at a
duly constituted meeting of the Board at which a quorum is present.
5.3.6 Written Resolution. By notice and copy to all Directors,
------------------
resolutions may be adopted in writing by (i) in the case of matters other than
those specified in Section 5.4 and, to the extent permitted by Cayman Islands
law, a majority of Directors, including at least one Director nominated by IWC
and one Director nominated by STHL or (ii) in the case of matters specified in
Section 5.4, all Directors.
5.4 Matters Requiring Unanimous Approval. The following matters shall
------------------------------------
require the affirmative vote or written consent of all Directors:
(a) any increase or decrease in the size of the Board;
(b) annual business plans of the Company and the Company Projects
and any material changes thereto;
(c) any decision to make an investment in or pursue any
<PAGE>
joint ventures or projects, or any decision to make any additional investment in
any of the Company Projects;
(d) hiring of a chief executive officer, chief financial officer,
chief operating officer and technical director of the Company;
(e) any merger, reorganization or other transaction that results
in a change in control of the Company or any of the Company Projects or any sale
of all or substantially all of the Company or its assets or of any of the
Company Projects or such Company Project assets;
(f) termination of the Company's operations or the operations of
any of the Company Projects;
(g) any decision to raise additional equity or debt financing,
incur any guarantees or grant any security interests by the Company or by any of
the Company Projects;
(h) any contracts between or among (i) the Company and any of the
Company Projects, (ii) the Company and any Shareholder of the Company or
Affiliate of any Shareholder or (iii) any of the Company Projects and any
Shareholder or Affiliate of any Shareholder;
(i) any changes in the principal activities or any amendment to
the Charter Documents or the charter documents of any of the Company Projects;
(j) any amendments to the Technical Services Agreement, the
Management Services Agreement, or any service agreement between the Company and
any entity in respect of any Company Project;
(k) issuance and allocation of the Management Options (as defined
in Section 9); and
(l) the determination by the Company of specific IWC Obligations
(as defined in the Management Services Agreement dated as of the date hereof
between IWC and the Company (the "Management Services Agreement")) to be
performed by IWC pursuant to the Management Services Agreement.
5.5 Chief Executive Officer. The Chief Executive Officer of the
-----------------------
Company shall be an individual nominated by IWC. The appointment of any such
nominee shall be subject to the consent of STHL, which consent shall not be
unreasonably withheld.
5.6 Directors' Access. Each Director shall be entitled to examine the
-----------------
books and accounts of the Company. The Company shall provide to each Director,
within 30 days after the end of each month, a monthly operating report of the
Company and each Subsidiary containing such information as may be specified by
the Board and such information relating to the business affairs and financial
position of the Company as such Director may require. Any Director may provide
such information to a Shareholder.
6. Financial Reports and Auditing.
------------------------------
<PAGE>
6.1 Right of Inspection. The Company shall allow the Shareholders and
-------------------
their authorized representatives the right during normal business hours to
inspect its books and accounting records and those of the Subsidiaries, to make
extracts and copies therefrom at their own expense and to have full access to
all of the Company's and each of the Subsidiaries' property and assets.
Notwithstanding the foregoing in this Section 6.1, the Company shall not be
obligated to provide any information to any Shareholder or Shareholder's
representative or to any competitor of the Company pursuant to this Section 6.1
that the Company considers to be a trade secret or similar confidential
information unless such Shareholder and such Shareholder's representative agrees
not to use such information and to keep such information confidential. The
foregoing rights of visitation and inspection shall be in addition to any other
similar rights the Shareholders may have under the law of the Cayman Islands.
6.2 Books and Records. The Company and the Subsidiaries shall keep
-----------------
proper, complete and accurate books of account in US dollars in accordance with
international accounting standards and shall have their accounts audited
annually in accordance with such standards by a reputable firm of international
accountants appointed by the Board, which firm initially shall be KPMG Peat
Marwick LLP.
6.3 Reports. The Company shall provide to each Shareholder (i) within
-------
three months after the end of each Financial Year, the annual audited
consolidated financial statements of the Company for such Financial Year, (ii)
within 45 days after the end of each quarter, quarterly unaudited consolidated
financial statements of the Company for such quarter, (iii) monthly operating
reports in a format approved by the Board and (iv) such other reports as the
Board may determine. The Company shall furnish to the Shareholders and their
auditors such financial and other information relating to the business of the
Company and its Subsidiaries as any of them may reasonably require.
6.4 Budgets and Business Plans. The Company shall prepare proposed
--------------------------
annual operating and capital budgets and business plans for the Company and each
Subsidiary, which shall be submitted to all Directors not less than two months
prior to the commencement of each Financial Year. The Board shall adopt budgets
and business plans for the Company and each Subsidiary within one month after
the commencement of the relevant Financial Year.
6.5 Bank Accounts. The parties shall procure that the bank account or
-------------
bank accounts opened in the name of the Company with The Hongkong and Shanghai
Banking Corporation Limited, or such other bank or banks as may be determined by
the Board, are maintained. Such account or accounts shall be operated as the
Board shall resolve from time to time. All payments to or by the Company shall
be paid into or withdrawn from such account or accounts.
7. Funding.
-------
7.1 Additional Capital Contributions. The Shareholders shall make
--------------------------------
capital contributions to the Company as contemplated by any business plan
approved by the Board in accordance with Section 5.4. Such capital
contributions shall be made according to a schedule determined by the
<PAGE>
Board.
7.2 Failure to Make Capital Contribution. If any Shareholder fails to
------------------------------------
contribute the capital required to be contributed by such Shareholder (a
"Required Contribution") within the time specified by the Board, then the equity
ownership interest of such defaulting Shareholder (a "Defaulting Shareholder")
in the Company shall be reduced as provided in this Section 7, and the equity
ownership interests of the remaining Shareholders who contribute both their own
required capital contributions as well as all or a portion of the Defaulting
Shareholder's Required Contribution shall be increased as provided in this
Section 7.
7.3 Penalty Percentage. For the purposes of this Section 7, the
------------------
"Penalty Percentage" shall be equal to the product of 100% times a fraction, the
numerator of which shall be the Required Contribution and the denominator of
which shall be the total capital contributed to the Company by the Shareholders
of the Company between the date of this Agreement and the date and time that is
immediately prior to the capital call in which the Defaulting Shareholder failed
to make its Required Contribution (the "Capital Call").
7.4 Reduction in Equity Interest. Each Defaulting Shareholder's
----------------------------
equity interest in the Company shall be decreased such that such Defaulting
Shareholder's total percent equity interest in the Company immediately after the
Capital Call shall be equal to such Defaulting Shareholder's total percent
equity interest in the Company immediately prior to the Capital Call minus the
Penalty Percentage.
7.5 Rights of Other Shareholders. Each Shareholder that is not a
----------------------------
Defaulting Shareholder shall have the right to contribute additional capital to
the Company to make up for the Defaulting Shareholder's Required Contribution.
Each Shareholder that elects to exercise such right (a "Participating
Shareholder") shall be permitted to contribute additional capital in an amount
equal to its pro-rata share of the Required Contribution based upon the ratio
its equity interest in the Company bears to the aggregate equity interest in the
Company held by all of the Participating Shareholders. The aggregate percent
equity interest of the Participating Shareholders in the Company shall be
increased such that the aggregate percent equity interest of the Participating
Shareholders in the Company immediately after the Capital Call shall be equal to
the sum of the aggregate equity interest of the Participating Shareholders
immediately prior to the Capital Call and the Penalty Percentage; and the
Penalty Percentage shall be allocated among the Participating Shareholders pro-
rata based upon the portion of the Required Contribution contributed by each
Participating Shareholder.
7.6 Further Assurances. Each Shareholder hereby agrees to execute all
------------------
documents and instruments required to effect the transfers of equity interests
set forth in this Section 7.
8. STHL Option. STHL shall have the option, exercisable in whole or in
-----------
part by written notice to the Company and IWC (the "STHL Exercise Notice") at
any time prior to the first anniversary of the date hereof, to subscribe for up
to an aggregate of 3000 new Shares so that after such subscription the
shareholding and equity interest of STHL in the Company shall increase from 30%
to up to 40% (assuming that the management
<PAGE>
options provided for in Section 9 are not exercised) for a subscription price of
US$1,000 per Share (the "STHL Option"). The closing of the subscription and
issuance of Shares pursuant to the STHL Option shall take place on a date, not
more than 30 days after the date of the STHL Exercise Notice, specified by STHL
in the STHL Exercise Notice. At such closing, the Company shall deliver share
certificates representing the Shares subscribed for by STHL, and STHL shall
deliver payment of the subscription price in cash by certified bank check or
wire transfer of immediately available funds.
9. Management Options. The parties agree that options to purchase up to
------------------
an aggregate of 900 Shares at a price of US$1,000 per Share may be issued upon
the unanimous decision of the Board to members of senior management of the
Company pursuant to a management stock option plan to be adopted by the Board
(the "Management Options"); provided, however, that if the STHL Option is
-------- -------
exercised, the parties agree that the Company may also issue a number of
additional options to purchase up to an aggregate number equal to five percent
of the number of Shares issued by the Company to STHL upon exercise of the STHL
Option at a price of US$1,000 per Share.
10. Covenants of the Parties.
------------------------
10.1 Memorandum and Articles of Association. The parties agree,
--------------------------------------
promptly after the date hereof, to take all necessary actions and execute all
documents and instruments necessary to amend the Charter Documents to conform to
the terms of this Agreement.
10.2 Name Change. As soon as is reasonably practicable after the date
-----------
hereof, the parties shall take all actions and execute all documents necessary
for the Company to effect the change of name of the Company as soon as
reasonably practicable from Mainstream Limited to Star Telecom Overseas (Cayman
Islands) Limited.
