<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1997
Registration No. 333-35021
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TELETRAC, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 48-1172403
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Identification No.)
of incorporation) Employer Classification Code Number)
</TABLE>
------------------------
2323 GRAND STREET
SUITE 1100
KANSAS CITY, MO 64108
(816) 474-0055
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------------
KAREN C. WIEDEMANN, ESQ.
REBOUL, MACMURRAY, HEWITT, MAYNARD & KRISTOL
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10111
(212) 841-5700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES TO AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED PRICE PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
14% Senior Notes due 2007........................ $105,000,000 100% $105,000,000 $31,818.18
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
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 THAT 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- -------------------------------------------------------------------- ------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus............................... Facing pages; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................. Inside Front and Outside Back Cover Pages of
Prospectus; "Table of Contents;" "Additional
Information."
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information...................................... "Risk Factors;" "Summary of the Prospectus;"
"Selected Financial Data."
4. Terms of Transaction..................................... "Summary of the Prospectus;" "Risk Factors;"
"The Exchange Offer;" "Description of The New
Notes;" "Certain Federal Income Tax
Considerations."
5. Pro Forma Financial Information.......................... "Prospectus Summary;" "Capitalization;"
"Selected Financial Data;" "Supplemental
Financial Data."
6. Material Contacts with the Company Being Acquired........ *
7. Additional Information Required for Reoffering by Persons
and Parties Deemed to be Underwriters.................. *
8. Interests of Named Experts and Counsel................... "Legal Matters;" "Independent Auditors."
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................. "Undertakings" at Part II of the Registration
Statement.
10. Information with Respect to S-3 Registrants.............. *
11. Incorporation of Certain Information by Reference........ *
12. Information with Respect to S-2 or S-3 Registrants....... *
13. Incorporation of Certain Information by Reference........ *
14. Information with Respect to Registrants Other Than S-3 or
S-2 Registrants........................................ Cover Page of Registration Statement;
"Additional Information;" "Summary of the
Prospectus;" "Risk Factors;" "Use of Proceeds;"
"Capitalization;" "Selected Financial Data;"
"Supplemental Financial Data;" "Management's
Discussion and Analysis of Financial Condition
and Results of Operations;" "Business;"
"Management."
15. Information with Respect to S-3 Companies................ *
16. Information with Respect to S-2 or S-3................... *
17. Information with Respect to Companies Other Than S-3 or
S-2 Companies.......................................... *
18. Information if Proxies, Consents or Authorizations are to
be Solicited........................................... *
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer............ "Management;" "Securities Ownership."
</TABLE>
- ------------------------
* Item is omitted because answer is negative or Item is inapplicable.
<PAGE>
PROSPECTUS
TELETRAC, INC.
OFFER TO EXCHANGE ITS
14% EXCHANGE B SENIOR NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
14% ORIGINAL A SENIOR NOTES DUE 2007
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 1997.
Teletrac, Inc., a Delaware corporation ("Teletrac" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), to exchange $1,000 principal amount of its 14% Exchange
Senior Notes due 2007 (the "New Notes"), which will have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its issued and outstanding 14% Original Senior Notes due
2007 (the "Old Notes" and, collectively with the New Notes, the "Notes"), of
which $105,000,000 aggregate principal amount is outstanding, from the holders
(the "Holders") thereof. The Company will not receive any proceeds from the
Exchange Offer and has agreed to pay "all the expenses incident to the Exchange
Offer. The Company is a wholly owned subsidiary of Teletrac Holding, Inc.
("Holdings").
The terms of the New Notes are identical in all material respects (including
principal amount, interest rate and maturity) to the terms of the Old Notes,
except for certain transfer restrictions and registration rights relating to the
Old Notes. The Notes are unsecured obligations of the Company, rank PARI PASSU
with all present and future senior subordinated debt of the Company, and rank
senior to all present and future subordinated debt of the Company. As of
September 30, 1997, the aggregate amount of outstanding indebtedness (excluding
the Notes) of the Company was approximately $2.0 million. See "Description of
the New Notes." The Company may incur up to $30 million of secured indebtedness
under its Credit Facility (as defined herein) and currently has no outstanding
indebtedness under such Credit Facility. See "Description of Certain
Indebtedness--Credit Facility." Upon a Change of Control (as defined herein),
each Holder of the Notes may require the Company to repurchase all or a portion
of such Holder's Notes at an offer price in cash equal to 101% of the principal
amount thereof, together with accrued and unpaid interest to the date of
repurchase. In the event of a Change of Control, the Company may not have
sufficient funds to satisfy its obligation to repurchase the Notes and other
debt that may come due as a result thereof. See "Description of the New Notes."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the registration rights agreement
relating to the Old Notes. Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission"), the Company believes that
the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by Holders thereof
(other than any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such Holders'
business and such Holders have no arrangement with any person to participate in
the distribution of such New Notes. Each broker-dealer that receives New 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 New 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 it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. See "Plan of Distribution."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be [ ], 1997 (the "Expiration
Date"). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer."
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for registration under the Securities Act
of the Old Notes held by them. 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. See "Risk Factors--Consequences of the Exchange
Offer to Non-Tendering Holders of the Old Notes" and "Exchange Offer--Terms of
the Exchange Offer."
The New Notes will be available initially only in book-entry form. The
Company expects that the New Notes issued pursuant to this Exchange Offer will
be issued in the form of one or more Global Notes (as defined herein), which
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in its name or in the name of Cede & Co., its
nominee. Beneficial interests in a Global Note representing the New Notes will
be shown on, and transfers thereof will be effected through, records maintained
by the Depositary and its participants. After the initial issuance of the Global
Notes, New Notes in certificated form will be issued in exchange for a Global
Note only on the terms set forth in the Indenture. See "Description of Exchange
Notes--Book Entry, Delivery and Form."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1997.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. No dealer-manager is being used in connection with this
Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would no be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law.
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN 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 October , 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Additional Information................................................................ 2
Summary of the Prospectus............................................................. 4
Risk Factors.......................................................................... 14
The Company........................................................................... 22
Use of Proceeds....................................................................... 22
The Exchange Offer.................................................................... 23
Capitalization........................................................................ 28
Selected Financial Data............................................................... 29
Supplemental Financial Data...........................................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 31
Business.............................................................................. 38
Management............................................................................ 56
Securities Ownership.................................................................. 62
Certain Relationships and Related Transactions........................................ 65
Description of Certain Indebtedness................................................... 69
Description of the New Notes.......................................................... 70
Certain Federal Income Tax Considerations............................................. 97
Plan of Distribution.................................................................. 97
Legal Matters......................................................................... 98
Independent Auditors.................................................................. 98
Index to Financial Statements......................................................... F-1
</TABLE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act with respect to the
New Notes being offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. The Registration Statement
and the exhibits and schedules thereto may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a web site that contains reports, proxy
statements and other information regarding registrants, including the Company,
that file such information electronically with the Commission. The address of
the Commission's web site is http://www.sec.gov.
As a result of the filing of the Registration Statement with the Commission,
the Company will become subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will be required to file periodic reports and other
information with the Commission. The Company's obligation to file periodic
reports with the Commission pursuant to the Exchange Act may be suspended if the
New 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 such
registration statement or registered exchange offer for the New Notes becomes
effective. However, the indenture dated August 6, 1997 (the "Indenture") between
the Company and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"), provides that the Company must file with the Commission and provide
the holders of the Notes with copies of annual reports and other information,
documents and reports specified in Sections 13 and 15(d) of the Exchange Act as
long as the Notes are outstanding.
2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER
OF TRANSMITTAL OR BOTH TOGETHER CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITY OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL OR BOTH TOGETHER,
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
Certain market data used throughout this Prospectus were obtained from
industry and government sources. The Company has not independently verified this
market data and makes no representations as to its accuracy.
------------------------
The following trademarks owned by the Company are used in this Prospectus:
Fleet Director-Registered Trademark-, Fleet Reporter-TM-,
OZZ-Registered Trademark-, Winfleet-TM- and Teletracer-TM-.
3
<PAGE>
SUMMARY OF THE PROSPECTUS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, THE AUDITED CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO, AND THE FINANCIAL PROJECTIONS
INCLUDED ELSEWHERE IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERMS "TELETRAC" AND THE "COMPANY" INCLUDE
TELETRAC, INC., ITS PREDECESSORS, ITS SUBSIDIARY AND TELETRAC HOLDINGS, INC., A
HOLDING COMPANY WHOSE SOLE ASSET IS ALL OF THE ISSUED AND OUTSTANDING CAPITAL
STOCK OF TELETRAC, INC. SEE "GLOSSARY" FOR DEFINITIONS OF CERTAIN TERMS USED IN
THIS PROSPECTUS.
THE COMPANY
Teletrac is a leading provider of vehicle location and fleet management
services, including associated two-way digital wireless messaging, to commercial
fleet operators. The Company has developed a proprietary land-based location
technology that provides customers with a low-cost, accurate and reliable real-
time method of locating vehicles in selected metropolitan areas. The Company's
system is designed to enable customers to better manage their mobile workforce,
provide security for their property and personnel and communicate more
effectively with mobile workers.
As of December 31, 1996, the Company operated in six metropolitan markets:
Los Angeles, Miami, Chicago, Detroit, Dallas and Houston. The Company commenced
operations in Orlando in March 1997 and plans to begin providing vehicle
location and fleet management services in eight additional markets by the end of
1998, giving the Company operations in 15 of the largest metropolitan
statistical areas ("MSAs") in the United States, including New York and Boston.
As of June 30, 1997, the Company served over 2,000 commercial fleet accounts,
more than any other provider of fleet vehicle location services, and had 54,430
location and messaging units in service with commercial fleet customers,
including Emery Air Freight, Inc., Tele-Communications, Inc., Budget Rent-a-Car
Corporation, Brinks Incorporated and the Dallas Independent School District. In
its Miami and Los Angeles markets, the Company also uses its proprietary
location systems to provide vehicle location and stolen vehicle recovery
services to consumers. As of June 30, 1997, the Company had 10,697 consumer
units in service.
An investor group led by management formed the Company in August 1995 to
acquire the assets of AirTouch Teletrac (as defined below). AirTouch Teletrac
was established to develop land-based 900 MHz radio networks for wireless
location monitoring and related two-way wireless messaging services. AirTouch
Teletrac developed the technology and software for such networks and constructed
operational systems in six metropolitan markets. The Company acquired the assets
of AirTouch Teletrac in January 1996 (the "Acquisition"). To date, the Company
has placed approximately $58 million in private equity capital. Investors in
such private equity include BancBoston Ventures, Inc.; Burr, Egan, Deleage
Funds; Eos Partners; GCC Investments, Inc.; Kingdon Capital; Toronto Dominion
Capital (U.S.A.), Inc.; and TruePosition, Inc. (formerly Associated RT, Inc.).
COMMERCIAL FLEET MANAGEMENT
Market studies indicate that there are approximately 7.6 million total
commercial fleet vehicles in the 15 markets in which the Company operates or
plans to operate. The Company believes that there is substantial demand for
cost-effective communications services that offer both reliable location
tracking and two-way wireless messaging in metropolitan areas. The Company's
products can be used either alone or in conjunction with other communications
technologies. The Company believes that the majority of its target customers'
vehicles are currently equipped with wireless communications devices that do not
provide automatic location features, such as two-way radio, specialized mobile
radio ("SMR"), pagers and cellular devices. The Company's products and services
allow commercial fleet operators to (i) increase driver productivity and fleet
efficiency, (ii) improve customer service, (iii) limit unauthorized vehicle use,
and (iv) reduce driver overtime. The Company's customers include metropolitan
commercial fleets (such as trade service providers, delivery services, bus and
taxi fleets, ambulance companies, telecommunications
4
<PAGE>
companies, utility companies, municipal government vehicles and law enforcement
agencies) and long-haul trucking fleets when operating within metropolitan
markets.
The Company offers a range of fleet management solutions, depending on the
customer's budget and location and messaging needs. All of these solutions
require the installation of a vehicle location unit ("VLU") in each vehicle. The
VLU is a radio transceiver that receives and transmits signals used to determine
a vehicle's location. In addition to the VLU, commercial fleet customers
generally purchase software or location services from the Company. The Company's
primary software product for commercial fleet operators is Fleet
Director-Registered Trademark-, a proprietary software application that provides
real-time 24-hour-a-day vehicle location through a digitized map displayed on
the customer's dedicated personal computer, which is connected to the Company's
networks. Fleet Director-Registered Trademark- can be complemented with the
Company's messaging units, which allow two-way messaging between the fleet
dispatcher and drivers directly from the Fleet Director-Registered Trademark-
screen. The Company also offers Fleet Reporter-TM-, a lower cost alternative to
Fleet Director-Registered Trademark- that provides fleet operators with daily
printed reports of vehicle locations and access to real-time location
information through OZZ-Registered Trademark-, a telephone-operated information
system. In the second half of 1997, the Company intends to introduce
Winfleet-TM-, a Microsoft Windows-Registered Trademark--based application based
on Fleet Director-Registered Trademark- that will not require a dedicated
computer.
The Company believes that its wireless location and related two-way
messaging technology can serve its customers more reliably and more
cost-effectively than competing systems, including those which rely on global
positioning satellite ("GPS") technology combined with other forms of wireless
communication. The Company's location technology, which consists of proprietary
software and land-based transmitters and receivers that are licensed to operate
in the 904-909.75 and 927.75-928 MHz bandwidth, operates reliably in a high-rise
urban setting. GPS-based systems, on the other hand, can lose accuracy in areas
where high-rise buildings or other large structures obstruct the signal between
the satellite and the vehicle. To provide location services for fleet
management, GPS-based systems must also be coupled with a wireless communication
system that transmits location information to the fleet operator. The other
forms of wireless communication used in conjunction with GPS technology, such as
cellular and SMR, generally make the incremental cost of determining and
transmitting a vehicle's location to a fleet operator more expensive than the
Company's technology.