10.3 Corporate Opportunities. Before a Shareholder or any Affiliate
-----------------------
of a Shareholder invests in a Person that is directly or indirectly engaged, or
proposes to engage, in the radio paging business, such Shareholder must first
offer the Company the opportunity to make such investment. The Company shall
decide within 30 days after receipt of such offer whether or not to pursue such
opportunity. If the Company elects not to pursue such opportunity, or if the
Company subsequently declines to make such investment, such Shareholder or
Affiliate may make such investment, provided that the terms of such investment
are no more favorable to such Shareholder or Affiliate than those offered to the
Company.
10.4 License Agreements. During the term of this Agreement, STHL
------------------
shall, and shall cause its Affiliates to, enter into technology and trademark
licensing agreements substantially in the form attached hereto as Exhibit C with
the Company if STHL or any of its Affiliates, as the case may be, shall develop
any new technologies relating to the radio paging business.
10.5 Taiwan Joint Venture. Promptly after such time, if any, that
--------------------
transfer of the registered ownership of STHL's interest in a company proposed to
be named Pacific Paging Co., Ltd., a company being formed in
<PAGE>
the Republic of China (the "Taiwan Joint Venture"), from STHL to the Company is
legally permitted, STHL shall take all actions and execute all documents
necessary to transfer such registered ownership to the Company. Until such time,
STHL shall take all actions and execute all documents necessary to ensure that
the Company shall receive the full economic benefit of STHL's interest in the
Taiwan Joint Venture.
10.6 Subscription of Additional Shares. Immediately after the First
---------------------------------
Closing (as defined in the Subscription Agreement), STHL and IWC shall subscribe
for additional shares of the Company in accordance with the terms of the
Subscription Agreement.
11. Representations and Warranties. Each party hereto represents,
------------------------------
severally and not jointly, to the other parties hereto that:
(a) such party has the full power and authority to enter into, execute
and deliver this Agreement and to perform the transactions contemplated hereby
and such party is duly organized and existing under the laws of the jurisdiction
of its organization and that the execution and delivery by such party of this
Agreement and the performance by such party of the transactions contemplated
hereby have been duly authorized by all necessary corporate or other action of
such party;
(b) assuming the due authorization, execution and delivery hereof by
the other parties, this Agreement constitutes the legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms; and
(c) the execution, delivery and performance of this Agreement by such
party and the consummation of the transactions contemplated hereby will not (i)
violate any provision of the Memorandum of Association or By-laws (or comparable
instruments) of such party; (ii) require such party to obtain any consent,
approval or action of, or make any filing with or give any notice to, any
governmental authority in such party's country of organization or any other
person pursuant to any instrument, contract or other agreement to which such
party is a party or by which such party is bound; (iii) conflict with or result
in any material breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both constitute) a default under,
any instrument, contract or other agreement to which such party is a party or by
which such party is bound; (iv) violate any order, judgment or decree against,
or binding upon, such party or upon its respective securities, properties or
businesses; or (v) violate any law or regulation of such party's country of
organization or any other country in which it maintains its principal office.
12. Fees and Expenses. Each of the parties hereto shall bear its
-----------------
respective fees and expenses incurred in connection with the preparation,
execution and performance of this Agreement and the other Basic Documents and
the transactions contemplated hereby and thereby, including, without limitation,
all fees and expenses of agents, representatives, counsel and accountants.
13. Confidentiality.
---------------
13.1 General Obligation. Each party undertakes that it shall
------------------
<PAGE>
not reveal, and shall cause its directors, officers and employees not to reveal,
to any third party any information acquired by it or them in connection with
this Agreement or confidential or proprietary information concerning the
organization, business, technology, finance, transactions or affairs of the
Company, the Subsidiaries or the Company Projects or any other party hereto
without the prior written consent of the other parties.
13.2 Exceptions. The provisions of Section 13.1 shall not apply to:
----------
(a) information that is publicly available (except by virtue of a
breach of this Agreement);
(b) a disclosure to legal, financial or professional advisors or
bankers of any party;
(c) a disclosure, after giving prior notice to the other parties to
the extent practicable under the circumstances and subject to any practicable
arrangements to protect confidentiality, to the extent required under the rules
of any stock exchange or by applicable laws or governmental regulations or
judicial or regulatory process or in connection with any judicial process
regarding any legal action, suit or proceeding arising out of or relating to
this Agreement; or
(d) a disclosure by the Company reasonably necessary in the
ordinary course of business or otherwise in connection with transactions or
proposed transactions of the Company.
13.3 Disclosure to Third Parties. Upon any Shareholder entering into
---------------------------
negotiations with any Person with a view to selling any Shares to such Person,
information in respect of the Company or any Subsidiary that is reasonably
necessary to permit such Person to evaluate the business of the Company or such
Subsidiary may be provided to such Person, provided that such Person has
executed a binding confidentiality letter in a form approved by the Board;
provided that where such Person is involved in a competing business, the Board
- --------
may prohibit the disclosure of any such confidential information as the Board
may determine.
14. Publicity. Except for a publicity release or public announcement,
---------
after giving prior notice to and consulting with the other parties to the extent
practicable under the circumstances, to the extent required under the rules of
any stock exchange or by applicable laws or governmental regulations or judicial
or regulatory process, no publicity release or public announcement concerning
the Company, any Subsidiary or any Company Project or the relationship or
involvement of the parties shall be made by any party without advance approval
thereof by the Board; provided that no disclosure of a party's identity may be
--------
made without the prior approval of such party.
15. Foreign Corrupt Practices Act. Each of the parties hereto, and each of
-----------------------------
such party's shareholders, agents, representatives and Affiliates, shall at all
times comply with the terms and provisions of the U.S. Foreign Corrupt Practices
Act, and shall also cause the Company and each of its agents, representatives
and Affiliates to so comply, in
<PAGE>
connection with the operation of the Company and the transactions contemplated
hereby.
16. Miscellaneous.
-------------
16.1 Legend. Each certificate for any Shares now held or hereafter
------
acquired by any Shareholder shall, for as long as this Agreement is effective,
bear a legend as follows:
"Mainstream Limited (the "Company") is a company organized under the
laws of the Cayman Islands, and the shares represented by this certificate
may not be sold, assigned, transferred, exchanged, mortgaged, pledged or
otherwise disposed of or encumbered without compliance with the provisions of
that certain Shareholders' Agreement, dated as of August 30, 1996, among the
Company and the shareholders of the Company named therein. A copy of such
Shareholders' Agreement is on file at the principal offices of the Company.
The Company will not register the transfer of such shares on the register of
members of the Company unless and until the transfer has been made in
compliance with the terms of such Shareholders' Agreement."
16.2 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally or sent by
registered mail or international courier service, in either case postage
prepaid, or delivered by telecopy, telex, facsimile or similar
telecommunications equipment. Any such notice shall be deemed given when so
delivered personally or, if sent by registered mail, five days after the date of
deposit in the mails or, if sent by international courier service, three days
after the date of deposit with the courier service or, if delivered by telecopy,
telex, facsimile or similar telecommunications equipment, at the time of receipt
thereof, as follows:
(a) if to the Company, to:
Mainstream Limited
c/o Star Telecom Overseas Limited
414 Kwun Tong Road
Kwun Tong
Kowloon, Hong Kong
Attention: Hugh McClung
Facsimile No.: (852) 2918-1777
(b) if to IWC, to:
International Wireless Communications, Inc.
400 South El Camino Real
San Mateo, California 94402
U.S.A.
Attention: Douglas Sloan Sinclair
Facsimile No.: 1 (415) 548-1842
(c) if to STHL, to:
Star Telecom Holding Limited
414 Kwun Tong Road
<PAGE>
Kwun Tong
Kowloon, Hong Kong
Attention: Francis Wong
Facsimile No.: (852) 2598-1392
Any party may, by notice to the other parties, designate another
address or person for receipt of notices hereunder.
16.3 Discrepancies. If there is any discrepancy between any of the
-------------
provisions of the Charter Documents or the charter documents of any of the
Subsidiaries and this Agreement, the provisions of this Agreement shall prevail,
and the parties shall thereupon procure that the Charter Documents or relevant
charter documents, as the case may be, are promptly amended, to the extent
permitted by applicable law, in order to conform with this Agreement.
16.4 Severability. In the event any provision hereof is held void or
------------
unenforceable by any court, such provision shall be severable and shall not
affect the remaining provisions hereof.
16.5 Entire Agreement. This Agreement, together with the other
----------------
agreements referred to herein, reflects the entire agreement among the parties
and supersedes all prior agreements and communications, either oral or in
writing, among the parties hereto with respect to the subject matter hereof.
16.6 Term of Agreement. This Agreement shall become effective upon
-----------------
the execution hereof by all of the parties hereto and shall continue in effect
until the earlier to occur of (a) the date on which at least 30% of the Shares
in issue on a fully diluted basis are publicly traded on an internationally
recognized stock exchange and (b) any date agreed upon in writing by all of the
Shareholders.
16.7 Amendment and Waiver. This Agreement may not be amended,
--------------------
modified or supplemented without the written consent of all of the parties
hereto. Any failure by a party hereto to comply with any obligation, agreement
or condition herein may be expressly waived in writing by each of the other
parties hereto, and neither any such waiver nor any failure to insist upon
strict compliance with such obligation, agreement or condition shall operate as
a waiver of, or estoppel with respect to, any such subsequent or other failure.
16.8 Consent to Specific Performance. The parties hereto declare that
-------------------------------
it is impossible to measure in money the damages that would be suffered by a
party by reason of the failure by any other party to perform any of the
obligations hereunder. Therefore, if any party shall institute any action or
proceeding to enforce the provisions hereof, any party against whom such action
or proceeding is brought hereby waives any claim or defense therein that the
other party has an adequate remedy at law.