The Company derives its revenues from (i) monthly service fees and (ii)
equipment sales, including sales of VLUs, messaging units and fleet management
software. Once the Company's system is installed in a customer's fleet, the
Company benefits from recurring monthly service fees with minimal additional
selling or other expenses. The total number of the Company's commercial VLUs and
messaging units in service increased from 35,465 as of December 31, 1995 to
43,156 as of December 31, 1996 and to 54,430 as of June 30, 1997.
CONSUMER VEHICLE SERVICES
In its Miami and Los Angeles markets, the Company also uses its proprietary
location systems to provide vehicle location and stolen vehicle recovery
services to consumers. The Company's service locates and tracks stolen vehicles
in real-time and its equipment can be integrated with a vehicle's alarm system
and/or ignition so that it is automatically activated if the vehicle is stolen.
The Company's service also allows a subscriber to initiate vehicle location in
other emergency or roadside assistance situations or remotely unlock the vehicle
doors through the OZZ-Registered Trademark- system.
In 1995, prior to the Acquisition, the Company's predecessor ceased to
actively market its consumer vehicle services. The Company has continued
providing consumer service as a legacy of the business acquired from AirTouch
Teletrac but has not launched any new marketing efforts. While the Company
intends to focus on its commercial business, it is currently exploring various
potential strategies for marketing and distributing its products to consumers,
including through strategic partnerships or third-
5
<PAGE>
party reseller arrangements, and expects to begin expanding its consumer
operations in late 1997 or early 1998.
BUSINESS STRATEGY
The Company's objective is to enhance its position as the leading national
provider of vehicle location and fleet management services in metropolitan areas
by exploiting its proprietary technology and systems. The key elements of the
Company's strategy are:
INCREASE MARKET PENETRATION. In its six original markets, the Company is
rapidly building a trained sales force to market its products and services to
operators of commercial fleets. Prior to the Acquisition, AirTouch Teletrac
terminated all of its active sales and marketing efforts. Since the Acquisition,
the Company has hired approximately 90 direct sales representatives to service
its six original metropolitan markets and the Company believes that it will more
effectively exploit opportunities in its existing markets as its sales force
gains experience. The Company believes it requires a modest penetration of its
target markets to achieve its business plan.
EXPAND GEOGRAPHIC COVERAGE AREAS. In 1996, the Company began constructing
the network infrastructure to expand its coverage from six to 15 metropolitan
markets. In March 1997, the Company introduced commercial fleet services in
Orlando, and the Company expects to introduce commercial fleet services in two
additional markets by the end of 1997 and a further six markets by the end of
1998. In connection with the roll-out of its commercial fleet services, the
Company plans to add over 150 new sales representatives in its new markets by
2001. The Company also holds Federal Communications Commission licenses in 11
additional markets, but the Company expects that it would have to obtain
additional licenses in certain of such 11 markets before it could commence
commercial operations.
CAPITALIZE ON LOW-COST SERVICE. The Company believes that its proprietary
location solutions permit lower cost operation than most competing technologies,
which generally require more expensive hardware, more expensive airtime, or
both. With the Company's technology, the incremental cost of locating a vehicle
and transmitting its location to the fleet operator is nominal, which permits
the Company to provide services for a relatively low monthly fee. This price
structure permits customers to locate all their vehicles simultaneously and
frequently throughout the day (typically, every 15 minutes), which the Company
believes substantially improves the customer's ability to increase fleet
efficiency and monitor driver compliance.
EXTEND PRODUCT OFFERINGS. The Company believes that its ability to expand
and maintain its customer base depends on its continued marketing of
highly-functional, low-cost and user-friendly solutions for fleet management.
The Company plans to offer the first generation of Winfleet-TM-, a
Windows-Registered Trademark--based solution, in the second half of 1997 and has
commenced development of a second generation product. The Company is also
exploring technological improvements that would expand the Company's messaging
capabilities to include additional services such as free text return messaging,
wireless e-mail, fax, database queries, credit card verification and inventory
management.
EXPLOIT NEW BUSINESS OPPORTUNITIES. In conjunction with certain strategic
suppliers, the Company is currently developing a portable miniaturized device
that would permit personal location through the Company's existing networks. In
addition, the Company has discussed joint arrangements with several companies
providing vehicle location coverage in rural locations, which arrangements would
provide cost-effective and reliable coverage nationwide, and has explored other
approaches to providing service to customers operating outside of covered
metropolitan areas.
6
<PAGE>
THE OLD NOTES OFFERING
<TABLE>
<S> <C>
OLD NOTES......................... The Old Notes were sold by the Company on August 6, 1997
to Donaldson, Lufkin & Jenrette Securities Corporation
and TD Securities (USA) Inc. (the "Initial Purchasers")
pursuant to a Purchase Agreement dated July 31, 1997
(the "Purchase Agreement"). The Old Notes were sold to
the Initial Purchasers (the "Unit Offering") together
with certain warrants (the "Warrants") to purchase
shares of the Company's Class A Common Stock ("Common
Stock") in the form of units (the "Units"). The Initial
Purchasers subsequently resold the Old Notes (in the
form of the Units) to qualified institutional buyers
pursuant to Rule 144A under the Securities Act and
pursuant to offers and sales that occurred outside the
United States within the meaning of Regulation S under
the Securities Act.
REGISTRATION RIGHTS AGREEMENT..... Pursuant to the Purchase Agreement, the Company,
Holdings and the Initial Purchasers entered into a
Registration Rights Agreement dated August 6, 1997 (the
"Registration Rights Agreement"), which grants the
holders of the Old Notes certain exchange and
registration rights. The Exchange Offer is intended to
satisfy such exchange rights, which terminate upon the
consummation of the Exchange Offer.
</TABLE>
SUMMARY OF THE EXCHANGE OFFER
<TABLE>
<S> <C>
THE EXCHANGE OFFER................ The Company is offering to exchange up to $105,000,000
aggregate principal amount of its 14% Exchange Senior
Subordinated Notes due 2007 (the "New Notes") for a like
principal amount of its 14% Original Senior Subordinated
Notes due 2007 (the "Old Notes", and collectively with
the New Notes, the "Notes"). The terms of the New Notes
are identical in all material respects (including
principal amount, interest rate and maturity) to the
terms of the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old
Notes. See "Description of the New Notes." The issuance
of the New Notes is intended to satisfy obligations of
the Company contained in the registration rights
agreement relating to the Old Notes.
EXPIRATION DATE; WITHDRAWAL OF
TENDER.......................... The Exchange Offer will expire at 5:00 p.m. New York
City time, on [ ], 1997. The tender of Old Notes
pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
ACCRUED INTEREST ON THE NEW
NOTES AND THE OLD NOTES......... Each New Note will bear interest from the most recent
date to which interest has been paid or duly provided
for on the Old Note surrendered in exchange for such New
Note or, if no interest has been paid or duly provided
for on such Old Note,
</TABLE>
7
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<TABLE>
<S> <C>
from August 6, 1997. Holders of Old Notes whose Old
Notes are accepted for exchange will not receive accrued
interest on such Old Notes for any period from and after
the last date to which interest has been paid or duly
provided for on the Old Notes prior to the original
issue date of the New Notes or, if no such interest has
been paid or duly provided for, will not receive any
accrued interest on such Old Notes, and will be deemed
to have waived, the right to receive any interest on
such Old Notes accrued from and after the last date to
which interest has been paid or duly provided for on the
Old Notes or, if no such interest has been paid or duly
provided for, from and after August 6, 1997.
PROCEDURES FOR TENDERING.......... Each Holder wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions
contained herein and therein and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with any other required documentation, to
Norwest Bank of Minnesota, National Association, as
Exchange Agent, at the address set forth therein. The
Letter of Transmittal will include a representation by
the tendering Holder that, among other things, (i) the
New Notes to be received pursuant to the Exchange Offer
are being acquired in the ordinary course of the
business of the person receiving such New Notes, (ii)
such holder has no arrangement with another person to
participate in the distribution of such New Notes, (iii)
such holder is not an "affiliate" (as defined in Rule
405 under the Securities Act) of the Company and (iv) if
the tendering Holder is a broker or a dealer (as defined
in the Exchange Act), it acquired the Old Notes for its
own account as a result of market-making activities or
other trading activities and that it has not entered
into any arrangement with the Company or any "affiliate"
of the Company to distribute the New Notes to be
received in the Exchange Offer. In the case of a
broker-dealer that receives New Notes for its own
account in exchange for Old Notes which were acquired by
it as a result of market-making or other trading
activities, the Letter of Transmittal will also include
an acknowledgment that the broker-dealer will deliver a
copy of this Prospectus in connection with the resale by
it of New Notes received pursuant to the Exchange Offer.
See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES.... Holders who wish to accept the Exchange Offer and cannot
complete the procedures for tendering on a timely basis,
may effect a tender according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Procedures
for Tendering."
FEDERAL INCOME TAX CONSEQUENCES... The exchange pursuant to the Exchange Offer will not
result in any income, gain or loss to the Holders or the
Company for Federal income tax purposes. See "Certain
Federal Income Tax Considerations."
</TABLE>
8
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<TABLE>
<S> <C>
EXCHANGE AGENT.................... Norwest Bank Minnesota, National Association is serving
as Exchange Agent in connection with the Exchange Offer.
The address and telephone number of the Exchange Agent
are set forth in "The Exchange Offer--Exchange Agent".
CONSEQUENCES OF EXCHANGING OLD
NOTES PURSUANT TO THE EXCHANGE
OFFER........................... Generally, based on interpretations by the staff of the
Securities and Exchange Commission, the Company believes
that Holders of Old Notes (other than any Holder which
is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act of 1933, as amended)
who exchange their Old Notes for New Notes pursuant to
the Exchange Offer may offer such New Notes for resale,
resell such New Notes, and otherwise transfer such New
Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act;
provided that such New Notes are acquired in the
ordinary course of such Holder's business and such
Holders have no arrangement with any person to
participate in the distribution of such New Notes. Each
broker-dealer that receives New 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 New Notes. See "Plan of Distribution." To
comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for sale
or register the New Notes prior to offering or selling
such New Notes. The Company does not currently intend to
register or qualify the sale of the New Notes in any
such jurisdictions.
UNTENDERED OLD NOTES.............. Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but who do
not tender their Notes will not have any further
exchange rights and such Old notes will contintue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old
Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE........................ If a Holder of Old Notes does not exchange such Old
Notes for New Notes pursuant to the Exchange Offer, such
Old Notes will continue to be subject to the
restrictions on transfer contained in the legend
thereon. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act of 1933,
as amended, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act of
1933, as amended, and applicable state securities laws.
See "The Exchange Offer--Consequences of Failure to
Exchange."
</TABLE>
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<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The form and terms of the New Notes are identical in all material respects
to the Old Notes, except for certain transfer restrictions and registration
rights relating to the Old Notes. The Old Notes will evidence the same debt as
the New Notes and both series of Notes will be entitled to the benefits of the
Indenture and treated as a single class of debt securities thereunder. See
"Description of the New Notes."
<TABLE>
<S> <C>
SECURITIES OFFERED................ $105,000,000 principal amount of 14% Senior Notes due
2007.
MATURITY.......................... August 1, 2007.
INTEREST.......................... Interest on the Notes will accrue at the rate of 14% per
annum and will be payable semi-annually in arrears on
February 1 and August 1 of each year, commencing on
February 1, 1998.
RANKING........................... The Notes will represent senior, unsecured obligations
of the Company, will rank PARI PASSU in right of payment
with all existing and future senior indebtedness of the
Company and will rank senior in right of payment to all
existing and future subordinated indebtedness of the
Company. The Company currently has no indebtedness that
is expressly subordinated in right of payment to the
Notes. Although the Indenture will limit the ability of
the Company and its subsidiaries to incur additional
indebtedness, the Indenture will permit the Company to
incur secured indebtedness under the Credit Facility (as
defined herein), which, if incurred, will effectively
rank senior to the Notes with respect to the assets
securing such indebtedness. See "Risk
Factors--Substantial Leverage and Ability to Service
Debt," "Possible Incurrence of Secured Indebtedness" and
"Description of Certain Indebtedness" As of June 30,
1997, the aggregate amount of outstanding indebtedness
(excluding the Notes) of the Company, on a consolidated
basis, was approximately $1.7 million.
SECURITY.......................... The Company has purchased certain Pledged Securities,
representing funds sufficient to pay the first six
semi-annual interest payments on the Notes (estimated at
approximately $39.9 million), as security for repayment
of the first six interest payments on the Notes. See
"Description of Notes--Security." The Pledged Securities
will be held by the Collateral Agent (as defined herein)
under the Pledge Agreement (as defined herein) pending
disbursement.
</TABLE>
10
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<TABLE>
<S> <C>
OPTIONAL REDEMPTION............... The Notes will not be redeemable prior to August 1,
2002. Thereafter, the Notes will be redeemable at the
option of the Company, in whole or in part, at the
redemption prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date. See "Description of
Notes--Optional Redemption." Notwithstanding the
foregoing, prior to August 1, 2000, the Company may
redeem outstanding Notes with the net proceeds of one or
more sales of Capital Stock (other than Disqualified
Stock) of the Company or Holdings to one or more persons
at a redemption price equal to 114% of the principal
amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption
date; provided that not less than $68.3 million
aggregate principal amount of Notes remain outstanding
immediately after any such redemption; and such
redemption shall occur within 30 days after the date of
the closing of such sale of Capital Stock.