16.9 Assignment; Binding on Transferee. The provisions of this
---------------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted transferees from and after the
effective date hereof.
<PAGE>
16.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND WALES.
16.11 Arbitration.
-----------
(a) Any dispute or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity hereof, shall be finally
settled by arbitration under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce (the "Rules") as are currently in force and as
may be amended by the rest of this Section 16.11. For the purpose of such
arbitration, there shall be one or more arbitrators appointed in accordance with
the Rules (such single arbitrator or board of arbitrators, as the case may be,
are referred to below as the "Arbitration Board"). The place of arbitration
shall be Hong Kong. All arbitration proceedings shall be conducted in the
English language. The arbitrators shall decide any such dispute or claim
strictly in accordance with the governing law specified in Section 16.10 of this
Agreement. Judgment upon any arbitral award rendered hereunder may be entered in
any court having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be.
(b) Each party shall cooperate in good faith to expedite (to the
maximum extent practicable) the conduct of any arbitral proceedings commenced
under this Agreement.
(c) The costs and expenses of the arbitration, including,
without limitation, the fees of the Arbitration Board, shall be borne equally by
each party to the dispute or claim, and each party shall pay its own fees,
disbursement and other charges of its counsel.
(d) Any award made by the Arbitration Board shall be final and
binding on the parties hereto. The parties expressly agree to waive the
applicability of any laws and regulations that would otherwise give the right to
appeal the decisions of the Arbitration Board so that there shall be no appeal
to any court of law for the award of the Arbitration Board, and a party shall
not challenge or resist the enforcement action taken by another party in whose
favor the award of the Arbitration Board was given.
16.12 Shareholder Obligations; Further Assurances. The parties hereto
-------------------------------------------
shall comply with the provisions of this Agreement in relation to their
investment in the Company and in transacting business with the Company and shall
exercise their respective rights and powers in accordance with and so as to give
effect to this Agreement. Each of the parties shall execute such documents and
other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby.
16.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
MAINSTREAM LIMITED
By: /s/
------------------------------------
Name:
Title:
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
By:
/s/
------------------------------------
Name:
Title:
STAR TELECOM HOLDING LIMITED
By:
/s/
------------------------------------
Name:
Title:
<PAGE>
Exhibit A
---------
Company Projects
----------------
(1) India:
-----
RPG Paging Services Limited, an Indian company engaged in the radio paging
business ("RPG"), the Shareholders of which are RPG Telecom Ltd., Hochu
Corporation, NTT International Corporation and Star Paging India Limited
("Star India"). Star India is a wholly owned subsidiary of Star Telecom
Overseas Limited ("STOL") and owns a 10.989% interest in RPG.
(2) Indonesia:
---------
A radio paging project currently being negotiated among PEWC
Telecommunications Co. Ltd., STOL and Sumberkreasi Prima as described in
the Memorandum of Understanding among such parties dated August 25, 1995.
(3) Philippines:
-----------
A radio paging project currently being negotiated among Subic Bay
Metropolitan Authority, Star Telecom Holding Limited ("STHL") and FNP Subic
Services Corporation as described in the Memorandum of Understanding dated
November 10, 1995 among such parties.
(4) Cambodia:
--------
A project currently being negotiated between Serting Telecommunications
Ltd. ("Serting") and STOL as described in:
(A) the Hire Purchase Contract dated November 17, 1995 between (a) Star
Telecom Holding Ltd., (b) Serting and (c) John S. K. Hau and John S.
K. Hau and Associates and Finecom Limited;
(B) the letter dated December 11, 1995 from STOL to Serting; and
(C) the letter dated May 8, 1996 from STOL to Serting.
(5) Thailand:
--------
A project currently being negotiated between STOL and SA Electrics Company
Ltd. as described in the Memorandum of Understanding dated July 20, 1995
between such parties.
(6) Taiwan:
------
A project described in the Shareholders Agreement dated August 21, 1996
among Tai-Hsiu Investment Co. Ltd., Pacific Technology Co. Limited, STOL,
Fubon Group, Evergreen International Corporation and Fan Jui-ying.
<PAGE>
Exhibit B
---------
Form of Deed of Adherence
-------------------------
THIS DEED OF ADHERENCE is made the day of 199
BETWEEN:
(1) Mainstream Limited (to be renamed Star Telecom Overseas (Cayman Islands)
Limited), an exempted company incorporated in the Cayman Islands (the
"Company"); and
(2) [Name of New Shareholder] (the "New Shareholder").
WHEREAS:
(A) On August 30, 1996, the Company and its shareholders entered into a
Shareholders' Agreement (the "Shareholders' Agreement") to which a form of
this Deed is attached as Exhibit B.
(B) The New Shareholder wishes to [be allotted/have transferred to him/her/it]
[ ] shares (the "Shares") in the share capital of the Company from [ ]
(the "Old Shareholder") and in accordance with the Shareholders' Agreement
has agreed to enter into this Deed.
(C) The Company enters this Deed on behalf of itself and as agent for all the
existing Shareholders of the Company.
NOW THIS DEED WITNESSES as follows:
1. Interpretation.
--------------
In this Deed, except as the context may otherwise require, all words and
expressions defined in the Shareholders' Agreement shall have the same
meanings when used herein.
2. Covenant.
--------
The New Shareholder hereby covenants to the Company as trustee for all other
persons who are at present or who may hereafter become bound by the
Shareholders' Agreement, and to the Company itself to adhere to and be bound
by all the duties, burdens and obligations of a shareholder holding the same
class of share capital as the Shares imposed pursuant to the provisions of
the Shareholders' Agreement and all documents expressed in writing to be
supplemental or ancillary thereto as if the New Shareholder had been an
original party to the Shareholders' Agreement since the date thereof.
3. Enforceability
--------------
Each existing shareholder and the Company shall be entitled to enforce the
Shareholders' Agreement against the New Shareholder, and the New Shareholder
shall be entitled to all rights and benefits of the Old Shareholder (other
than those that are non-assignable) under the
<PAGE>
Shareholders' Agreement in each case as if the New Shareholder had been an
original party to the Shareholders' Agreement since the date thereof.
4. Governing Law.
-------------
THIS DEED OF ADHERENCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF ENGLAND AND WALES.
IN WITNESS WHEREOF, this Deed of Adherence has been executed as a deed on
the date first above written.
MAINSTREAM LIMITED
By: _____________________________
Name:
Title:
[ Name of New Shareholder ]
By: _____________________________
Name: [ ]
Title: [ ]
<PAGE>
Exhibit C
---------
Form of License Agreement
-------------------------
<PAGE>
================================================================================
TECHNOLOGY AND TRADEMARK LICENSING AGREEMENT
between
STAR TELECOM HOLDING LIMITED
and
MAINSTREAM LIMITED
(TO BE RENAMED STAR TELECOM OVERSEAS (CAYMAN
ISLANDS) LIMITED)
_______________________________
Dated as of August 30, 1996
_______________________________
================================================================================
<PAGE>
TECHNOLOGY AND TRADEMARK
LICENSING AGREEMENT
THIS TECHNOLOGY AND TRADEMARK LICENSING AGREEMENT (this "Agreement")
is entered into as of August 30, 1996, by and between STAR TELECOM HOLDING
LIMITED, a Hong Kong company with its registered offices at 6/F, Star Telecom
Tower, 414 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong (the "Licensor"), and
MAINSTREAM LIMITED (to be renamed STAR TELECOM OVERSEAS (CAYMAN ISLANDS)
LIMITED), a Cayman Islands exempted company with its principal offices at 6th
Floor, Star Telecom Tower, 414 Kwun Tong Road, Kwun Tong, Kowloon (the
"Licensee").
The Licensor is the owner of, or has the right to license, certain
proprietary information and intellectual property rights relating to the
provision of radio paging services.
The Licensee desires to obtain from the Licensor, and the Licensor is
willing to grant to the Licensee, a license to use such proprietary information
and intellectual property rights to enable the Licensee to provide radio paging
services within a certain territory as agreed by the Parties.
The Licensor has entered into a Subscription Agreement with the
Licensee and International Wireless Communications, Inc. ("IWC"), dated as of
August 30, 1996 (the "Subscription Agreement"), pursuant to which the execution
of this Agreement is a condition precedent to the obligation of IWC to complete
the subscription of 12,600 shares of the Licensee's share capital from the
Licensee and the payment of US$900,000 to the Licensor.
In consideration of the foregoing and of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto agree as
follows:
2. Definitions.
2.1 In this Agreement, unless otherwise defined or where the
context otherwise requires, the following words and expressions shall have the
following meanings:
"Affiliates" of a party means any Person controlling, controlled
by or under common control with such party. "Control" for this purpose means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, or the ownership or voting
securities, by contract or otherwise.
"Agreement" means this Agreement, including the Preamble, and,
unless the context otherwise indicates, the Schedules and Exhibits hereto.
"Article" means an Article of this Agreement.
<PAGE>
"Dollars" or "US$" means the lawful currency of the United States
of America.
"Effective Date" means the Closing Date as defined in the
Subscription Agreement.
"Improvement" means any development or improvement after the date
hereof of the Proprietary Information or Patents or any portion thereof,
including, without limitation, any new, improved or changed method of providing
the Services.
"Licensed Territory" means worldwide excluding Hong Kong.
"Licensee" has the meaning set forth in the Preamble.
"Licensing Fee" has the meaning set forth in Article 3.
"Licensor" has the meaning set forth in the Preamble.
"Noncompetition Agreement" means the Noncompetition Agreement
dated as of the date hereof between IWC and the Licensor.
"Notice of Infringement" has the meaning set forth in Article 4.
"Parties" means the Licensor and the Licensee and their
respective successors and permitted assigns, and a "Party" means either the
Licensor or the Licensee and its successors or permitted assigns.
"Patents" means all patents now or hereafter granted to the
Licensor or other parties, and patents for which application has been made by
the Licensor or other parties, which the Licensor has used, is using or may
hereafter use in connection with or in relation to its radio paging services,
including, without limitation, those patents and patent applications set forth
in Schedule I attached hereto.
"Person" means any natural person, corporation, partnership,
firm, joint venture, association, joint stock company, trust, unincorporated
association, governmental authority or other legal entity.
"Proprietary Information" means the technical knowledge,
inventions, creations, know-how, formulations, recipes, specifications, designs,
methods, processes, techniques, data, rights, devices, drawings, instructions,
expertise, trade practices, trade secrets, commercial information and other
information now or hereafter in the possession of the Licensor relating to the
provision of the Services, whether patented, patentable or not, and including
Improvements, but not including Patents and Trademarks.
"Schedule" means a Schedule to this Agreement.
"Services" means radio paging services excluding the
manufacturing of any products and equipment.
<PAGE>
"Subscription Agreement" has the meaning set forth in the
Preamble.
"Technical Documentation" means that portion of the Proprietary
Information, Trademarks and Patents in written form and drawings to be furnished
to the Licensee pursuant to this Agreement, including, without limitation, the
details as specified in Schedule II attached hereto.
"Technical Services Agreement" means the Technical Services
Agreement dated as of the date hereof between the Licensor and the Licensee.
"Term" has the meaning set forth in Article 10.1.
"Termination" means the termination of this Agreement for any
reason as provided for in Article 10.
"Trademarks" means all registered trademarks and service marks of
the Licensor or other parties now or hereafter in existence, and trademarks and
service marks for which registration has been applied for by the Licensor or
other parties, which the Licensor has used, is using or may hereafter use in
connection with or in relation to its radio paging services, including, without
limitation, those marks and applications for registration of marks set forth in
Schedule III attached hereto.
2.2 In this Agreement, unless the context otherwise requires,
words importing the singular shall include the plural and vice versa and words
importing the masculine gender shall include the feminine and neuter genders and
vice versa.
3. Scope of Agreement.
3.1 Licensed Technology and Intellectual Property Rights. The
Licensor hereby grants the Licensee a license to (i) employ the Proprietary
Information and (ii) use the Trademarks and the Patents for providing the
Services in the Licensed Territory for the Term. Such license shall be on a
non-exclusive basis to the extent permitted by the Noncompetition Agreement.
The Licensee shall have the right to sublicense, assign or otherwise transfer
the license granted hereby only to any entity in which the Licensee holds,
directly or indirectly, an equity interest.
3.2 Improvements. Either Party shall promptly notify the other
Party of any Improvement that is discovered or developed by it, any of its
employees or any other person authorized by it to have access to the Proprietary
Information or Patents, as the case may be, and shall make complete disclosure
thereof to the other Party. All proprietary rights to any Improvement shall
belong to the Party that discovered or developed such Improvement. Any such
Improvement discovered or developed by the Licensor shall be deemed to be part
of the Proprietary Information or the Patents, as the case may be, subject to
the terms and conditions of the license granted to the Licensee under this
Agreement.
3.3 License of Improvements owned by the Licensee.
<PAGE>
All Improvements, if any, discovered or developed by the Licensee shall be
licensed, during the term of this Agreement for no fee, by the Licensee to the
Licensor for proper and authorized use and employment in connection with the
provision of permitted radio paging services by the Licensor.
4. Licensing Fees. The fee for the license (i) to employ the
Proprietary Information and (ii) to use the Patents and Trademarks granted to
the Licensee pursuant to the terms of this Agreement shall be US$100 per annum
(the "Licensing Fee"). The Licensing Fee shall be paid to the Licensor by the
Licensee in advance every year, on the date hereof and on every subsequent
anniversary of such date.
5. Claims and Infringements.
5.1 Notification of Claims. The Licensee shall notify the
Licensor immediately of any claim or possible claim of any nature by a third
party that the proper and authorized use of the Proprietary Information, any
Trademark or any Patent by the Licensee is an infringement of any patent right,
trademark right or other proprietary right of such third party. The Licensor
shall be solely responsible for the cost and conduct of defending such claims.
5.2 Compensation. In the case where infringement is
established, the Licensor shall be solely responsible for the compensation or
damages to any and all third parties and shall compensate the Licensee for all
losses, expenses and fees incurred and liabilities and damages suffered by the
Licensee arising from the proper and authorized use of the Patents, Trademarks
and Proprietary Information.
5.3 Infringement by a Third Party. If either Party hereto
discovers or has knowledge of any third person or entity infringing or
potentially infringing on any of the rights granted or licensed herein, or any
part thereof, such Party shall promptly notify the other Party thereof in
writing (the "Notice of Infringement") and furnish the other Party with all
available information pertaining to such infringement or potential infringement.
The Licensor shall have the right to take all action for the protection of the
rights granted or licensed hereunder against such infringer or potential
infringer by giving written notice (the "Action Notice") to such effect to the
Licensee within 30 days of the giving of the Notice of Infringement. If the
Licensor does not deliver the Action Notice within 30 days, the Licensee shall
have the right, at the Licensee's expense, to take all such steps as it deems
necessary or appropriate against the infringer or potential infringer.
6. Technical Documentation.
6.1 Provision of the Technical Documentation. The Licensor
shall furnish the Technical Documentation to the Licensee in the manner provided
in this Article 5 for use by the Licensee in connection with providing the
Services.
6.2 Guarantee of Completeness. The Licensor guarantees that the
Technical Documentation shall be legible and complete. The Licensee shall,
within one month after receipt of any
<PAGE>
delivery of Technical Documentation, review such Technical Documentation and
inform the Licensor in writing within such period of time of any failure of the
Technical Documentation in question to be legible and complete, in which case
the Licensor shall in its discretion correct or replace the relevant Technical
Documentation free of charge.
7. Confidentiality.
7.1 Obligation of Confidentiality. Except as permitted by
Section 2.1, the Licensee agrees that neither it nor its successors in interest
shall disclose, directly or indirectly, by any means, any of the Proprietary
Information (including but not limited to the Technical Documentation) or
details of the Patents and Trademarks to any individual, firm, enterprise or
corporation not affiliated with the Licensee or its successors in interest, or
to any government agency or organization or other person without the prior
written approval of the Licensor.
7.2 Permitted Disclosures. The Licensee may disclose
Proprietary Information (including the Technical Documentation) or details of
the Patents and Trademarks to (i) its employees, to approved subcontractors and
their employees and to any entities affiliated with the Licensee or its
successors in interest to the extent necessary for the provision of the Services
by the Licensee in the Licensed Territory and (ii) any entity in which the
Licensee holds, directly or indirectly, an equity interest.
7.3 Use of Proprietary Information, Patents and Trademarks. The
Licensee shall not use any of the Proprietary Information, Patents or Trademarks
except as necessary to provide the Services in the Licensed Territory.
7.4 Ownership of Proprietary Information, Patents and
Trademarks. All proprietary rights in the Proprietary Information, Patents and
Trademarks owned or possessed by Licensor shall remain the property of the
Licensor. The Licensee shall at all times recognize the Licensor's ownership,
rights and title in and to the Proprietary Information, Patents and Trademarks.
The Licensee agrees and warrants that it shall not register nor attempt to
register such Proprietary Information, Trademarks or Patents anywhere in the
world, except with the written consent of the Licensor. The Licensor shall at
all times recognize the Licensee's ownership, rights and title in and to
Improvements developed or discovered by the Licensee. The Licensor agrees and
warrants that it shall not register nor attempt to register such Improvements
anywhere in the world, except with the written consent of the Licensee.
7.5 Exceptions. Anything to the contrary notwithstanding, the
provisions of Articles 6.1, 6.2 and 6.3 shall not apply to any information that
(a) is or becomes public other than as a result of disclosure by the Licensee,
(b) the Licensor agrees may be disclosed, (c) the Licensee is required to
disclose by applicable law, regulation or legal process, (d) was available to
the Licensee on a non-confidential basis prior to its disclosure by the
Licensor, (e) becomes available to the Licensee on a non-confidential basis from
a person other than the Licensor who is not known to the Licensee to be
otherwise bound
<PAGE>
by a confidentiality agreement with the Licensor, or (f) is developed by the
Licensee separate and apart from any disclosure by the Licensor.