CHANGE OF CONTROL................. Upon the occurrence of a Change of Control (as defined
herein), each holder of the Notes will have the right to
require the Company to repurchase all or any part of
such holder's Notes at an offer price in cash equal to
101% of the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date of purchase. A Change of
Control will not occur if any of the Existing
Stockholders (as defined below) becomes the benficial
owner of more than 50% of the total voting power of the
Voting Equity Interests (as defined below) of the
Company. See "Description of Notes--Repurchase at the
Option of Holders--Change of Control."
CERTAIN COVENANTS................. The Indenture governing the Notes (the "Indenture")
contains certain covenants that limit the ability of the
Company and its Restricted Subsidiaries (as defined
herein) to, among other things, incur additional
Indebtedness (as defined herein), pay dividends or make
other distributions, repurchase Equity Interests (as
defined herein) or subordinated Indebtedness, make
certain other Restricted Payments (as defined herein),
create certain liens, enter into certain transactions
with affiliates, sell assets, issue or sell Equity
Interests or enter into certain mergers and
consolidations. See "Description of Notes--Certain
Covenants." The Credit Facility contains similar
covenants. See "Description of Certain Indebtedness."
</TABLE>
RISK FACTORS
Holders of the Old Notes should consider carefully all of the information
contained in this Prospectus prior to tendering their Old Notes in the Exchange
Offer. In particular, Holders should consider the factors set forth under "Risk
Factors."
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<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
Set forth below is selected historical financial and operating data of the
Company and its predecessors. Certain of such historical financial and operating
data have been derived from the audited consolidated financial statements of the
Company and its predecessors as of and for the periods noted. The financial
information of the Company as of and for the six months ended June 30, 1996 and
1997 is unaudited and is derived from the unaudited consolidated financial
statements of the Company which include all adjustments management considers
necessary for a fair presentation of the Company's financial position and
results of operations in accordance with generally accepted accounting
principles, subject to normal recurring year-end adjustments. The results for
the six months ended June 30, 1997 are not necessarily indicative of the results
to be expected for the full year ending December 31, 1997. The data contained in
the following table should be read in conjunction with "Management's Discussion
and Analysis of Results of Operations and Financial Condition" and the Company's
and its predecessors' audited consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996(2) 1996(2) 1997
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................................. $ 15,336 $ 13,244 $ 15,957 $ 5,941 $ 11,370
Operating loss........................................................... (24,473) (36,114) (13,854) (4,829) (13,119)
Net loss................................................................. (39,824) (57,380) (13,792) (4,767) (12,801)
OTHER DATA:
EBITDA(3)................................................................ $ (19,255) $ (14,753) $ (11,260) $ (3,880) $ (12,120)
Commercial units in service at end of period............................. 30,283 35,465 43,156 37,632 54,430
Consumer units in service at end of period............................... 10,618 13,814 11,717 12,420 10,697
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(4)
--------- --------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................................ $ 4,261 $ 57,574
Restricted cash.......................................................................................... 1,756 41,704(5)
Total assets............................................................................................. 42,022 147,022
Long-term debt........................................................................................... 1,746 99,707(6)
Redeemable preferred stock............................................................................... 35,815 35,815
Stockholders' deficit.................................................................................... (8,167) (8,167)
</TABLE>
- ------------------------
(1) Represents financial and operating data of AirTouch Teletrac for the year
ended December 31, 1994 and for the period January 1, 1995 through December
28, 1995, the date on which AirTouch Teletrac was dissolved.
(2) The Company acquired the assets of the business on January 17, 1996, the
effective date of the Acquisition. From December 29, 1995 to January 16,
1996, the business was operated by AirTouch Services, successor to AirTouch
Teletrac. The results of operations of AirTouch Services for such period
were not material and are not included herein.
(3) EBITDA consists of operating income (loss) before interest, taxes,
depreciation and amortization. EBITDA also excludes refrequencing costs
accrued in the fiscal years ended December 31, 1995 and 1996 and an asset
impairment charge taken in the fiscal year ended December 31, 1995. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Background" and "Business--Regulation--Frequency Conversion."
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. EBITDA, however, is not a
measure determined in accordance with generally accepted accounting
principles ("GAAP") and should not be considered in isolation or as a
substitute for or an alternative to net income (loss), cash flow from
operating activities or other income or cash flow data prepared in
accordance with GAAP or as a measure of a company's operating performance or
liquidity.
(4) Adjusted to give effect to the Unit Offering, and the application of the
estimated net proceeds from the Notes, as if the Unit Offering had occurred
on June 30, 1997. See "Use of Proceeds" and "Capitalization." The cash
proceeds from the Unit Offering for the value of the Warrants has not been
reflected in cash and cash equivalents or stockholders' deficit since the
Warrants were sold by Teletrac Holdings, Inc.
(5) Includes the aggregate principal amount of the Pledged Securities, estimated
at approximately $39.9 million. See "Description of Notes--Security."
(6) The Company received gross proceeds from the Unit Offering of $105 million.
The estimated value of the Warrants ($7.0 million) has been reflected as a
debt discount. However, the actual aggregate principal amount of the Notes
is $105 million.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE TENDERING THEIR OLD NOTES IN
THE EXCHANGE OFFER.
This Prospectus contains statements that constitute forward-looking
statements. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company or its management primarily with respect to the future operating
performance of the Company. Prospective Holders of the Notes are cautioned that
any such forward-looking statements are not guarantees of future performance and
may involve risks and uncertainties, and that actual results may differ from
those in the forward-looking statements as a result of various factors, many of
which are beyond the control of the Company. The information set forth below and
the information under the heading "Management's Discussion and Analysis of
Results of Operations and Financial Condition" identify important factors that
could cause such differences (the "Cautionary Statements"). All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements. The Company does not intend to update any of its
forward-looking statements.
NET LOSSES AND NEGATIVE EBITDA
The Company and its predecessors have had losses in each year of their
operations, including net losses of $39.8 million, $57.4 million and $13.8
million for the fiscal years ended December 31, 1994, 1995, and 1996,
respectively. For the six months ended June 30, 1996 and 1997, the Company had
losses of $4.8 million and $12.8 million, respectively. In addition, the Company
had an EBITDA deficiency (excluding refrequencing costs and asset impairment) of
$19.3 million, $14.8 million and $11.3 million for such years and $3.9 million
and $12.1 million for such six-month periods. The Company also expects that
operating and net losses and negative EBITDA will increase as the Company
completes its market build-out and that, under its current business plan,
operating and net losses and negative EBITDA will continue at least through
year-end 1998. As of June 30, 1997, the Company had a stockholders' deficit of
approximately $8.2 million and an accumulated deficit of approximately $30.2
million.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
As of June 30, 1997, after giving effect to the Unit Offering, the Company's
total outstanding long-term indebtedness would have been approximately $100
million (which excludes the portion of the Unit Offering allocated to the
Warrants) and its total long-term indebtedness-to-total capitalization ratio
would have been 0.74 to 1.0.
The Company has received a commitment letter from Banque Paribas and Fleet
National Bank with respect to a secured revolving credit facility providing up
to $30 million of credit. See "Description of Certain Indebtedness." If such
Credit Facility (as defined herein) is made available to the Company,
substantial borrowings thereunder would have the effect of increasing the
Company's total long-term indebtedness-to-total capitalization ratio, resulting
in a more highly leveraged company than existed prior to the Units Offering.
The ability of the Company to meet its debt service requirements will depend
upon achieving significant and sustained growth in cash flow. The Company
currently anticipates that earnings generated from operations should be
sufficient, together with the Pledged Securities, to provide enough cash flow to
make principal and interest payments on the Notes as they become due. However,
the Company's ability to generate such cash flow is subject to a number of risks
and contingencies. Included among these risks are the possibility that the
Company may not complete its planned geographic expansion on a timely basis,
that the Company's software products or vehicle location system could experience
performance problems or that utilization could be lower than anticipated.
Accordingly, there can be no assurance as to whether the Company will at any
time have sufficient resources to meet all of its debt service obligations as
they become due.
The Company's current and future debt service requirements could have
important consequences to holders of the Notes, including the following: (i) the
Company's ability to obtain additional financing for
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future working capital needs or financing for acquisitions or other purposes
will be limited; (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing funds available for operations; and (iii) the
Company may be more vulnerable to adverse economic conditions than less
leveraged competitors and, thus, its ability to withstand competitive pressures
may be limited. The discretion of the Company's management with respect to
certain business matters will be limited by covenants contained in the Indenture
and future debt instruments. Among other things, the covenants contained in the
Indenture restrict, condition or prohibit the Company from incurring additional
indebtedness, creating liens on its assets, making certain asset dispositions,
conducting certain other business and entering into transactions with affiliates
and other related persons. There can be no assurance that the Company's leverage
and such restrictions will not materially and adversely affect the Company's
ability to finance its future operations or capital needs or to engage in other
business activities. Moreover, a failure to comply with the obligations
contained in the Indenture or any agreements with respect to additional
financing could result in an event of default under such agreements, which could
permit acceleration of the related debt and acceleration of debt under future
debt agreements that may contain cross-acceleration or cross-default provisions.
See "Description of the New Notes."
POSSIBLE INCURRENCE OF SECURED INDEBTEDNESS
The New Notes will represent senior, unsecured obligations of the Company,
will rank PARI PASSU in right of payment with all existing and future senior
indebtedness of the Company and will rank senior in right of payment to all
existing and future subordinated indebtedness of the Company. Although the
Indenture will limit the ability of the Company and its subsidiaries to incur
additional indebtedness, the Indenture will permit the Company to incur secured
indebtedness under the Credit Facility which, if incurred, will effectively rank
senior to the Notes with respect to the assets securing such indebtedness. In
such a case, if the Company's indebtedness under the Credit Facility were to be
accelerated, the holders of such secured indebtedness would be entitled to
payment in full out of the assets securing such indebtedness prior to payment to
holders of the Notes. If the lenders party to, or the holders of, any such
secured indebtedness were to foreclose on the collateral securing the Company's
obligations to them, subject to FCC approval if required, there can be no
assurance that there would be sufficient assets remaining after payment of all
such secured indebtedness to satisfy the claims of holders of the Notes in full.
See "Description of Notes--Certain Covenants" and "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Liquidity and Capital
Resources--Credit Facility."
RISKS OF EXPANSION AND MANAGEMENT OF GROWTH
The Company is currently operating in seven markets across the United States
and intends to commence commercial operations in an additional two markets in
1997 and six additional markets in 1998. The Company also holds Federal
Communications Commission ("FCC") licenses in 11 additional markets, for a total
of 26 markets, but the Company expects that it would have to obtain additional
licenses in certain of such 11 markets before it could commence commercial
operations. In the future, the Company may acquire FCC licenses to operate in
additional markets. Depending on the development of the Company's business plan,
the geographic scope of the Company's operations may continue to expand rapidly
for the next several years. A portion of the net proceeds of the Unit Offering
will be applied to expand the Company's current operations. There can be no
assurance as to whether, when, or on what terms the Company will be able to
construct its additional networks or that the construction will prove beneficial
to it. If the Company encounters delays or difficulties in a particular market,
it may redirect its expansion to one or more other markets. The Company may
encounter delays in the construction of its networks, including delays caused by
weather and late delivery or installation of equipment. In addition, the Company
will be subject to challenges inherent to companies experiencing rapid growth.
The Company's ability to market its products on a larger scale while maintaining
competitive pricing and customer service will depend on its ability to implement
and continually expand its operational systems and to recruit, train, manage and
motivate both current and new employees. There can be no assurance that the
Company will be able to effectively expand its operations or manage its expanded
operations. Failure
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<PAGE>
to successfully expand its operations and effectively manage the growth of the
Company could have a material adverse effect on the Company's business.
POTENTIAL FUTURE CAPITAL NEEDS
Based upon its current operating plan, the Company anticipates that the net
proceeds to the Company from the Unit Offering, together with its existing cash
balances and cash flow from operations, will be sufficient to meet the Company's
cash requirements for the foreseeable future. However, the Company's long-term
capital requirements will depend upon numerous factors, including the size and
success of the Company's marketing, sales and customer support efforts, the
demand for the Company's products and services, the pace of the Company's
expansion to new markets, the need for funds to participate and prevail in any
competitive-bidding auctions that the FCC may hold for licenses in any of the
markets in which the Company currently operates or in any of the markets which
the Company wishes to enter, the impact of regulatory requirements (such as the
required conversion of VLUs to a new FCC-mandated frequency band plan), the
scope of the Company's product development efforts and the continuing growth of
the Company's industry. To the extent that the funds generated by the Unit
Offering, together with existing resources and any future earnings or borrowings
under credit facilities, are insufficient to fund the Company's activities, the
Company may need to raise additional funds through public or private financings.
The issuance of additional equity, and the incurrence of additional
indebtedness, by the Company is subject, under certain circumstances, to the
prior approval of the holders of Holdings' Preferred Stock, which may affect the
Company's ability to raise capital in the future. See "Certain Relationships and
Related Transactions." No assurance can be given that additional financing will
be available or that, if available, it will be obtained on terms favorable to
the Company. If adequate funds are not available, the Company may have to reduce
or eliminate expenditures for product development, the marketing of its services
and its market build-out, which would have a material adverse effect on the
Company's business.
RELIANCE ON SOLE SUPPLIER
The Company purchases its VLUs and Base Station Units ("BSUs") from Tadiran
Telematics, Ltd. ("Tadiran"), a leading Israeli technology supplier and a
wholly-owned subsidiary of Tadiran Limited, a publicly traded Israeli company, a
majority of the stock of which is owned by Koor Industries Ltd. The Company's
ability to develop, construct and implement its networks and products on
schedule may be adversely affected by Tadiran's development, manufacturing and
delivery capabilities. While a limited number of other suppliers are available
for these products, management believes that it would take at least a year
before a new supplier could reach full production of these products. There can
be no assurance that alternate suppliers of the Company's equipment and products
will be available in the future or that such suppliers, if available, would be
able to manufacture such equipment and products at an acceptable price. The loss
of Tadiran as a supplier or the inability of another supplier to supply such
equipment would have a material adverse effect on the Company's business.