8. Licensor's Representations, Warranties and Covenants. The
Licensor hereby represents, warrants and covenants to the Licensee that:
(i) it is the lawful owner of or has the right to license the
Proprietary Information, the Patents and the Trademarks;
(ii) it shall enter into any and all necessary agreements
(including but not limited to users agreement) as may be required by the laws of
any part of the Licensed Territory for the purpose of registration of the
Licensee's right to use any of the Proprietary Information, Patents or the
Trademarks;
(iii) (1) the ultimate parent company of the Licensor, Star
Telecom International Holding Limited (formerly known as Star Paging
(International Holding) Limited) (the "Parent Company") and Mr. Wong Kam Fu (the
"Principal") have entered into a Services Agreement, dated July 10, 1991 (the
"Services Agreement"), pursuant to which any invention or improvement or design
made or process or information discovered or copyright work or trademark or
trade name or get-up relating to the Business (as defined therein) created by
the Principal during the continuance of his appointment as an executive director
of the Parent Company (whether capable of being patented or registered or not
and whether or not made or discovered in the course of the Principal's
appointment as a director of the Parent Company) in conjunction with or in any
way affecting or relating to the Business or capable of being used or adapted
for use therein or in connection therewith (such intellectual property, the
"Subject IP") shall belong to and be the absolute property of the Parent Company
or any of its subsidiaries as the Parent Company may direct, (2) the Services
Agreement is in full force and effect and neither party thereto is in default
thereunder, (3) a true and complete copy of the Services Agreement has
heretofore been delivered to the Licensee, (4) the Parent Company has not
heretofore and shall not hereafter (and the Licensor shall cause it not to)
waive any of its rights under Article 7 of the Services Agreement, (5) the
Licensor is a subsidiary of the Parent Company, (6) the Licensor has the right
to use all of the Subject IP and has the right to license any and all of the
Subject IP to the Licensee and will continue to have such rights in the future
notwithstanding the termination, if any, of the Services Agreement or the
Principal resigning as a director of the Parent Company, and (7) the Licensor
shall cause the Parent Company to keep and maintain the provisions of Article 7
of the Services Agreement in full force and effect during the Term of this
Agreement;
(iv) none of its affiliates or related individuals owns or
holds the right to use any proprietary information, patents and trademarks
relating to the Services except for proprietary information, patents and
trademarks that the Licensor has the right to license and is licensing hereunder
to the Licensee.
9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF ENGLAND AND WALES.
<PAGE>
10. Arbitration.
10.1 Any dispute or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity hereof, shall be finally
settled by arbitration under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce (the "Rules") as are currently in force and as
may be amended by the rest of this Article 9. For the purpose of such
arbitration, there shall be one or more arbitrators appointed in accordance with
the Rules (such single arbitrator or board of arbitrators, as the case may be,
are referred to below as the "Arbitration Board"). The place of arbitration
shall be Hong Kong. All arbitration proceedings shall be conducted in the
English language. The arbitrators shall decide any such dispute or claim
strictly in accordance with the governing law specified in Article 8 of this
Agreement. Judgment upon any arbitral award rendered hereunder may be entered
in any court having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be.
10.2 Each party shall cooperate in good faith to expedite (to
the maximum extent practicable) the conduct of any arbitral proceedings
commenced under this Agreement.
10.3 The costs and expenses of the arbitration, including,
without limitation, the fees of the Arbitration Board, shall be borne equally by
each party to the dispute or claim, and each party shall pay its own fees,
disbursement and other charges of its counsel.
10.4 Any award made by the Arbitration Board shall be final and
binding on the Parties. The Parties expressly agree to waive the applicability
of any laws and regulations that would otherwise give the right to appeal the
decisions of the Arbitration Board so that there shall be no appeal to any court
of law for the award of the Arbitration Board, and a party shall not challenge
or resist the enforcement action taken by another party in whose favor the award
of the Arbitration Board was given.
11. Term and Termination.
11.1 Term. This Agreement shall commence on the Effective Date
and shall continue in effect until the tenth (10th) anniversary of the Effective
Date, unless earlier terminated pursuant to Article 10.2 below; provided,
however, that such initial term may be extended from the date of the expiry of
the initial term by agreement between the Licensee and the Licensor (such
initial term and any extension thereof, through the expiration thereof or the
date of any such earlier termination is referred to herein as the "Term").
11.2 Termination. Notwithstanding the provisions of Article
10.1, this Agreement may be terminated by either Party by notice in writing to
the other Party upon either Party becoming bankrupt or insolvent or if either
Party is otherwise unable to discharge its financial obligations generally as
they become due, or liquidates or otherwise ceases to continue to be in business
for any reason. Upon termination of this Agreement (regardless of the cause of
termination), the Licensee shall forthwith return to the Licensor all Technical
<PAGE>
Documentation whether specified in Schedule II or III or otherwise supplied to
the Licensee by the Licensor pursuant to this Agreement and shall not keep any
copy of the same.
11.3 Effect of Termination. The termination of this Agreement
shall not affect the rights or liabilities of the Parties accrued as of the date
of termination.
11.4 Breach. If either Party shall breach any material
provisions of this Agreement or default materially in its obligations hereunder,
the other Party shall have the right, subject to Articles 6 and 7, to seek
damages from the breaching or defaulting Party in respect of any cost, liability
or loss caused by such breach or default (including but not limited to interest
paid or lost as a result of such breach or default and any consequential
damages). If the breach or default shall continue for 30 days after written
notice to the breaching or defaulting Party by the other Party, then the latter
Party shall have the right to terminate this Agreement immediately upon written
notice to the breaching or defaulting Party.
11.5 Surviving Obligations. Notwithstanding Termination, the
Licensee or, if the Licensee has been liquidated or dissolved, any successor
owner of the assets of the Licensee shall continue to be bound for the
performance of all obligations of the Licensee under Article 6.
12. Assignment.
12.1 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the Parties, including their successors and
permitted assigns.
12.2 Assignment by the Licensor. Except as provided in Section
11.3, this Agreement, and the rights hereunder, shall not be assignable or
transferable in whole or in part by the Licensor, either voluntarily or by
operation of law or otherwise, without the written consent of the Licensee, and
the Licensor shall not attempt to assign, transfer, pledge, sublicense or
otherwise dispose of this Agreement or of any of its rights or obligations
hereunder without the prior written consent of the Licensee. Any attempt by the
Licensor to make any such disposition of this Agreement or of any of its rights
or obligations hereunder without the prior written consent of the Licensee shall
be void.
12.3 Assignment by Licensor to Affiliates. Notwithstanding
anything to the contrary in Section 11.2, the Licensor shall have the right to
assign or transfer in whole, but not in part, its rights and obligations under
this Agreement if it transfers the Proprietary Information, Trademarks and
Patents to any of its Affiliates. The Licensor shall give notice to the Licensee
prior to such assignment or transfer.
12.4 Assignment by the Licensee. The Licensee shall have the
right to perform this Agreement in whole or in part through any one or more of
its Affiliates, and may sublicense, assign or otherwise transfer the license
granted hereby as provided in Article 2.1.
<PAGE>
13. Miscellaneous Provisions.
13.1 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
interpretation of this Agreement.
13.2 Entire Agreement. This Agreement, together with the other
agreements referred to herein, reflects the entire agreement among the Parties
and supersedes all prior agreements and communications, either oral or in
writing, among the Parties with respect to the subject matter hereof.
13.3 Waiver. No failure or delay by any Party in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
under this Agreement. A Party that in a particular situation waives its rights
in respect of a breach of Agreement by the other Party shall not be deemed to
have waived its rights against the other Party for a similar breach of Agreement
in other situations.
13.4 Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the Parties.
13.5 Counterparts. This Agreement may be signed in two or more
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
13.6 Severability. In the event any provision hereof is held
void or unenforceable by any court, such provision shall be severable and shall
not affect the remaining provisions thereof.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
registered mail or international courier service, in either case postage
prepaid, or delivered by telecopy, telex, facsimile or similar
telecommunications equipment. Any such notice shall be deemed given when so
delivered personally or, if sent by registered mail, five days after the date of
deposit in the mails or, if sent by international courier service, three days
after the date of deposit with the courier service or, if delivered by telecopy,
telex, facsimile or similar telecommunications equipment, at the time of receipt
thereof, as follows:
(a) if to the Licensor, to:
Star Telecom Holding Limited
414 Kwun Tong Road
Kwun Tong
Kowloon, Hong Kong
Attention: Francis Wong
Facsimile No.: (852) 2771-7421
(b) if to the Licensee, to:
<PAGE>
Mainstream Limited
c/o Star Telecom Overseas Limited
414 Kwun Tong Road
Kwun Tong
Kowloon, Hong Kong
Attention: Hugh McClung
Facsimile No.: (852) 2918-1777
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date and year first written above.
MAINSTREAM LIMITED
By:________________________
Name:
Title:
STAR TELECOM HOLDING LIMITED
By:________________________
Name:
Title:
<PAGE>
Schedule I
Patents
-------
<PAGE>
Schedule II
Technical Documentation
-----------------------
<PAGE>
Schedule III
Trademarks
----------
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
International Wireless Communications Holdings, Inc.:
We consent to the use of our report dated July 12, 1996, except for note 1,
as to which the date is August 8, 1996, on the consolidated balance sheets of
International Wireless Communications Holdings, Inc. and subsidiary as of
December 31, 1994 and 1995, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the
years in the three-year period ended December 31, 1995, included herein, and
to the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
San Francisco, California
September 12, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
International Wireless Communications Holdings, Inc.:
We consent to the use of our report dated July 17, 1996, on the consolidated
balance sheets of Syarikat Telefon Wireless (M) Sdn Bhd as of December 31,
1994 and 1995, and the related consolidated profit and loss accounts,
statements of shareholders' equity and cash flow for each of the years in the
three-year period ended December 31, 1995, included herein, and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick
Kuala Lumpur
September 12, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
(ART)
September 6, 1996 -----------------------------
Letter No. UO-6648 Prasetio, Utomo & Co.
Registered Public
Accountants
The Board of Directors and Stockholders PT Rajasa Hazanah Perkasa Wishta
Pejaten Jl. Pejaten Earat No. 6 Jakarta Indonesia
-----------------------------
Dear Sirs, Chase Plaza Jalan Jend,
Sudirman Kav. 21 Jakarta
12920 Indonesia
We refer to the registration statement on Form S-1 of International Wireless
Communications Holdings, Inc. dated August 9, 1996 relating to Units
consisting of Senior Secured Discount Notes due 2001 and Warrants to purchase
shares of Common Stock to be issued by International Wireless Communications,
Inc.
We hereby consent to the inclusion of our report and the references to our
name in such registration statement on Form S-1.
Very truly yours,
PRASETIO, UTOMO & CO.
(ART)
Drs M.P. Sibarani
Partner
<PAGE>
EXHIBIT 25.1
Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
---------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---------------
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Eric Parets
Senior Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-6560
(Name, address and telephone number of agent for service)
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-3248701
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1275
San Mateo, California 94402
(415) 548-0808 (Zip Code)
(Address of principal executive offices)
14% SENIOR SECURED NOTES DUE 2001
(Title of Indenture Securities)
<PAGE>
General
Item 1. General Information.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory
authority to which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
--------------------------
If the obligor is an affiliate of the trustee, describe
each such affiliation.
None
<PAGE>
Item 16. List of Exhibits.
-----------------
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C> <C> <C>
T1A(i) * - Copy of the Organization Certificate of Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York Banking Department dated December 31, 1993 as to the
authority of Marine Midland Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine Midland Bank as adopted on January 20, 1994.
T1A(v) Not applicable.
T1A(vi) * - Consent of Marine Midland Bank required by Section 321(b) of the Trust Indenture Act of 1939.
T1A(vii) - Copy of the latest report of condition of the trustee (June 30, 1996), published
pursuant to law or the requirement of its supervisory or examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
</TABLE>
* Exhibits previously filed with the Securities and Exchange Commission
with Registration No. 33-53693 and incorporated herein by reference
thereto.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York on the 11th day of September 1996.
MARINE MIDLAND BANK
By: /s/ James D. Nesci
------------------------------
James D. Nesci
Corporate Trust Officer
<PAGE>
EXHIBIT T1A (VII)
Board of Governors of the
Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance
Corporation
OMB Number: 3064-0052
Office of the Comptroller of
the Currency
OMB Number: 1557-0081
Expires March 31, 1999
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
- --------------------------------------------------------------------------------
This financial information has not been reviewed, [1]
or confirmed for accuracy or relevance, by the
Federal Reserve System. Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES-FFIEC 031
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 (950630)
------------
(RCRI 9999)
This report is required by law; 12 U.S.C. (S)324 (State member banks); 12 U.S.C.
(S) 1817 (State nonmember banks); and 12 U.S.C. (S)161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consoli-dated foreign subsidiaries, or
International Banking Facilities.
- -------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
I, Gerald A. Ronning, Executive VP & Controller
--------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and believe.
/s/ Gerald A. Ronning
----------------------------------
Signature of Officer Authorized to Sign Report
7/25/96
- -----------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Henry J. Nowak
- -------------------------------------
Director (Trustee)
/s/ Bernard J. Kennedy
- -------------------------------------
Director (Trustee)
/s/ Northrup R. Knox
- -------------------------------------
Director (Trustee)
- -------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANK: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------
FDIC Certificate Number 0 0 5 8 9
--------------------
(RCRI 9030)
<PAGE>
NOTICE
This form is intended to assist institutions with state publication
requirements. It has not been approved by any state banking authorities. Refer
to your appropriate state banking authorities for your state publication
requirements.
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business
June 30, 1996
<TABLE>
<CAPTION>
Thousands
of dollars
<S> <C> <C>
ASSETS
Cash and balances due from depository
institutions:
Noninterest-bearing balances
currency and coin........................... $ 1,133,237
Interest-bearing balances................... 1,117,267
Held-to-maturity securities................. 0
Available-for-sale securities............... 3,312,291
Federal Funds sold and securities purchased
under agreements to resell in domestic
offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds sold.......................... 555,000
Securities purchased under
agreements to resell........................ 421,771
Loans and lease financing receivables:
Loans and leases net of unearned
income...................................... 14,765,000
LESS: Allowance for loan and lease
losses...................................... 456,646
LESS: Allocated transfer risk reserve....... 0
Loans and lease, net of unearned
income, allowance, and reserve.............. 14,308,354
Trading assets.............................. 871,466
Premises and fixed assets (including
capitalized leases)......................... 181,721
Other real estate owned....................... 4,643
Investments in unconsolidated
subsidiaries and associated companies......... 0
Customers' liability to this bank on
acceptances outstanding....................... 23,253
Intangible assets............................. 164,521
Other assets.................................. 460,618
Total assets.................................. 22,554,142
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices......................... 14,788,828
Noninterest-bearing......................... 3,061,906
Interest-bearing............................ 11,726,922
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs........................ 3,485,266
Noninterest-bearing......................... 0
Interest-bearing............................ 3,485,266
Federal funds purchased and securities sold
under agreements to repurchase in domestic
offices of the bank and its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds purchased..................... 859,455
Securities sold under agreements to
repurchase.................................. 324,584
Demand notes issued to the U.S. Treasury...... 246,051
Trading Liabilities........................... 415,593
Other borrowed money:
With original maturity of one year
or less..................................... 32,459
With original maturity of more than
one year.................................... 0
Mortgage indebtedness and obligations
under capitalized leases...................... 34,193
Bank's liability on acceptances
executed and outstanding...................... 23,253
Subordinated notes and debentures............. 225,000
Other liabilities............................. 326,680
Total liabilities............................. 20,761,362
Limited-life preferred stock and
related surplus............................... 0
EQUITY CAPITAL
Perpetual preferred stock and related
surplus....................................... 0
Common Stock.................................. 185,000
Surplus....................................... 1,633,098
Undivided profits and capital reserves........ (23,953)
Net unrealized holding gains (losses)
on available-for-sale securities.............. (1,365)
Cumulative foreign currency translation
adjustments................................... 0
Total equity capital.......................... 1,792,780
Total liabilities, limited-life
preferred stock, and equity capital.......... 22,554,142
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
International Wireless Communications Holdings, Inc. and Subsidiary and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 25,398 5,249
<SECURITIES> 0 0
<RECEIVABLES> 338 1,630
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 26,851 11,030
<PP&E> 4,325 11,409
<DEPRECIATION> 56 358
<TOTAL-ASSETS> 95,643 87,007
<CURRENT-LIABILITIES> 11,557 9,954
<BONDS> 0 0
<COMMON> 98,254 100,306
12 12
3 3
<OTHER-SE> (14,183) (23,268)
<TOTAL-LIABILITY-AND-EQUITY> 95,643 87,007
<SALES> 0 183
<TOTAL-REVENUES> 0 183
<CGS> 0 180
<TOTAL-COSTS> 0 180
<OTHER-EXPENSES> 10,121 9,339
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,354 201
<INCOME-PRETAX> (11,271) (9,126)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,271) (9,126)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,271) (9,126)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO EXCHANGE
14% SENIOR SECURED DISCOUNT NOTES DUE 2001
OF
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
400 SOUTH EL CAMINO REAL, SUITE 1275
SAN MATEO, CALIFORNIA 94402
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
EXCHANGE AGENT:
BANKERS TRUST COMPANY
TO: BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Mail or Courier:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust and Agency Corporate Trust and Agency
P.O. Box 292737 Group Group
Nashville, TN 37229-2737 Receipt & Delivery Window Reorganization Unit
123 Washington St., 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
For information call:
(800) 735-7777
Confirm: (615) 835-3572
Facsimile: (615) 835-3701
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1996,
(as the same may be amended or supplemented from time to time, the
"Prospectus") of International Wireless Communications Holdings, Inc., a
Delaware corporation (the "Issuer"), and this Letter of Transmittal for 14%
Senior Secured Discount Notes 2001 which may be amended from time to time
(this "Letter"), which together constitute the Issuer's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 14% Senior Secured Discount
Notes due 2001 which have been registered under the Securities Act of 1933, as
amended (the "Exchange Notes"), for each $1,000 in principal amount of its
outstanding 14% Senior Secured Discount Notes due 2001 (the "Old Notes") that
were issued and sold in a transaction (the "Initial Offering") exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Old Notes who wish to tender their Old Notes must, prior to
the Expiration Date: (1) complete, sign, date and deliver this Letter, or a
facsimile thereof, to the Exchange Agent, in person or to the address set
forth above; and (2) tender his or her Old Notes or, if a tender of Old Notes
is to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility"),
confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case
in accordance with the procedures for tendering described in the Instructions
to this Letter. Holders of Old Notes
<PAGE>
whose certificates are not immediately available, or who are unable to deliver
their certificates or Book-Entry Confirmation and all other documents required
by this Letter to be delivered to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth under the caption "The Exchange Offer--How to
Tender" in the Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuer shall be deemed to have accepted
for exchange validly tendered Old Notes when, as and if the Issuer has given
written notice thereof to the Exchange Agent.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of
the Prospectus or this Letter may be directed to the Exchange Agent, at the
address listed above, or Douglas S. Sinclair, Executive Vice President and
Chief Financial Officer of the Issuer, at (415) 548-0808, 400 South El Camino
Real, Suite 1275, San Mateo, California 94402.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS TO
THIS LETTER, CAREFULLY BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Old Notes of which you are the holder. If the space
provided in Box 1 is inadequate, list the certificate numbers and principal
amount of Old Notes on a separate signed schedule and affix that schedule to
this Letter.
BOX 1
- --------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL AMOUNT OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF OLD NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S)(1) OLD NOTES TENDERED(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
TOTALS:
- ------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed if Old Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Old Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Old Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest
in and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes, with
full power of substitution, to: (a) deliver certificates for such Old Notes;
(b) deliver Old Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuer upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuer of the Old Notes
tendered under the Exchange Offer; (c) presentation of Old Notes for transfer
on the register for such Old Notes; and (d) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignments and transfer of the Old Notes tendered.