GOVERNMENT REGULATION
The Company and the wireless telecommunications industry are subject to
federal, state and local regulation with respect to licensing, service
standards, land use and tower site location and other matters. The Company's
operations are subject to recently adopted rules of the FCC that have not been
significantly interpreted by the FCC and that remain subject to reconsideration.
Several parties, including the Company, have requested that the FCC reconsider
various aspects of the newly-adopted rules governing Location and Monitoring
Service ("LMS"). In some cases, the reconsideration requests, if granted by the
FCC, could have a material adverse effect on the Company's business. There can
be no assurance that governmental authorities will not propose or adopt
legislation or regulations that would have a material adverse effect on the
Company's business. Under existing FCC regulations, operating licenses are
issued for five-year terms, subject to renewal by application upon expiration of
their initial terms. Renewal is not automatic, although current FCC regulations
provide that renewal applications may be denied only for specific causes. There
can be no assurance that the Company will continue to hold its operating
licenses in the future.
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<PAGE>
FACTORS AFFECTING GRANDFATHERED SYSTEMS
FCC rules regulating LMS, adopted in 1995 and modified in March 1996 and
September 1997, established that LMS licenses would be granted on a geographic
basis. At the time that it adopted the new rules governing LMS, the FCC ceased
to accept applications for authorizations for new LMS transmitters. LMS licenses
granted prior to the 1995 rules, including those under which the Company
operates its systems, were granted for individual transmitter sites. In its 1995
rules, the FCC established procedures for the "grandfathering" of those LMS
systems that were in operation or authorized as of February 3, 1995. In order to
retain authorization for grandfathered systems that were authorized by the FCC
but not yet constructed as of February 3, 1995, however, each such grandfathered
system must have been built to the capability of locating a vehicle and
otherwise in compliance with the 1995 rules (as modified) by a deadline date
that was ultimately extended to January 1, 1997. The Company completed
construction of multilateration LMS stations in 26 markets prior to the January
1, 1997 deadline, submitted modification applications and associated waivers to
reflect minor parameter variations, and obtained special temporary authority
from the FCC to operate the newly constructed stations. The Company recently
discovered additional minor parameter variations and has submitted additional
modification applications and requests for special temporary authority relating
to the operation of those facilities. There can be no assurance that the FCC
will grant such applications or requests. The Company believes that it has met
all requirements of the FCC to retain the grandfathered multilateration LMS
systems it has constructed. The FCC's rules, however, contain no provision for
receiving a formal declaration from the FCC that the Company has met all of the
requirements for a grandfathered LMS licensee.
In addition, the FCC has further required that all LMS systems must conform
the LMS transmitters that had been constructed and that were in operation on
February 3, 1995 to the new LMS frequency band plan by April 1, 1998, the date
on which authority to operate on the previous LMS frequencies will expire. While
the Company already has constructed facilities in all of its markets to comply
with the new band plan and is currently converting the VLUs owned by its current
customers to the new band, there can be no assurance that the Company's systems
constructed prior to February 3, 1995 will comply with the new LMS spectrum band
plan by April 1, 1998. Non-multilateration LMS systems that were operating on
segments of the frequency band that the FCC allocated for multilateration LMS
use in 1995 were grandfathered until April 1, 1998. This means that
multilateration LMS systems such as the Company's may be required to share their
frequencies with non-multilateration systems until next April. See
"Business--Regulation-- Construction and Operation of Grandfathered Systems."
FCC rules also provide that additional licenses to operate an LMS system in
the markets in which a grandfathered system operates may be allocated by
auction. The Company intends to participate in future auctions of LMS spectrum,
including in those markets in which it has a grandfathered system. Management
expects that such auctions will occur in early 1998, and the Company may require
additional funds to participate in such auctions. See "Use of Proceeds" and
"Business--Regulation--LMS Spectrum Auctions." In the event that the Company
does not submit the winning bid in a market in which it operates a grandfathered
system, it will have to cooperate with the winning bidder and will be precluded
from further expanding such grandfathered system. There can be no assurance that
in any such auction the Company will acquire a license to operate its system in
each market in which it currently holds grandfathered licenses, or that its
failure to do so would not require the Company to modify its existing technology
to avoid interference with the winning bidder or otherwise delay or increase the
cost of its planned market build-out. See "Business--Regulation--LMS Spectrum
Auctions." In addition, if the Company acquires licenses in the auction, it
would be obligated under present rules to build out the systems for those
markets under deadlines set by the FCC.
FOREIGN OWNERSHIP
The FCC has not declared whether multilateration LMS will be classified as a
private mobile radio service (PMRS) or as a commercial mobile radio service
(CMRS), but has proposed to classify LMS providers on a case-by-case basis. If
the Company's services were reclassified as CMRS rather than as PMRS, the
Company, which holds its FCC authorizations through a wholly-owned subsidiary,
Teletrac License, Inc., would be subject to the foreign ownership restrictions
under the Communications Act that
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apply to the parent corporations of CMRS licensees. Under this restriction,
non-U.S. persons would not be permitted to hold, directly or indirectly, in the
aggregate, more than 25% of the ownership or 25% of the voting rights in the
Company, absent a waiver or determination by the FCC that a higher level of
foreign ownership would be in the public interest. Although, as of October 15,
1997, the Company was controlled by U.S. citizens, non-U.S. persons held
slightly more than 25% of the ownership of the Company. If the FCC were to
reclassify its multilateration LMS as CMRS at a time when the Company's level of
foreign ownership or foreign voting rights exceeded 25%, the Company would be
required to obtain a public interest determination from the FCC approving its
level of foreign ownership or to restructure its ownership to meet the 25%
benchmark.
RADIO FREQUENCY INTERFERENCE
The FCC allocated radio frequencies to multilateration LMS on a secondary
basis. This means that LMS operations cannot cause interference to, and may be
required to accept interference from, users of those same or adjacent
frequencies in the Industrial, Scientific, and Medical radio service and in the
Federal government's radiolocation service. In addition, under Part 15 of the
FCC's rules, certain unlicensed radio devices (such as spread spectrum devices
used for local area networks) operate on the same or adjacent frequencies as LMS
systems. Although multilateration LMS systems generally have priority in the use
of their frequencies over such Part 15 devices, the FCC's rules provide a
"safe-harbor" for the operation of Part 15 devices in LMS spectrum. If a Part 15
device is operated in a manner that satisfies those safe-harbor requirements
(which are designed to avoid or minimize the risk of interference to LMS
services), an LMS system that nonetheless suffers interference from such a Part
15 device may have no recourse other than to negotiate with the Part 15 user on
methods for eliminating or reducing the interference. See
"Business--Regulation--Technical Requirements."
The Company's location and communication technology operates through radio
signals, which may experience interference from radio signals on adjacent
frequencies. Interference can reduce system effectiveness. So long as other
users comply with the regulations applicable to their devices or services, the
Company may have no legal recourse even if it experiences significant
interference from other radio signals. In developing or expanding a system in a
metropolitan market, the Company tests for interference and generally expects
that a certain amount of system modification will be required to minimize
interference. There can be no assurance that the Company will not encounter
significant interference with its systems in some or all of its new markets,
which could impair the functioning of its system in such markets and/or increase
the cost of subscriber equipment or system build-out.
In certain portions of its Los Angeles market area, the Company has
experienced interference from paging networks operating on frequencies adjacent
to the new LMS frequency band. Such interference has impaired service to certain
customers, although it has not materially affected the Company's operating
results in Los Angeles. Such interference would be minimized by the installation
of additional transmitters or by enhancement of the filtering capabilities of
the VLU. The Company has applied for waivers to permit the installation of
additional transmitters in Los Angeles and other markets, but there can be no
assurance that the Company will obtain such waivers and the Company's request
for such waivers has been opposed in filings by other parties. Tadiran has also
developed and is testing an enhanced filter in the VLU that is expected to
reduce interference from out-of-band transmissions, but there can be no
assurance that the filter will be effective in the field or will be available at
acceptable cost. In testing its system in San Francisco, the Company has
experienced interference from Part 15 devices at several of its receiver
installations. The Company believes that such interference is primarily caused
by devices that do not comply with the safe-harbor provisions for Part 15
devices operating in the LMS spectrum. There can be no assurance that such
interference can be minimized in a timely manner, or that interference would not
be experienced in other existing or new markets. There can be no assurance, if
such interference is the result of devices not in compliance with safe-harbor
provisions, that the interference can be minimized in a timely manner.
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NETWORK BUILD-OUT
The Company is engineering and designing its own network of transmitters and
receivers. While the Company has secured transmitter sites for each of its
licensed transmitters and has constructed all such transmitters in compliance
with FCC regulations, there can be no assurance that the Company will be able to
secure leases for the receiver sites necessary to construct and operate its
networks within its budgeted time frames and costs. Part of this process
involves identification of the optimal number of sites to receive signals
necessary to deliver the Company's location and associated messaging services.
In this identification process, known as radio frequency ("RF") propagation
analysis, engineers utilize computer software programs to analyze terrain,
topography, building penetration, population concentrations and other factors.
Once sites are identified in the network design process, the Company must secure
leases for the sites upon which it will install antennae, receivers and other
infrastructure equipment. The site acquisition process requires the negotiation
of site leases and verification by the Company that the site owner has obtained
the necessary governmental approvals and permits. The location and development
of sites that are considered desirable from the perspective of maximizing signal
coverage and penetration has become more difficult, due in part to the
saturation of such sites by other wireless service providers. In addition to
site identification and acquisition, the construction of the Company's networks
will require equipment installation and systems testing. Each stage involves
various risks and contingencies, many of which are not within the control of the
Company and any of which could adversely affect the implementation of the
Company's proposed networks.
COMPETITION AND TECHNOLOGICAL CHANGE
The Company is facing increasing competition in the vehicle location and
fleet management industries. The Company faces competition for its services from
companies using GPS technology, as well as cellular, SMR and paging technology.
In addition, a variety of wireless two-way communication technologies are under
development and could result in increased competition for the Company. Certain
of the Company's competitors are larger and have substantially greater financial
and research and development resources and more extensive marketing and selling
organizations than the Company. There can be no assurance that additional
competitors will not enter markets that the Company plans to serve or that the
Company will be able to withstand the competition. Moreover, changes in
technology could lower the cost of competitive services to a level where the
Company's services would become less competitive or where the Company would need
to reduce its service prices in order to remain competitive, which could have a
material adverse effect on the Company's business. See "Business--Competition."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will be
entitled to require the Company to purchase any or all of the Notes held by such
holder at the prices stated herein. In the event that a Change of Control
occurs, the Company would likely be required to refinance the indebtedness
outstanding under the Notes. In addition, the Credit Facility provides that, if
a change of control (as defined therein) occurs, the Company would be required
to repay the indebtedness outstanding under the Credit Facility and the Company
may be required to repay the Notes. There can be no assurance that the Company
would be able to refinance either such indebtedness or, if such refinancing were
to occur, that such refinancing would be on terms favorable to the Company. See
"Description of Notes--Repurchase at the Option of Holders--Change of Control."
RELIANCE ON KEY PERSONNEL
The Company's business is managed by a small group of key executive
officers, the loss of any of whom could have a material adverse effect on the
Company's business. The Company believes that its continued success will depend
in large part on its ability to attract and retain highly skilled and qualified
personnel.
PROPRIETARY RIGHTS AND PATENTS; CERTAIN PENDING LITIGATION
The Company's success will depend in part upon its ability to protect the
confidentiality of its proprietary technology. The Company currently holds no
material patents and generally seeks to protect its
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software products and trade secrets by requiring that its consultants, employees
and others with access to its trade secrets sign nondisclosure and
confidentiality agreements. Management believes that these actions provide
appropriate legal protection for the Company's intellectual property rights in
its software products, but there can be no assurance that such measures will be
sufficient. There also can be no assurance that others will not independently
develop similar technologies, duplicate the Company's technologies or design
around aspects of any technologies developed by the Company. See "Business--
Product Protection."
AirTouch Teletrac brought an action before the United States Patent and
Trademark Trial and Appeal Board against T.A.B. Systems ("TAB") opposing TAB's
registration of the mark "Teletrak." The Trademark Trial and Appeal Board
granted AirTouch Teletrac's motion for summary judgment, but summary judgment
was reversed by the U.S. Court of Appeals for the Federal Circuit. Under the
terms of the Asset Purchase Agreement between AirTouch Teletrac and the Company,
AirTouch Teletrac must pay the costs of any litigation relating to this matter
and must indemnify the Company against any losses relating thereto. AirTouch
Teletrac has notified the Company that it intends to continue to litigate this
matter on its own behalf, as well as on behalf of the Company, and that it will
bear the cost of such litigation. There can be no assurance that AirTouch
Teletrac will be successful in such litigation or will honor its indemnification
obligations (including any costs or losses relating to a change of name, if
required).
DEPENDENCE ON NETWORK OPERATIONS
The Company's operations are dependent upon its ability to protect its
computer and network equipment against damage that may be caused by equipment
failure, fire, weather, earthquakes, power loss or similar events. There can be
no assurance that such events would not disable one or more of the Company's
networks. Because each metropolitan area has its own network control center,
damage to any network control center would disrupt service for the entire
metropolitan area serviced by such control center. Any significant damage to any
one of the Company's networks could have a material adverse effect on the
Company's business. The Company is currently enhancing its location monitoring
system hardware and software to enable it to reduce its number of network
control centers from one in each metropolitan market to three of four regional
network control centers. If such improvements are made, damage to any network
control center would disrupt service for several metropolitan markets serviced
by such control center.
ABSENCE OF A PUBLIC MARKET FOR THE NEW NOTES
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued in August 1997 to certain Qualified Institutional Buyers (as
defined in Rule 144A under the Securities Act) and pursuant to offers and sales
outside the United States within the meaning of Regulation S under the
Securities Act and are eligible for trading in the Private Offerings, Resale and
Trading through Automatic Linkages (PPORTAL) market. The New Notes are
securities for which there currently is no market. If the New Notes are traded,
they may trade at a discount from their face value, depending upon prevailing
interest rates, the market for similar securities and other factors. The Company
does not currently intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as the development or liquidity of any trading market
for the New Notes.
CONSEQUENCES OF THE EXCHANGE OFFER TO NON-TENDERING HOLDERS OF THE OLD NOTES
In the event the Exchange Offer is consummated, the company will not be
required to register the Old Notes. In such event, the New Notes would rank PARI
PASSU with the Old Notes and holders of Old Notes seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act. A reduction of the principal
amount of the Old Notes as a result of this Exchange Offer may have an adverse
effect on the ability of holders of the Old Notes to transfer such Old Notes.
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THE COMPANY
An investor group led by management formed Teletrac, Inc. in August 1995 to
acquire the assets of AirTouch Teletrac. AirTouch Teletrac was established in
1988 to develop land-based 900 MHz radio networks for wireless location
monitoring and related two-way wireless messaging services. Over an eight year
period, AirTouch Teletrac developed the technology and software for such
networks and constructed operational systems in six metropolitan markets.
Teletrac, Inc. acquired the assets of AirTouch Teletrac on January 17, 1996.
The current management of Teletrac has had significant experience in the
wireless communications industry. James A. Queen, the Company's Chief Executive
Officer, together with several members of the Company's current management,
founded and managed Premiere Page, Inc. ("Premiere Page"), a paging company with
operations in Alabama, Illinois and surrounding markets. Premiere Page was
established in 1988, completed an initial public offering of its stock in 1993,
and in 1994 was merged into another paging company, forming the fifth largest
paging company in the nation at the time, based on units in service.
To create a holding company structure, Holdings, Teletrac and all of the
stockholders of Teletrac entered into an Exchange Agreement. Under the terms of
such Exchange Agreement, all of Teletrac's stockholders exchanged their shares
of Common Stock and Preferred Stock of Teletrac for substantially similar shares
of the Common Stock and Preferred Stock of Holdings (the "Exchange"). See
"Certain Relationships and Related Transactions--Exchange Agreement." As a
result of the Exchange, Holdings owns all the outstanding capital stock of
Teletrac, which constitutes its sole asset.
The principal executive offices of Teletrac and Holdings are located at 2323
Grand Street, Suite 1100, Kansas City, Missouri 64108, and its telephone number
is (816) 474-0055.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of New Notes
pursuant to the Exchange Offer. The proceeds to the Company and Holdings from
the Unit Offering was approximately $100 million, net of discounts and
commissions and estimated offering expenses. The Company used approximately
$39.9 million of such proceeds to purchase the Pledged Securities. See
"Description of Notes-- Security." The Company intends to use the net proceeds
from the Unit Offering (i) to fund expenditures for the continued construction,
development and roll-out of its networks and services, including site
construction, marketing costs and the purchase of system hardware, and (ii) for
general corporate purposes, including the funding of operating losses, working
capital requirements and the possible acquisition of additional radio spectrum
in metropolitan markets. The Company believes that the net proceeds of the Unit
Offering, together with its current cash reserves and cash flow from operations,
are sufficient to build out its operations in the new markets to be opened in
1997 and 1998 and to fund its operations in fifteen markets for the foreseeable
future.
The Company may require additional financing in order to complete the
build-out of its networks in additional markets beyond the markets scheduled to
open in 1997 and 1998. See "Risk Factors--Potential Future Capital Needs" and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
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<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
The Holders of the Old Notes currently are entitled to certain registration
rights under the Registration Rights Agreement dated August 6, 1997 (the
"Registration Rights Agreement") among the Company, Donaldson, Lufkin & Jenrette
Securities Corporation and TD Securities (USA) Inc. Pursuant thereto, the
Company became obligated to file with the Commission an Exchange Offer
Registration Statement covering the offer by the Company to the Holders of the
Old Notes to exchange all of the Old Notes for the New Notes. The Exchange Offer
being made hereby, if consummated, will satisfy the Company's obligations under
the Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
New Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by the holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such Holders'
business and such Holders have no arrangement with any person to participate in
the distribution of such New Notes. See MORGAN STANLEY & CO., INC., SEC
No-Action Letter (available June 5, 1991), EXXON CAPITAL HOLDINGS CORPORATION,
SEC No-Action Letter (available May 13, 1988) and SHEARMAN & STERLING, SEC No-
Action Letter (available July 2, 1993).
If any person were to be participating in the Exchange Offer for the
purposes of distributing securities in a manner not permitted by the
Commission's interpretation, such person (i) could not rely on the position of
the staff of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION or
similar interpretive letters and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
Each broker-dealer that receives New 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 New 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 it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. See "Plan of Distribution."
As of the date of this Prospectus, there was $105,000,000 aggregate
principal amount of the Old Notes outstanding. This Prospectus, together with
the Letter of Transmittal, is being sent to all such registered holders as of
the date of this Prospectus.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has 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 the New Notes from the Company and
delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
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If Old Notes are not tendered, they shall remain outstanding and shall
accrue interest from their date of issue, August 6, 1997, at a rate of 14% per
annum.
In the event the Exchange Offer is consummated, the Company will not be
required to register the Old Notes. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act. See "Risk
Factors--Consequences of the Exchange Offer to Non-Tendering Holders of the Old
Notes."
The term "Expiration Date" shall mean the expiration date set forth on the
Cover Page of this Prospectus.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from August 6, 1997, payable semiannually
on February 1 and August 1 of each year, commencing February 1, 1998, at a rate
of 14% per annum.
PROCEDURES FOR TENDERING
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.
A holder of Old Notes 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,
to the Exchange Agent at its address set forth on the back cover of this
Prospectus on or prior to the Expiration Date (or complying with the procedure
for book-entry transfer described below) 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 New 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 (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
book-entry transfer facility) whose name appears on a security listing as the
owner of Old Notes), 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 commercial bank or trust company located or
having an office or correspondent in the United States, or by a member firm of a
national securities exchange or of the National Association of Securities
Dealers, Inc., which firm must also be a member of or participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program (any of the
foregoing hereinafter referred to as an "Eligible Institution"). If the New
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 Notes,
the signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
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 INSTANCE 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.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Old Notes at the book-entry
transfer facility for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of Old Notes by causing such book-
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<PAGE>
entry, transfer facility to transfer such Old Notes into the Exchange Agent's
account with respect to the Old Notes in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's accounts at the
book-entry transfer facility, an appropriate Letter of Transmittal with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its address
set forth on the back cover page of this Prospectus on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such 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 or the procedure for book-entry transfer cannot be completed on
a timely basis, 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 names in which the Old
Notes are registered and, if possible, the certificate numbers of the Notes to
be tendered, and stating that the tender is being made thereby and guaranteeing
that within five 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 (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility), 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 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 (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of New
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.
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. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give such
notification.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of such holder's business, (ii) such holder has
no arrangement with any person to participate in the distribution of such New
Notes, (iii) such holder is not an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company and (iv) if such holder is a broker or a dealer
(as defined in the Exchange Act), that it acquired the Old Notes for its own
account as a result of market-making activities on other trading activities and
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<PAGE>
that it has not entered into any arrangement or understanding with the Company
or any "affiliate" of the Company to distribute the New Notes received in the
Exchange Offer.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written
transmission notice of withdrawal via telegram, telex, facsimile transmission or
letter must be received by the Exchange Agent at its address set forth herein
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the depositor
withdrawing the tender and (iv) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor. All questions as to
the validity, form and eligibility (including time of receipt) of such
withdrawal notices will be determined by the Registrants, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for exchange will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
The Exchange Offer is not subject to any conditions other than that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the Commission.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal and
deliveries of completed Letters of Transmittal with tendered Old Notes should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT EXPRESS: BY MAIL:
Norwest Bank Minnesota, National Association
Norwest Bank Minnesota, National Association Corporate Trust Operations
Corporate Trust Operations Norwest Center
P.O. Box 1517 Sixth and Marquette
Minneapolis, MN 55480-1517 Minneapolis, MN 55479-0113
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and their affiliates in person, by
telegraph or telephone.
24
<PAGE>
The Company will not make any payments to brokers, dealers, or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes, and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, but not including transfer taxes, if any, relating to the sale or
disposition of the Old Notes by a holder of the Old Notes, will be paid by the
Company, and are estimated in the aggregate to be approximately $500,000.
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of Teletrac,
Inc. as of June 30, 1997, as adjusted to give effect to the sale of the Notes.
The table should be read in conjunction with the audited consolidated financial
statements of the Company and its predecessors and the related notes included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................ $ 4,261 $ 57,574
---------- -----------
---------- -----------
Restricted cash(1)....................................................................... 1,756 41,704
---------- -----------
---------- -----------
Long-term debt:
Long-term leases payable............................................................... $ 1,746 $ 1,746
Notes(2)............................................................................... -- 97,961
---------- -----------
Total long-term debt..................................................................... 1,746 99,707
Series A Redeemable Preferred Stock, $.01 par value, 190,477 shares authorized and
190,476.19 shares issued and outstanding............................................... 35,815 35,815
Undesignated Preferred Stock, $.01 par value, 190,477 shares authorized and none issued
and outstanding........................................................................ -- --
Stockholders' equity (deficit):
Class A Common Stock, $.01 par value, 1,000,000 shares authorized and 249,000 shares
issued and outstanding................................................................. 2 2
Class B Common Stock, $.01 par value, 70,000 shares authorized and none issued and
outstanding............................................................................ -- --
Additional paid-in capital............................................................... 22,023 22,023
Accumulated deficit...................................................................... (30,192) (30,192)
---------- -----------
Stockholders' deficit.................................................................... (8,167) (8,167)
---------- -----------
Total capitalization..................................................................... $ 29,394 $ 127,355
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Includes the aggregate principal amount of the Pledged Securities, estimated
at approximately $39.9 million. See "Description of Notes--Security."
(2) The Company anticipates gross proceeds from the Unit Offering of $105
million. The estimated value of the Warrants ($7.0 million) has been
reflected as a debt discount. However, the actual aggregate principal amount
of the Notes is $105 million. The cash proceeds from the Unit Offering for
the value of the Warrants has not been reflected in cash and cash
equivalents since the Warrants were sold by Teletrac Holdings, Inc.
26
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Set forth below are selected historical financial and operating data of the
Company and its predecessors. Certain of such historical financial and operating
data have been derived from the audited consolidated financial statements of the
Company and its predecessors as of and for the periods noted. The financial
information of the Company as of and for the six months ended June 30, 1996 and
1997 is unaudited and is derived from the unaudited consolidated financial
statements of the Company which include all adjustments management considers
necessary for a fair presentation of the Company's financial position and
results of operations in accordance with generally accepted accounting
principles subject to normal recurring year-end adjustments. The results for the
six months ended June 30, 1997 are not necessarily indicative of the results to
be expected for the full year ending December 31, 1997. The data contained in
the following table should be read in conjunction with "Management's Discussion
and Analysis of Results of Operations and Financial Condition" and the Company's
and its predecessors' audited consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSORS(1) THE COMPANY
---------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996(2) 1996(2) 1997
---------- ---------- ---------- ---------- ---------- --------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT UNIT DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:................................. $ 6,805 $ 11,550 $ 15,336 $ 13,244 $ 15,957 $ 5,941 $ 11,370
Operating Expenses
Cost of revenues........................ 7,212 5,748 6,357 4,323 7,031 1,757 5,194
Selling, general and administrative..... 44,336 40,272 28,234 23,674 20,186 8,064 18,296
Refrequencing costs(3).................. -- -- -- 5,936 1,340 406 --
Depreciation and amortization........... 3,844 5,155 5,218 4,458 1,254 543 999
Asset impairment(4)..................... -- -- -- 10,967 -- -- --
---------- ---------- ---------- ---------- ---------- --------- ----------
Total operating expenses.................. 55,392 51,175 39,809 49,358 29,811 10,770 24,489
---------- ---------- ---------- ---------- ---------- --------- ----------
Operating Loss............................ (48,587) (39,625) (24,473) (36,114) (13,854) (4,829) (13,119)
Interest Expense........................ (7,154) (10,318) (15,610) (21,239) (109) (10) (86)
Other................................... (166) 16 259 (27) 171 72 404
---------- ---------- ---------- ---------- ---------- --------- ----------
Net Loss.................................. $ (55,907) $ (49,927) $ (39,824) $ (57,380) $ (13,792) $ (4,767) $ (12,801)
---------- ---------- ---------- ---------- ---------- --------- ----------
---------- ---------- ---------- ---------- ---------- --------- ----------
Other Data:
EBITDA(5)................................. $ (44,743) $ (34,470) $ (19,225) $ (14,753) $ (11,260) $ (3,880) $ (12,120)
Deficiency of earnings to fixed charges
(6)..................................... 55,907 49,927 39,824 57,380 14,132 4,764 15,276
Commercial units in service at end of
period.................................. 9,426 23,903 30,283 35,465 43,156 37,632 54,430
Consumer units in service at end of
period.................................. 4,367 6,688 10,618 13,814 11,717 12,420 10,697
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------- AS OF
1992 1993 1994 1995 1996 JUNE 30, 1997
--------- ---------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS) (UNAUDITED)
Balance Sheet Data:
Cash and cash equivalents:........................ $ 3,253 $ 1,586 $ 546 -- $ 27,639 $ 4,261
Restricted cash................................... -- -- -- -- 1,256 1,756
Total assets...................................... 42,968 37,392 28,852 11,137 53,713 42,022
Long-term debt.................................... 129,250 170,653 203,285 226,101 1,615 1,746
Redeemable preferred stock........................ -- -- -- -- 33,340 35,815
Partners'/Stockholders' equity (deficit).......... (94,786) (144,713) (184,038) (241,418) 7,111 (8,167)
</TABLE>
- ------------------------
(1) Represents financial and operating data of PacTel Teletrac for the years
ended December 31, 1992 and 1993 and AirTouch Teletrac for the year ended
December 31, 1994 and for the period January 1, 1995 through December 28,
1995, the date on which AirTouch Teletrac was dissolved.