By tendering Old Notes, the undersigned certifies (a) that it is not an
affiliate (as defined in Rule 501 of the Securities Act, an "Affiliate") of
the Issuer, that it is not a broker-dealer that owns Old Notes acquired
directly from the Issuer or an Affiliate of the Issuer, that it is acquiring
the Exchange Notes offered hereby in the ordinary course of the undersigned's
business and that the undersigned is not engaged in and does not intend to
engage in and has no arrangement with any person to participate in the
distribution of such Exchange Notes; (b) that it is an Affiliate of the Issuer
or of the Initial Purchasers (as defined in the Prospectus) of the Old Notes
in the Initial Offering and that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable to it; or (c) that it is a Participating Broker-Dealer (as defined
in the Registration Rights Agreement) and that it will deliver a prospectus in
connection with any resale of the Exchange Notes.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of
the undersigned under this Letter shall be binding upon the undersigned's
heirs, personal representatives, successors and assigns. Tenders may be
withdrawn only in accordance with the procedures set forth in the Instructions
contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Old Notes not tendered but represented by a certificate also
encompassing Old Notes which are tendered) to the undersigned at the address
set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
<PAGE>
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transation Code Number: ____________________________________________________
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
Name of Institution which Guaranteed Delivery: _____________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by the registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity such person must set forth his or her full title
below. (See Instruction 3)
X _________________________________________________________________________
X _________________________________________________________________________
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY
Date:_________________________ , 1996
Name(s):___________________________________________________________________
(PLEASE PRINT)
Capacity:__________________________________________________________________
Address:___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ______________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (SEE
INSTRUCTIONS 4 BELOW) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION
___________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
___________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE)
OF FIRM)
___________________________________________________________________________
(AUTHORIZED SIGNATURE)
___________________________________________________________________________
(TITLE)
___________________________________________________________________________
(PRINTED NAME)
Date: ________________________ , 1996
- --------------------------------------------------------------------------------
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: BANKERS TRUST COMPANY
PART 1--PLEASE PROVIDE YOUR Social security number
TIN IN THE BOX AT RIGHT AND or Employer
CERTIFY BY SIGNING AND Identification Number
DATING BELOW.
SUBSTITUTE -------------------------
FORM W-9 --------------------------------------------------------
DEPARTMENT OF PART 2--Check the box if you are NOT subject to back-
THE TREASURY up withholding under the provisions of Section
INTERNAL 2406(a)(1)(C) of the Internal Revenue Code because
REVENUE (1) you have not been notified that you are subject
SERVICE to back-up withholding as a result of failure to
report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to back-up withholding. [_]
--------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PART 3 --
PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT,
AND COMPLETE. Awaiting
Tin [_]
SIGNATURE ______________ DATE _______
Name: (Please Print) _________________
- --------------------------------------------------------------------------------
BOX 4
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes in a principal amount not
exchanged, or Exchange Notes, are to be issued in the name of someone other
than the person whose signature appears in Box 2, or if Old Notes delivered by
book-entry transfer which are not accepted for exchange are to be returned by
credit to an account maintained at the Book-Entry Transfer Facility other than
the account indicated above.
Issue and deliver:
(check appropriate boxes)
[_] Old Notes not tendered
[_] Exchange Notes, to:
(Please Print)
Name: ________________________________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
TAX I.D. OR SOCIAL SECURITY NUMBER
- --------------------------------------------------------------------------------
BOX 5
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes in a principal amount
not exchanged, or Exchange Notes, are to be sent to someone other than the
person whose signature appears in Box 2 or to an address other than that
shown in Box 1.
Deliver:
(check appropriate boxes)
[_] Old Notes not tendered
[_] Exchange Notes, to:
(Please Print)
Name: ______________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
TAX I.D. OR SOCIAL SECURITY NUMBER
- --------------------------------------------------------------------------------
PLEASE COMPLETE THE SUBSTITUTE FORM W-9 ABOVE.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or a
Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed copy of this Letter and any other documents required by this
Letter, must be received by the Exchange Agent at one of its addresses set
forth herein on or before the Expiration Date. The method of delivery of this
Letter, certificates for Old Notes or a Book-Entry Confirmation, as the case
may be, and any other required documents is at the election and risk of the
tendering holder, but except as otherwise provided below, the delivery will be
deemed made when actually received by the Exchange Agent. If delivery is by
mail, the use of registered mail with return receipt requested, properly
insured, is suggested.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Issuer and duly executed
by the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act of 1934, as
amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender Old Notes should contact such holder promptly and instruct such holder
to tender Old Notes on such beneficial owner's behalf. If such beneficial
owner wishes to tender such Old Notes himself, such beneficial owner must,
prior to completing and executing the Letter of Transmittal and delivering
such Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or follow the procedures
described in the immediately preceding paragraph. The transfer of record
ownership may take considerable time.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes or a Book-Entry Confirmation, as the case may be, and all
other required documents to the Exchange Agent on or before the Expiration
Date may tender their Old Notes pursuant to the guaranteed delivery procedures
set forth in the Prospectus. Pursuant to such procedure: (i) tender must be
made by or through an Eligible Institution; (ii) prior to the Expiration Date,
the Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by telegram, telex,
facsimile transmission, mail or hand delivery) (x) setting forth the name and
address of the holder, the description of the Old Notes and the principal
amount of Old Notes tendered, (y) stating that the tender is being made
thereby and (z) guaranteeing that, within five New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, this
Letter together with the certificates representing the Old Notes or a Book-
Entry Confirmation, as the case may be, and any other documents required by
this Letter will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) the certificates for all tendered Old Notes or a Book-Entry
Confirmation, as the case may be, as well as all other documents required by
this Letter, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "The Exchange
Offer--How to Tender."
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent on or before the Expiration
Date.
<PAGE>
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide his or her taxpayer identification number (social security
number or employer identification number) and certify that such number is
correct. Each tendering holder should complete and sign the main signature
form and the Substitute Form W-9 included a part of the Letter of Transmittal,
so as to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received
at its office listed on the back cover hereof on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal
amount of the Old Notes being tendered, the names in which the Old Notes are
registered and, if possible, the certificate numbers of the Old Notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Old Notes, in proper form for transfer, will be delivered by
such Eligible Institution together with a properly completed and duly executed
Letter of Transmittal (and any other required documents). Unless Old Notes
being tendered by the above-described method (or a timely Book-Entry
Confirmation) are deposited with the Exchange Agent within the time period set
forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), the Issuer may, at its option,
reject the tender. Copies of a Notice of Guaranteed Delivery which may be used
by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal
(and any other required documents) and the tendered Old Notes (or a timely
Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Issuer, whose determination will be final and binding. The Issuer
reserves the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which, in the opinion of the Issuer's
counsel, would be unlawful. The Issuer also reserves the right to waive any
irregularities or conditions of tender as to particular Old Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Old Notes. The Issuer's interpretation of the
terms and conditions of the Exchange Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of
any Old Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Old Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. A certificate for Old Notes not tendered will be sent to the
holder, unless otherwise provided in Box 5, as soon as practicable after the
Expiration Date, in the event that less than the entire principal amount of
Old Notes represented by a submitted certificate is tendered (or, in the case
of Old Notes tendered by book-entry transfer, such non-exchanged Old Notes
will be credited to an account maintained by the holder with the Book-Entry
Transfer Facility).
<PAGE>
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Exchange Agent at its address set forth on the back cover of the
Prospectus prior to the Expiration Date. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn,
the principal amount of Old Notes to be withdrawn, a statement that such
holder is withdrawing his election to have such Old Notes exchanged, and the
name of the registered holder of such Old Notes, and must be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Issuer that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Old Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notice of
withdrawal. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the certificate(s)
for such Old Notes, without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Old Notes are held
in different names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there are names in
which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Old Notes are tendered; and/or (ii)
untendered Old Notes, if any, are to be issued to the holder of record, then
the holder of record need not endorse any certificates for tendered Old Notes,
nor provide a separate bond power. In any other case, the holder of record
must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to
the Issuer of their authority to so act must be submitted, unless waived by
the Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Old Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP). If Old Notes
are registered in the name of a person other than the signer of this Letter,
the Old Notes surrendered for exchange must be endorsed by, or be accompanied
by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Issuer, in its sole discretion, duly
executed by the registered holder with the signature thereon guaranteed by an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Old Notes not exchanged are to be issued or
sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Old Notes
by book-entry transfer may request that Old Notes not exchanged be credited to
such account maintained at the Book-Entry Transfer Facility as such holder may
designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Old Notes are accepted for exchange must provide the Exchange
Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security
<PAGE>
number. If the Exchange Agent is not provided with the correct TIN, the holder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, delivery to the holder of the Exchange Notes pursuant to the
Exchange Offer may be subject to back-up withholding. (If withholding results
in overpayment of taxes, a refund may be obtained.) Exempt holders (including,
among others, all corporations and certain foreign individuals) are not
subject to these back-up withholding and reporting requirements. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the
TIN provided is correct (or that the holder is awaiting a TIN) and that: (i)
the holder has not been notified by the Internal Revenue Service that he or
she is subject to back-up withholding as a result of failure to report all
interest or dividends; (ii) the Internal Revenue Service has notified the
holder that he or she is no longer subject to back-up withholding; or (iii) in
accordance with the Guidelines, such holder is exempt from back-up
withholding. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for information on which
TIN to report.
6. TRANSFER TAXES. The issuer will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes
not exchanged are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Issuer or its order pursuant to the Exchange Offer, then the amount of
such transfer taxes (whether imposed on the record holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment
of taxes or exemption from taxes is not submitted with this Letter, the amount
of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend or
waive any of the specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD
NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
<PAGE>
EXHIBIT 99.2
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
NOTICE OF GUARANTEED DELIVERY
of 14% Senior Secured Discount Notes due 2001
As set forth in the Prospectus dated ______, 1996 (as the same may be
amended or supplemented from time to time, the "Prospectus") of International
Wireless Communications Holdings, Inc. (the "Issuer") under "The Exchange Offer,
How to Tender" and in the Letter of Transmittal for 14% Senior Secured Discount
Notes due 2001 (the "Letter of Transmittal"), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer (as defined below)
of the Issuer if: (i) certificates for the above-referenced Notes (the "Old
Notes") are not immediately available, (ii) time will not permit all required
documents to reach the Exchange Agent (as defined below) on or prior to the
Expiration Date (as defined in the Prospectus) or (iii) the procedures for
book-entry transfer cannot be completed on or prior to the Expiration Date. Such
form may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Exchange Agent.