(2) The Company acquired the assets of the business on January 17, 1996, the
effective date of the Acquisition. From December 29, 1995 to January 16,
1996, the business was operated by AirTouch Services, successor to AirTouch
Teletrac. The results of operations of AirTouch Services for such period
were not material and are not included herein.
(3) Refrequencing costs are certain costs accrued in connection with the
conversion of vehicle location units to a new frequency band plan mandated
by the FCC. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Background" and
"Business--Regulation--Frequency Conversion."
(4) Asset impairment for 1995 resulted from the Acquisition, in which the assets
of AirTouch Teletrac were sold for approximately $11.0 million less than the
historical book value of such assets recorded by AirTouch Teletrac. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Background."
(5) EBITDA consists of operating income (losses) before interest, taxes,
depreciation and amortization. EBITDA excludes the accrued refrequencing
costs and asset impairment charge described above. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to incur and service debt. EBITDA, however, is not a measure determined in
accordance with GAAP and should not be considered in isolation or as a
substitute for or an alternative to net income (loss), cash flow from
operating activities or other income or cash flow data prepared in
accordance with GAAP or as a measure of a company's operating performance or
liquidity.
(6) For purposes of calculation, earnings consist of the Company's loss before
income taxes and fixed charges. Fixed charges consist of gross interest
expense plus the portion of rental expense under operating leases which has
been deemed by the Company to be representative of interest factor. The
deficiency of earnings to fixed charges represents the additional earnings
required to bring the ratio of earnings to fixed charges to 1.00.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO OF THE COMPANY AND ITS PREDECESSORS AND
"SELECTED FINANCIAL AND OPERATING DATA" APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE
CERTAIN RISKS AND UNCERTAINTIES. SEE "RISK FACTORS."
BACKGROUND
AIRTOUCH TELETRAC OPERATIONS. The Company's vehicle location business was
established in 1988 by PacTel Teletrac, a California partnership whose majority
partner was a wholly-owned subsidiary of Pacific Telesis Group. The partnership
changed its name to AirTouch Teletrac in connection with the spin-off by Pacific
Telesis Group of its wireless operations to AirTouch Communications, Inc.
AirTouch Teletrac was established to develop land-based 900 MHz radio networks
for wireless location monitoring and two-way wireless messaging services. Over
an eight-year period, AirTouch Teletrac developed the technology and software
for such networks, obtained FCC licenses and constructed operational systems in
six metropolitan markets. In addition, AirTouch Teletrac developed the Company's
proprietary software and other products and built a sales and marketing
organization in the six metropolitan markets in which it had operational
networks. Development costs and operating losses were primarily funded through
the issuance of convertible debt of the partnership to the majority partner, a
subsidiary of AirTouch Communications, Inc.
In 1995, AirTouch Teletrac determined to sell its business and, in
connection with that decision, substantially curtailed its marketing efforts.
FORMATION OF THE COMPANY. Teletrac was formed in August 1995 to acquire the
assets of the AirTouch Teletrac business. From its inception in August 1995
through December 31, 1995 the Company's expenses were nominal and the Company
had no revenues.
ACQUISITION OF ASSETS OF AIRTOUCH TELETRAC. On January 17, 1996, the
Company acquired the assets of AirTouch Teletrac in the Acquisition. In
connection with the Acquisition, the Company assumed certain liabilities of
AirTouch Teletrac, but did not assume its long-term debt. The Company accounted
for the Acquisition as a purchase and allocated the purchase price to the assets
purchased and the liabilities assumed. As a result of the sale of the assets for
less than book value, an asset impairment charge of approximately $11.0 million
was recorded by AirTouch Teletrac in 1995.
CHANGES IN BUSINESS STRATEGY. Management has significantly changed the
Company's business strategy since the Acquisition. The primary change has been
to shift the focus of the Company from engineering and product development to
sales and marketing. During 1995, in anticipation of the sale of its business,
AirTouch Teletrac substantially curtailed its marketing efforts. The Company
began increasing sales and marketing activity immediately upon completing the
Acquisition in order to increase market penetration and restore revenue growth.
To date, management has focused the Company's sales efforts exclusively on sales
of commercial fleet equipment and services. The Company has continued providing
consumer service and has allowed dealer arrangements in place at the Acquisition
to continue, but has not launched any new marketing efforts. The Company is
currently exploring various potential strategies for marketing and distributing
its products to consumers, including through strategic partnerships or
third-party reseller arrangements, and expects to begin expanding its consumer
operations in late 1997 or early 1998.
In addition, over the next 18 months, the Company expects to continue
expanding its operations beyond the six markets operating at the time of the
Acquisition. As of December 31, 1996, the Company operated in six metropolitan
markets: Los Angeles, Miami, Chicago, Detroit, Dallas and Houston. The Company
commenced operations in Orlando in March 1997 and plans to initiate commercial
fleet service in San Francisco and San Diego before the end of 1997 and a
further six markets (Washington, D.C./ Baltimore, New York, Boston,
Philadelphia, Indianapolis and Columbus) before the end of 1998. The
29
<PAGE>
Company made capital expenditures and incurred expenses in 1996 and the first
six months of 1997 in connection with network build-out in these markets. The
Company also incurred expenses in connection with the network build-out required
to grandfather its FCC licenses in 11 other metropolitan markets in which it may
commence offering commercial fleet services in the future. See
"Business--Regulation-- Construction and Operation of Grandfathered Systems."
REFREQUENCING COSTS. The FCC has required all LMS systems that were
constructed and in operation as of February 3, 1995 to conform their
already-constructed facilities to a new LMS frequency band plan. The frequency
conversion must be completed by April 1, 1998, the date on which authority to
operate on the previous LMS frequencies will expire. The Company has begun an
active program of converting installed VLUs to operate within the new frequency
band plan. The Company anticipates that the frequency conversion process for its
existing markets will be completed prior to the April 1, 1998 deadline. The
Company estimates that the total cost of such conversion will be approximately
$7.2 million. Approximately $5.9 million of such estimated cost was accrued in
1995 to account for VLUs installed prior to the Acquisition, and the remainder
was accrued in 1996 to account for VLUs installed after the Acquisition that
operated on the old frequency. New markets are being opened with equipment that
conforms to the new band plan requirements and all VLUs sold after December 31,
1996 operate on the new frequency. See "Business--Regulation--Frequency
Conversion."
OPERATING LOSSES. The Company has experienced significant operating and net
losses and negative EBITDA in connection with the build-out of its networks and
the operation of its business, and expects to continue to experience operating
and net losses and negative EBITDA until such time as it develops a
revenue-generating customer base sufficient to fund its operating expenses. See
"Risk Factors--Net Losses and Negative EBITDA." The Company expects to build its
customer base over time by (i) increasing the number of markets in which it
operates from six, as of December 31, 1996, to 15 by the end of 1998 and (ii)
increasing its market penetration by building a larger and more productive sales
force. The Company anticipates that revenues will increase in 1997. The
Company's operations in Los Angeles are currently generating positive EBITDA
(excluding corporate overhead). The Company's management expects several
additional markets to begin generating positive EBITDA (excluding corporate
overhead) by the end of 1997 and the Company as a whole to achieve positive
EBITDA in 1999. However, the Company also expects that operating and net losses
and negative EBITDA will increase as the Company completes its market build-out
and that, under its current business plan, operating and net losses and negative
EBITDA will continue at least through the end of fiscal 1998. See "--Liquidity
and Capital Resources" and "Projected Financial Information."
FINANCIAL STATEMENT PRESENTATION. The audited consolidated financial
statements of Teletrac, Inc. for 1996 include the period prior to the
Acquisition, from January 1, 1996 through January 16, 1996. During such period,
Teletrac, Inc. had no revenues and nominal expenses. No information with respect
to the operations of the fleet management and vehicle location business by
AirTouch Teletrac during such period is included in the financial statements of
Teletrac, Inc.
COMPONENTS OF REVENUES. The Company's revenues are generated from two
primary sources: monthly service fees from customers and the sale of equipment
and software to customers. Commercial customers are charged flat monthly service
fees for vehicle location and related communication services and consumer
customers are charged flat monthly service fees for vehicle location services.
The Company sells VLUs, messaging terminals, personal computers and its
proprietary software to commercial fleet customers, and sells VLUs to consumer
customers. See "Business--Commercial Fleet Management" and "Business--Consumer
Vehicle Services." For the year ended December 31, 1996 and the six months ended
June 30, 1997, service revenues represented approximately 55.9% and 50.8% of
total revenues, respectively, and revenues from equipment sales represented the
remaining 44.1% and 49.2%, respectively. The Company expects that, as it builds
its customer base by expanding into new markets and increasing penetration of
its existing markets, the percentage of its revenues generated by equipment
sales will
30
<PAGE>
initially increase. Over time, as the monthly service fee base grows, the
Company expects that revenues from equipment sales will decrease, and service
revenues will increase, as a percentage of total revenues.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996.
REVENUES. Total revenues increased to $11.4 million for the six months
ended June 30, 1997 from $5.9 million for the six months ended June 30, 1996, an
increase of 93%.
Equipment revenues increased to $5.6 million for the six months ended June
30, 1997 from $1.8 million for six months ended June 30, 1996, an increase of
211%, principally due to an increase in the Company's commercial sales efforts.
Following the Acquisition, the Company significantly increased the size of its
salesforce, which did not significantly impact revenues from equipment sales for
the six-month period ended June 30, 1996. Commercial equipment sales were 98%
and 100% of total equipment sales for the 1997 and 1996 periods, respectively.
Service revenues increased to $5.8 million for the six months ended June 30,
1997 from $4.2 million for comparable period of fiscal 1996, an increase of 38%,
primarily due to an increase in the number of commercial units in service to
54,430 at June 30, 1997 from 37,632 at June 30, 1996.
COST OF REVENUES. Cost of revenues includes the cost of equipment and the
direct cost of providing service (network communications, billing, roadside
assistance and bad debt expense). Cost of revenues increased to $5.2 million for
six months ended June 30, 1997 from $1.8 million for six months ended June 30,
1996 primarily as a result of the higher number of new units sold. In addition,
the Company incurred $0.5 million in the first half of 1997 on network
communications costs associated with installing and maintaining its networks in
markets that are not yet opened.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $10.2 million, to $18.3 million, in the
first six months of 1997 from $8.1 million for the six months ended June 30,
1996. The increase was primarily related to increased sales personnel for the
commercial operations, the funding of new product development and increased
administrative support for the growth of the customer base. The Company expensed
$2.0 million in the first half of 1997 relating to research and development for
its new IBSU.
REFREQUENCING COSTS. Refrequencing costs were not accrued for the 1997
period since all units placed in service in 1997 are operating on the new
frequency.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$1.0 million in the first half of 1997 from $0.5 million for the 1996 period,
primarily due to depreciation on additional assets related to the new market
build-out and additional infrastructure in existing markets.
OPERATING LOSSES. Operating losses incurred by the Company were $13.1
million for the six months ended June 30, 1997, as compared to $4.8 million for
the six months ended June 30, 1996, for the reasons discussed above.
EBITDA. EBITDA, which excludes refrequency costs, was $(12.1) million for
the six months ended June 30, 1997, and $(3.9) million for the first half of
1996, for the reasons discussed above.
INTEREST EXPENSE. Interest expense was $86,400 for six months ended June
30, 1997, compared to $10,100 for the first half of 1996. The Company's interest
expense for the first half of 1997 related to $2.0 million of long-term lease
commitments.
NET LOSS. For the reasons discussed above, net loss increased to $12.8
million for the six months ended June 30, 1997 from $4.8 million for the six
months ended June 30, 1996.
31
<PAGE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995.
REVENUES. Total revenues increased to $16.0 million for 1996 from $13.2
million for 1995, an increase of 21.2%.
Equipment revenues increased to $7.0 million for 1996 from $4.0 million for
1995, an increase of 75.0%, principally due to an increase in the Company's
sales efforts. Commercial equipment sales increased to $6.9 million for 1996
from $2.6 million for 1995, and the number of gross commercial units added
during 1996 increased to approximately 14,500 units from approximately 8,500
units for 1995. Consumer equipment sales declined to $152,000 for 1996 from $1.4
million for 1995 as a result of the Company's decision not to recommence the
marketing of consumer services during the year.
Service revenues increased to $8.9 million for 1996 from $8.6 million for
1995, an increase of 3.5%, primarily due to an increase in the number of
commercial units in service, to 43,156 at December 31, 1996 from 35,465 at
December 28, 1995. The increase in commercial fleet service revenues was
partially offset by a decline in consumer vehicle service revenues for the
reasons discussed above.
COST OF REVENUES. Cost of revenues increased to $7.0 million for 1996 from
$4.3 million for 1995, primarily as a result of the higher number of new units
sold and the larger customer base. In addition, the Company incurred costs
associated with building and maintaining its networks in markets that are not
yet opened.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses declined by $3.5 million, to $20.2 million for 1996 from
$23.7 million for 1995. Selling, general and administrative expenses also
decreased as a percentage of revenues, from 179% for 1995 to 127% for 1996. The
decline was primarily due to $3.2 million in severance and retention payment
expenses incurred by AirTouch Teletrac for 1995 and to decreases in overhead and
administrative costs.