TO: BANKERS TRUST COMPANY
(the "Exchange Agent")
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Mail or Courier:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust and Agency Corporate Trust and Agency
P.O. Box 292737 Group Group
Nashville, TN 37229-2737 Receipt & Delivery Window Reorganization Unit
123 Washington St. 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
For information call:
(800) 735-7777
Confirm: (615) 835-3572
Facsimile: (615) 835-3701
</TABLE>
Delivery of this instrument to an address other than
as set forth above or transmittal of this instrument to
a facsimile or telex number other then as set forth
above does not constitute a valid delivery.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures described in the Prospectus and the Letter of Transmittal.
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on _________, 1996, unless extended by
the Issuer. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<TABLE>
<S> <C>
SIGNATURES Principal amount of Old Notes
- - Exchanged: $________________________________
Signature of Owner Certificate Nos. of Old Notes (if available)
- - ____________________________________________
Signature of Owner (if more than one) ____________________________________________
Dated: __, 1996 Total $_____________________________________
Name(s):_____________________________ IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY
X TRANSFER, PROVIDE THE DEPOSITORY TRUST
(Please Print) COMPANY ("DTC") ACCOUNT NO.: _______________
Address: ____________________________ Account No. ________________________________
____________________________
____________________________
(Include Zip Code)
Area Code and
Telephone No.: __
Capacity (full title), if signing in a
representative\capacity: _____________
- -
Taxpayer Identification or Social Security
No.:
____________________
</TABLE>
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion program
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), hereby guarantees (a) that the above-named
person(s) own(s) the above-described securities tendered hereby within the
meaning of Rule 10b-4 under the Exchange Act, (b) that such tender of the
above-described securities complies with Rule 10b-4 under the Exchange Act,
and (c) that delivery to the Exchange Agent of certificates tendered hereby,
in proper form for transfer, or delivery of such certificates pursuant to the
procedure for book-entry transfer, in either case with delivery of a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
any other required documents, is being made within three New York Stock
Exchange trading days after the date of execution of a Notice of Guaranteed
Delivery of the above-named person.
Name of Firm: _____________________________
_____________________________ (Authorized Signature)
_____________________________ Title: ______________________
Number and Street or P.O. Box
_____________________________ Date:________________________
City State Zip Code
Tel. No. ____________________
Fax No.: ____________________
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS NOTICE. OLD
NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.3
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
Offer to Exchange
$1,000 in principal amount of
14% Senior Secured Discount Notes due 2001
which have been registered under the Securities Act
for
each $1,000 in principal amount of
outstanding 14% Senior Secured Discount Notes due 2001
that were issued and sold in a transaction
exempt from registration under the Securities
Act of 1933, as amended
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated ____________, 1996
(as the same may be amended or supplemented from time to time, the "Prospectus")
and a form of Letter of Transmittal (the "Letter of Transmittal") relating to
the offer (the "Exchange Offer") by International Wireless Communications
Holdings, Inc. (the "Issuer") to exchange up to $196,720,000 in aggregate
principal amount of its 14% Senior Secured Discount Notes due 2001 (the
"Exchange Notes") for up to $196,720,000 in aggregate principal amount of its
outstanding 14% Senior Secured Discount Notes due 2001 that were issued and sold
in a transaction exempt from registration under the Securities Act of 1933, as
amended (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee, in addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Issuer will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Issuer for
customary mailing and handling expenses incurred by you to forwarding any of the
enclosed materials to your clients. The Issuer will pay all transfer taxes, if
any, applicable to the tender of Old Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the exchange
of Old Notes and for the information of your clients (facsimile copies of the
Letter of Transmittal may be used to exchange Old Notes);
3. A form of letter that may be sent to your clients for whose accounts
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4. A Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to Bankers Trust Company, the Exchange
Agent.
Your prompt action is requested. The Exchange offer will expire at 5:00
p.m., New York City time, on ___________________, 1996, unless extended (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
<PAGE>
To tender Old Notes, certificates for Old Notes or a Book-Entry
Confirmation (as defined in the Prospectus), a duly executed and properly
completed Letter of Transmittal or a facsimile thereof, and any other required
documents, must be received by the Exchange Agent as provided in the Prospectus
and the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or
for additional copies of the enclosed material may be directed to the Exchange
Agent at its address set forth in the Prospectus or at (800) 735-7777.
Very truly yours,
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSE DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.4
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
Offer to Exchange
$1,000 in principal amount of
14% Senior Secured Discount Notes due 2001
which have been registered under the Securities Act
for
each $1,000 in principal amount of
outstanding 14% Senior Secured Discount Notes due 2001
that were issued and sold in a transaction
exempt from registration under the Securities
Act of 1933, as amended
To Our Clients:
Enclosed for your consideration in a Prospectus dated ___________, 1996 (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by International Wireless Communications Holdings,
Inc. (the "Issuer") to exchange up to $196,720,000 in aggregate principal amount
of its 14% Senior Secured Discount Notes due 2001 (the "Exchange Notes") for up
to $196,720,000 in aggregate principal amount of its outstanding 14% Senior
Secured Discount Notes due 2001 that were issued and sold in a transaction
exempt from registration under the Securities Act of 1933, as amended (the "Old
Notes").
The material is being forwarded to you as the beneficial owner of Old Notes
carried by us for your account or benefit but not registered in your name. A
tender of any Old Notes may be made only by us as the registered holder and
pursuant to your instructions. Therefore, the Issuer urges beneficial owners of
Old Notes registered in the name of a broker, dealer, commercial bank, trust
company or other nominee to contact such registered holder promptly if they wish
to tender Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender
any or all of the Old Notes held by us for your account, pursuant to the terms
and conditions set forth in the Prospectus and Letter of Transmittal. We urge
you to read carefully the Prospectus and Letter of Transmittal before
instructing us to tender your Old Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ________________, 1996, unless extended (the "Expiration
Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to the
Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount at
maturity of the Exchange Notes for each $1,000 principal amount at maturity of
the Old Notes, of which $196,720,000 aggregate principal amount of the Old
Notes was outstanding as of _____________, 1996. The terms of the Exchange Notes
are substantially identical (including principal amount, interest rate,
maturity, security and ranking) to the terms of the Old Notes, except that the
Exchange Notes (i) are freely transferable by holders thereof (except as
provided in the Prospectus) and (ii) are not entitled to certain registration
rights and certain additional interest provisions which are applicable to the
Old Notes under a registration rights agreement dated as of August 15, 1996 (the
"Registration Rights Agreement") among the Company and BT Securities Corporation
Toronto-Dominions Securities (USA) Inc. and Salomon Brothers Inc, as initial
purchasers.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE EXCHANGE
OFFER -
<PAGE>
CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New
York City time, on ____________, 1996, unless extended.
<PAGE>
4. The Issuer has agreed to pay the expenses of the Exchange Offer except
as provided in the Prospectus and the Letter of Transmittal.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Issuer will be paid by the Issuer, except as provided in
the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange be accepted from
or on behalf of holders of Old Notes in any jurisdiction in which the making of
the Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction.
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer International
Wireless Communications Holdings, Inc., including the Prospectus and the Letter
of Transmittal.
This form will instruct you to exchange the aggregate principal amount of
Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms and conditions set forth in the Prospectus and Letter of
Transmittal.
Aggregate Principal Amount of Old Notes to be exchanged
$ _______________________*
* I (we) understand that if I (we) ________________________________________
sign these instruction forms ________________________________________
without indicating an aggregate ________________________________________
principal amount of Old Notes ________________________________________
Signature(s) in the space above, ________________________________________
all Old Notes held by you for my ________________________________________
(our) account will be exchanged. ________________________________________
(Please print name(s) and address above)
Dated: _____________, 1996
________________________________
(Area Code & Telephone Number)
________________________________
(Taxpayer Identification or
Social Security Number)
<PAGE>
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer_Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employee identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
GIVE THE SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the account
or, if combined funds, any one
of the individuals (1)
3. Husband and wife (joint account) The actual owner of the account
or, if joint funds, either
person (1)
4. Custodian account of a minor (Uniform The minor (2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is
the only contributor, the
minor (1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person (3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-trustee (1)
account (grantor is also trustee)
b. So-called trust account that is not a The actual owner (1)
legal or valid trust under State law
8. Sole proprietorship account The owner (4)
<CAPTION>
GIVE THE EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C>
9. A valid trust, estate, or pension trust The legal entity (Do not furnish
the identifying number of the
person representative or trustee
unless the legal entity itself
is not designated in the account
title) (5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name of The partnership
the business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or prison)
that receives agricultural program
payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation
. A financial institution
. An organization exempt from tax under section 501(a). or an
individual retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality
thereof.
. A registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust describe
in section 4947(a)(1).
. An entity registered at all times under the Investment Company Act
of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under section
1441.
. Payments to partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not
paid in money.
. Payments made a by a certain foreign organizations.
. Payments made to a nominee.
<PAGE>
Payments of interest not generally subject to backup withholding
include the following:
. Payments of Interest on obligations issued by individuals. Note:
You may be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest
dividends under section 852). Payments described in section 6049(b)(5) to non-
resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt Payees described above should file form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage
dividends, that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to IRS. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Beginning January 1, 1993, payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
PENALTIES
(1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to a
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