REFREQUENCING COSTS. Refrequencing costs accrued for 1996 were $1.3
million, compared to $5.9 million accrued for 1995. The 1996 accrual reflects
the estimated cost of conversion of VLUs placed in service after the
Acquisition. The 1995 accrual reflects the estimated cost of conversion of VLUs
in service with customers at the time of the Acquisition.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization declined by
$3.2 million to $1.3 million for 1996 from $4.5 million for 1995, primarily due
to the lower book value recorded by the Company for the assets acquired in the
Acquisition as compared to the historical cost recorded by AirTouch Teletrac.
The Company expects depreciation to increase for 1997 as assets acquired in
connection with the Company's planned market expansion, which are currently
classified as construction in progress, are placed in service during the year.
ASSET IMPAIRMENT. Because the purchase price paid for the assets of
AirTouch Teletrac was $11.0 million less than the historical cost of such assets
recorded by AirTouch Teletrac, AirTouch Teletrac recorded an asset impairment of
$11.0 million for 1995.
OPERATING LOSSES. Operating losses incurred by the Company were $13.9
million for 1996, compared to $36.1 million for 1995, a reduction of 61%, for
the reasons discussed above.
EBITDA. EBITDA, which excludes refrequencing costs and asset impairment,
was $(11.3) million for 1996 and $(14.8) million for 1995, an improvement of
24%, for the reasons discussed above.
INTEREST EXPENSE. Interest expense was $108,600 for 1996, compared to $21.2
million for 1995. This decline reflects the fact that the Company did not assume
the approximately $226.1 million of long-term debt of AirTouch Teletrac. The
Company's interest expense for 1996 related to $2.0 million of long-term lease
commitments.
32
<PAGE>
NET LOSS. For the reasons discussed above, net loss decreased to $13.8
million for 1996 from $57.4 million for 1995.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994.
REVENUES. Total revenues decreased to $13.2 million for 1995 from $15.3
million for 1994.
Equipment revenues declined to $4.0 million for 1995 from $5.8 million for
1994. As a result of the reduction in sales force implemented by AirTouch
Teletrac in 1995, the gross number of units sold declined to approximately
14,700 for 1995 from approximately 17,700 for 1994.
Service revenues increased to $8.6 million for 1995 from $7.4 million for
1994, an increase of 16.2%. The increase in service revenues is primarily
attributable to the increase in units in service to 49,279 at December 31, 1995
from 40,901 at December 31, 1994.
Revenues for 1995 and 1994 also included $681,000 and $2.1 million,
respectively, of revenues attributable to an engineering consulting contract
between AirTouch Teletrac and Ituran Location and Control Ltd., an Israeli
licensee ("Ituran"), relating to the construction in Israel of a network similar
to the Company's. Construction began in 1994 and was completed in 1995.
COST OF REVENUES. Cost of revenues declined to $4.3 million for 1995 from
$6.4 million for 1994. As indicated above, equipment sales decreased for 1995 as
compared to 1994, which led to a decrease in equipment costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses declined by $4.5 million, to $23.7 million for 1995 from
$28.2 million for 1994. During 1995, AirTouch Teletrac's management made the
decision to sell its assets, at which point AirTouch Teletrac began to reduce
its expenses. The number of employees was reduced from 197 at December 31, 1994
to 117 at December 31, 1995. Reductions were also made in certain administrative
expenses.
REFREQUENCING COSTS. Refrequencing costs accrued for 1995 are the estimated
costs for the conversion of VLUs in service with customers at the time of the
Acquisition. Because the change in frequency was mandated by a 1995 order of the
FCC, there was no expense recorded in 1994.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
declined to $4.5 million for 1995 from $5.2 million for 1994. This decline was
due to a reduction in the aggregate value of the Company's plant, property and
equipment as certain assets became fully depreciated and additional assets were
not acquired.
OPERATING LOSSES. AirTouch Teletrac incurred operating losses of $36.1
million for 1995, compared to $24.5 million for 1994, for the reasons discussed
above.
EBITDA. EBITDA, which excludes refrequencing costs and asset impairment,
was $(14.8) million for 1995 and $(19.3) million for 1994, for the reasons
discussed above.
INTEREST EXPENSE. Interest expense increased to $21.2 million for 1995 from
$15.6 million for 1994 due to the increase in AirTouch Teletrac's long-term debt
to $226.1 million for 1995 from $203.3 million for 1994.
NET LOSS. Net loss increased to $57.4 million for 1995 from $39.8 million
for 1994, for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has required a substantial investment of capital in order to
fund the Acquisition, its subsequent operating losses and the build-out of its
networks in new markets. During 1996, the Company
33
<PAGE>
used $16.2 million of cash in its operating activities, $7.1 million for
purchases of property, plant and equipment and $2.1 million to acquire the
assets of AirTouch Teletrac. For the six months ended June 30, 1997, the Company
used $16.5 million of cash for operating activities and $5.9 million for
purchases of property, plant and equipment. These cash outflows were financed
through private equity placements of common and preferred stock. From November
14, 1995 through December 6, 1996, the Company issued and sold 244,000 shares of
its Class A Common Stock for an aggregate purchase price of $24.4 million
pursuant to the terms of a Stock Purchase Agreement, dated November 14, 1995,
among the Company and certain investors. From March 29, 1996 through December 6,
1996, the Company issued and sold 5,000 shares of its Class A Common Stock for
an aggregate purchase price of $500,000 pursuant to a Subscription Agreement,
dated March 29, 1996, among the Company and certain other investors. On December
6, 1996, the Company issued and sold 190,476.19 shares of its Series A
Redeemable Convertible Participating Preferred Stock for an aggregate purchase
price of $33.0 million pursuant to the terms of a Stock Purchase Agreement,
dated December 6, 1996, among the Company and certain investors. At June 30,
1997, the Company had working capital of $5.3 million and restricted cash of
$1.8 million.
On August 6, 1997, the Company sold 105,000 Units, consisting of an
aggregate $105,000,000 of its 14% Senior Notes due 2007 and 105,000 Warrants,
for an aggregate purchase price of $101,325,000. The Company has purchased $39.9
million of government securities (the "Pledged Securities") which it has pledged
to Norwest Bank, National Association as Collateral Agent to secure the payment
of the first six semi-annual payments of interest on the Notes. The Company
intends to use the net proceeds of such Units Offering (i) to fund expenditures
for the continued construction, development and roll-out of its networks and
services, including site construction, marketing costs and the purchase of
system hardware and (ii) for general corporate purposes, including the funding
of operating losses, working capital requirements and the possible acquisition
of additional radio spectrum in metropolitan markets.
As indicated above, capital expenditures were $7.1 million for 1996 and $5.9
million for the first six months of 1997, primarily for the build-out of the
Company's networks in new markets. The Company currently expects that its
aggregate capital expenditures (excluding the acquisition of spectrum rights)
will be $14.8 million for 1997 and an aggregate $17 million for both 1998 and
1999 combined. These capital expenditures will consist primarily of costs
associated with the opening of new markets in 1997 and 1998. In addition, the
Company's capital expenditure plans also include network design and development,
the maintenance of existing markets and other capital improvements.
CREDIT FACILITY
On September 18, 1997, Teletrac, Inc. entered into a bank credit facility
(the "Credit Facility") pursuant to which Banque Paribas, Fleet National Bank
and certain other banks (the "Banks") have agreed to provide the Company a five
and one-half $30 million secured revolving line of credit. The loans under the
Credit Facility are, at the election of the Company, domestic loans or
Eurodollar loans. During the first year of the facility, loans bear interest (i)
in the case of domestic loans, at 2.50% per annum plus a reference rate (which
is the prime rate) and (ii) in the case of Eurodollar loans, at 3.50% per annum
plus a reference Eurodollar loan rate. For the remaining term of the facility,
the applicable margin rates may be increased or decreased quarterly depending
upon the Company's debt to operating cash flow ratio.
The maximum aggregate commitment of the Banks under the Credit Facility is
reduced each quarter, beginning December 31, 1999, until all amounts borrowed
thereunder are paid in full on March 31, 2003. All amounts outstanding in excess
of the commitment as so reduced must be paid by the Company in full. The
aggregate commitment of the Banks under the Credit Facility will be reduced by a
total of $6.0 million over the four quarters ended September 30, 2000, by a
total of $9.0 million over each of the four quarters ended September 30, 2001
and 2002, and by a total of $6.0 million over the two quarters ended March 31,
2003.
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The Credit Facility contains restrictive covenants that, among other things,
impose limitations on the Company and its subsidiaries with respect to (i) the
incurrence and maintenance of indebtedness, including guarantees, (ii) the
incurrence, creation or maintenance of liens, (iii) the making of dividends and
certain payments, (iv) transactions with affiliates, (v) the disposition of
assets, (vi) the types of acquisitions that can be made and the amount which can
be invested in acquisitions, (vii) the amount of rental payments that can be
incurred, and (viii) consolidations and mergers. The Credit Facility also
provides for events of default customary in facilities of its type.
AGREEMENTS WITH TADIRAN
The Company has entered into a contract with Tadiran to purchase 200,000
VLUs between October 1996 and October 1998. The agreement permits the Company to
effectively double the period of time in which it takes delivery of VLUs and to
cancel its order at any time, subject to payment of a nominal fee per VLU not
purchased and certain other expenses. In addition, the Company has funded
approximately $2.0 million of research and development costs with Tadiran
related to the Integrated Base Station Unit ("IBSU"), and expects to fund an
additional $2.5 million in the future on this project. See "Business-- Network
and Subscriber Equipment." Although the Company does not have any other material
commitments to fund research and development, such expenditures may occur from
time to time. See "Business-- Network and Subscriber Equipment."
CAPITAL NEEDS FOR NETWORK BUILD-OUT
During 1996 and the first six months of 1997, the Company experienced
significant operating and net losses and negative EBITDA in connection with the
build-out of its networks and the operation of its business. Management
anticipates that such losses and negative EBITDA will continue for the remaining
portion of 1997 and for 1998 as the Company implements its growth strategy. The
Company's Los Angeles operations are currently generating positive EBITDA
(excluding corporate overhead). Management believes that the Company as a whole
will achieve positive EBITDA in 1999 and positive net income in 2000. However,
due to the high level of risk in the Company's industry and in its current
growth strategy, the risk that the Company will not be able to complete its
market build-out on time and within budget, and other risks identified elsewhere
herein, there can be no assurance that such results will be realized. See "Risk
Factors" and "Projected Financial Information."
FCC rules currently provide that additional licenses to operate LMS systems,
including licenses to operate additional LMS systems in the markets in which the
Company operates, may be allocated by auction. The Company intends to
participate in future auctions of LMS spectrum, including in those markets in
which it currently operates. Management expects that such auctions will occur in
early 1998, and the Company may require additional funds to participate in such
auctions. See "Risk Factors," "Use of Proceeds" and "Business--Regulation--LMS
Spectrum Auctions."
Based on its current operating plan, which includes the expansion of the
Company's operations to 15 markets, management anticipates that the net proceeds
to the Company from the Unit Offering, together with its existing cash balances
and cash flow from operations, will be sufficient to build out its operations in
the new markets planned to open in 1997 and 1998 and meet its other cash
requirements for at least the next 18 to 24 months. However, the Company
believes that it may have opportunities to expand its business significantly and
that access to capital would enable it to expand more quickly and effectively.
See "Risk Factors--Risks of Expansion and Management of Growth." If the
assumptions underlying the current operating plan are not met, or if the Company
expands its operations beyond the 15 planned markets, the Company would need
additional capital. There can be no assurance that additional financing would be
available or that, if available, it would be obtained on terms favorable to the
Company. See "Risk Factors--Potential Future Capital Needs."
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<PAGE>
BUSINESS
Teletrac is a leading provider of vehicle location and fleet management
services, including associated two-way digital wireless messaging, to commercial
fleet operators. The Company has developed a proprietary land-based location
technology that provides customers with a low-cost, accurate and reliable real-
time method of locating vehicles in selected metropolitan areas. The Company's
system is designed to enable customers to better manage their mobile workforce,
provide security for their property and personnel and communicate more
effectively with mobile workers.
As of December 31, 1996, the Company operated in six metropolitan markets:
Los Angeles, Miami, Chicago, Detroit, Dallas and Houston. The Company commenced
operations in Orlando in March 1997 and plans to begin providing vehicle
location and fleet management services in eight additional markets by the end of
1998, giving the Company operations in 15 of the largest MSAs in the United
States, including New York and Boston. As of June 30, 1997, the Company served
over 2,000 commercial fleet accounts, more than any other provider of fleet
vehicle location services, and had 54,430 units in service with commercial
customers. In its Miami and Los Angeles markets, the Company also uses its
proprietary location systems to provide vehicle location and stolen vehicle
recovery services to consumers. As of June 30, 1997, the Company had 10,697
consumer units in service.
Market studies indicate that there are approximately 7.6 million total
commercial fleet vehicles in the 15 markets in which the Company operates or
plans to operate. The Company believes that there is substantial demand for
cost-effective communications services that offer both reliable location
tracking and two-way wireless messaging in metropolitan areas. The Company's
products can be used either alone or in conjunction with other communications
technologies. The Company believes that the majority of its target customers'
vehicles are currently equipped with wireless communications devices that do not
provide automatic location features, such as two-way radio, specialized mobile
radio ("SMR"), pagers and cellular devices. The Company's products and services
allow commercial fleet operators to (i) increase driver productivity and fleet
efficiency, (ii) improve customer service, (iii) limit unauthorized vehicle use,
and (iv) reduce driver overtime. The Company's customers include metropolitan
commercial fleets (such as trade service providers, delivery services, bus and
taxi fleets, ambulance companies, telecommunications companies, utility
companies, municipal government vehicles and law enforcement agencies) and
long-haul trucking fleets when operating within metropolitan markets.
The Company offers a range of fleet management solutions, depending on the
customer's budget and location and messaging needs. All of these solutions
involve the installation of a VLU in each vehicle. The VLU is a radio
transceiver that receives and transmits signals used to determine a vehicle's
location. In addition to the VLU, commercial fleet customers generally purchase
software or location services from the Company. The Company's primary product
for commercial fleets is Fleet Director-Registered Trademark-, a proprietary
software application that permits simultaneous location of all fleet vehicles on
a real-time 24-hour-a-day basis through a digitized map displayed on the
customer's dedicated personal computer, which is connected to the Company's
networks. Fleet Director-Registered Trademark- can be complemented with the
Company's messaging units, which allow two-way messaging between the fleet
dispatcher and drivers directly from the Fleet Director-Registered Trademark-
screen. The Company also offers Fleet Reporter-TM-, a lower cost alternative to
Fleet Director-Registered Trademark- that provides fleet operators with daily
printed reports of vehicle locations and access to real-time location
information through OZZ-Registered Trademark-, a telephone-operated information
system. In the second half of 1997, the Company intends to introduce
Winfleet-TM-, a Microsoft Windows-Registered Trademark--based application based
on Fleet Director-Registered Trademark- that will not require a dedicated
computer.
The Company believes that its wireless location and two-way messaging
technology can serve its customers more reliably and more cost-effectively than
competing systems, including those which rely on GPS technology combined with
other forms of wireless communication. The Company's location technology, which
consists of proprietary software and land-based transmitters and receivers that
are licensed to operate in the 904-909.75 and 927.75-928 MHz bandwidth, operates
reliably in a high-rise urban setting.
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GPS-based systems, on the other hand, can lose accuracy in areas where high-rise
buildings or other large structures obstruct the signal between the satellite
and the vehicle. Unlike the Company's technology, GPS-based location systems
must be coupled with a wireless communication system to transmit location
information to a fleet operator. The other forms of wireless communication used
in conjunction with GPS technology, such as cellular and SMR, generally make the
incremental cost of determining and transmitting a vehicle's location to a fleet
operator more expensive than the Company's technology.
In its Miami and Los Angeles markets, the Company also uses its proprietary
location systems to provide vehicle location and stolen vehicle recovery
services to consumers. The Company's service locates and tracks stolen vehicles
in real time and its equipment can be integrated with a vehicle's alarm system
and/or ignition so that it is automatically activated if the vehicle is stolen.
The Company's service also allows a subscriber to initiate vehicle location in
other emergency or roadside assistance situations.
In 1995, prior to the Acquisition, the Company's predecessor ceased to
actively market its consumer vehicle services. The Company has continued
providing consumer service as a legacy of the business acquired from AirTouch
Teletrac but has not launched any new marketing efforts. While the Company
intends to focus on its commercial business, it is currently exploring various
potential strategies for marketing and distributing its products to consumers,
including through strategic partnerships or third-party reseller arrangements,
and expects to begin expanding its consumer operations in late 1997 or early
1998.
BUSINESS STRATEGY
The Company's objective is to enhance its position as the leading national
provider of vehicle location and fleet management services in metropolitan areas
by exploiting its proprietary technology and systems. The key elements of the
Company's strategy are:
INCREASE MARKET PENETRATION. In its six original markets, the Company is
rapidly building a trained sales force to market its products and services to
operators of commercial fleets. Prior to the Acquisition, AirTouch Teletrac
terminated all of its active sales and marketing efforts. Since the Acquisition,
the Company hired approximately 90 direct sales representatives to service its
six original metropolitan markets and the Company believes that it will more
effectively exploit opportunities in its existing markets as its sales force
gains experience. See "Commercial Fleet Management--Sales, Marketing and
Customer Service." The Company believes it requires a modest penetration of its
target markets to achieve its business plan.
EXPAND GEOGRAPHIC COVERAGE AREAS. In 1996, the Company began constructing
the network infrastructure to expand its coverage from six to 15 metropolitan
markets. In March 1997, the Company introduced commercial fleet services in
Orlando, and the Company expects to introduce commercial fleet services in two
additional U.S. markets by the end of 1997 and a further six markets by the end
of 1998. The Company expects to begin offering commercial fleet service in San
Francisco and San Diego in the third quarter of 1997, and in the remaining
markets during 1998. Management believes that, in addition to providing services
to local fleet operators in its new markets, the planned geographic expansion
will make the Company's services more appealing to regional and national
customers that have fleets in several metropolitan areas. In connection with the
roll-out of its commercial fleet services, the Company plans to add over 150 new
sales representatives in its new markets by 2001. The Company also holds FCC
licenses in 11 additional markets, but the Company expects that it would have to
obtain additional licenses in certain of such 11 markets before it could
commence commercial operations.
CAPITALIZE ON LOW-COST SERVICE. The Company believes that its proprietary
location solutions permit lower cost operation than most competing technologies,
which generally require more expensive hardware, more expensive airtime, or
both. With the Company's technology, the incremental cost of locating a vehicle
and transmitting its location to the fleet operator is nominal, which permits
the Company to provide
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<PAGE>
services for a relatively low monthly fee. This price structure permits
customers to locate their vehicles frequently throughout the day (typically,
every 15 minutes), which the Company believes substantially improves the
customer's ability to increase fleet efficiency and monitor driver compliance.
The Company believes that the low cost of its products and services also enables
its customers to quickly recover the cost of their purchase by reducing overtime
costs and increasing fleet efficiency. The Company intends to pursue a larger
market share by emphasizing its cost advantage and rapid return on investment.
EXTEND PRODUCT OFFERINGS. The Company believes that its ability to expand
and maintain its customer base depends on its continued marketing of low-cost
and user-friendly solutions for fleet management. The Company plans to offer the
first generation of Winfleet-TM-, a Windows-Registered Trademark--based
solution, in the second half of 1997. The first generation product is a
simplified version of Fleet Director-Registered Trademark- that does not require
a dedicated computer. The second generation of Winfleet-TM- is being designed
with an open client server architecture to permit it to operate on a variety of
hardware platforms and to be integrated with the customer's other management
information systems to serve the needs of customers with more sophisticated
information needs and capabilities. The Company is also developing an Internet
version of its fleet management software. In addition, the Company is exploring
technological improvements that would expand the Company's messaging
capabilities to include additional services such as free text return messaging,
wireless e-mail, fax, database queries, credit card verification and inventory
management.
EXPLOIT NEW BUSINESS OPPORTUNITIES. The Company is considering entering
into a number of strategic alliances and partnerships to develop and offer new
products. In conjunction with certain strategic suppliers, the Company is
currently developing a portable miniaturized device that would permit personal
location through the Company's vehicle location networks. The Company also
licenses its technology to Ituran, which provides location information and
wireless messaging services in Israel, and is pursuing additional opportunities
to license its technology abroad. In addition, the Company has discussed joint
arrangements with several companies providing vehicle location coverage in rural
locations. The Company has developed, and is currently testing, a prototype
hybrid device that combines a VLU for use in covered metropolitan areas and a
GPS location device and a cellular modem that can operate on a cellular digital
packet data ("CDPD") network and/or a traditional cellular system for use
outside the Company's system coverage areas. Such a device could permit
customers to locate vehicles between covered markets (such as Los Angeles and
San Francisco) on long-haul routes or in other areas where the Company does not
currently operate.
COMMERCIAL FLEET MANAGEMENT
TARGET MARKETS
The Company believes that there is substantial demand in metropolitan
markets for cost-effective communications services that offer both reliable
location tracking and two-way wireless messaging for metropolitan fleets and for
long-haul fleets when operating within metropolitan areas. Commercial fleet
operators need a location and messaging solution that can accurately locate
vehicles in urban settings in order to (i) increase driver productivity and
fleet efficiency, (ii) improve customer service, (iii) limit unauthorized
vehicle use, and (iv) reduce driver overtime. Commercial fleet operators also
demand security systems for fleet drivers, vehicles and cargo.
The Company's commercial fleet services provide reliable, low-cost location
information, two-way messaging and fleet management services in real time. The
Company markets its fleet management products both to metropolitan fleets and
long-haul trucking fleets, which may desire to optimize driver efficiency in
metropolitan areas because of the impact on customer service and overall fleet
productivity. The Company believes that urban commercial fleets represent the
largest market for its products. Market studies indicate that there are
approximately 7.6 million total commercial fleet vehicles in the 15 markets in
which the Company currently operates or plans to operate.
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<PAGE>
Many metropolitan commercial fleet operators have not employed location
information or messaging services because of the lack of low-cost, reliable
location and messaging alternatives. Two-way voice services (such as cellular,
SMR and two-way radio) cost significantly more to provide a similar level of
location services and rely on the driver to report vehicle location. Although
these two-way voice services may also be integrated with GPS-based technologies
to provide location information, these integrated solutions can be unreliable in
a high-rise urban setting and generally require more expensive equipment and/or
higher service fees for a level of service comparable to the Company's. A
significant number of metropolitan fleet vehicles utilize lower-cost one-way
paging services, but such services lack both location tracking and two-way
messaging capabilities. Management believes its commercial fleet service
generates demonstrable cost benefits and efficiency gains for its metropolitan
fleet customers.
The Company believes that its cost-effective network allows it to provide
more comprehensive fleet management services than are available at a competitive
price using another technology. To provide effective fleet monitoring and
management services in an urban or suburban environment, fleet operators need to
frequently update the location of their vehicles. The Company's commercial fleet
customers typically locate every vehicle simultaneously every 15 minutes
throughout the day and send messages to the drivers as needed. Competitive
systems, which rely on more expensive cellular or SMR communications coupled
with a GPS system, generally do not offer a similar level of service at a
similar price. The Company believes that less frequent location information
reduces the effectiveness of fleet management in metropolitan markets.
Due to the diversity of metropolitan commercial fleets, the Company's
customer base ranges from independent plumbers with one or two vehicles to large
municipal bus and ambulance fleets and national delivery companies. The
Company's range of products allows it to provide a fleet management solution to
meet each segment of this market. However, the Company has recently determined
to target marketing and sales efforts primarily at fleets of at least ten
vehicles, which it believes it can service more cost-effectively than smaller
fleets. The Company believes that the expansion of its networks to its new
metropolitan markets will allow it to attract nationwide customers with fleet
operations in a number of metropolitan markets. Among the Company's current
customers are Emery Air Freight, Inc., Budget Rent-a-Car Corporation, Brinks
Incorporated (security transportation), Roto Rooter Corp., Tele-Communications,
Inc., department stores such as Target, and the Dallas Independent School
District.
PRODUCTS AND SERVICES
The Company offers its customers a range of fleet management, communications
and security products. All of the Company's products rely on its networks of
radio transmitters and receivers. Each customer must equip its vehicles with a
VLU in order to use the location and communication features of the Company's
products.
FLEET MANAGEMENT. The Company's fleet management software products and
services are designed to address the needs of a wide range of customers. The
Company believes that software solutions that must be customized to the needs of
individual fleet customers are too expensive and time-consuming to be sold
effectively to any but the largest fleets. By emphasizing its off-the-shelf,
user-friendly software, the Company believes it can attract a wide range of
customers, many of whom would otherwise use less sophisticated communication and
management systems, if any.
FLEET DIRECTOR-REGISTERED TRADEMARK- is a proprietary software application
that provides fleet customers accurate fleet vehicle location through the
customer's detailed digitized map of a metropolitan area displayed on the
customer's dedicated personal computer, which is connected to the Company's
networks. Fleet Director-Registered Trademark- displays the position of all
VLU-equipped vehicles at periodic intervals determined by the customer
(typically every 15 minutes), at the time of each communication with a vehicle
and otherwise as specified by the customer. Customers can adjust the level of
map detail through a zoom in/zoom out feature, allowing a customer to
simultaneously view the location of all fleet vehicles or to focus in on a
single vehicle. Fleet operators can
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<PAGE>
establish "zones of compliance" around their customers' locations, their
drivers' homes, or other locations to detect whether vehicles enter or leave
specific areas. Fleet Director-Registered Trademark- also produces reports that
detail a driver's route and the time of each stop and provides documentation for
customers who require verification of deliveries. Such reports are produced on
screen in real-time and can be faxed or electronically transmitted daily to the
customer by the Company. Real-time location reports can also be saved on the
customer's computer to be retrieved and reviewed on-screen or printed at a later
time.
Fleet Director-Registered Trademark- can also act as a platform from which
the customer can use the Company's two-way communications products (discussed
below) to send and receive messages to and from drivers. Customers can type
messages directly to drivers from the computer on which Fleet
Director-Registered Trademark- operates and send the messages to a single
vehicle, several vehicles or the entire fleet.
Fleet Director-Registered Trademark- operates in a DOS environment on a
dedicated personal computer located in the customer's office. The customer may
maintain a dedicated line to the Company's local network control center to
continually track vehicles and communicate with drivers. Alternatively, the
Fleet Director-Registered Trademark- system may connect with the Company's
system only as needed.
The Company had approximately 1,800 Fleet Director-Registered Trademark-
customer accounts as of June 30, 1997, constituting 90% of its commercial
service customer accounts.
Fleet Reporter-TM- is a lower cost alternative service to Fleet
Director-Registered Trademark- that provides customers with daily hard-copy
reporting of vehicle locations and OZZ-Registered Trademark- mobile information,
but does not require the customer to use a computer. The Company's local network
will periodically (typically every 15 minutes) locate each vehicle in a fleet
and send the Fleet Reporter-TM- customer a daily fax detailing the location of
each vehicle throughout the day. The customer can compare the report to each
driver's time card or delivery log for compliance purposes, or otherwise use
such data to manage its fleet more efficiently. Each customer who subscribes to
Fleet Reporter-TM- can also use the OZZ-Registered Trademark- mobile information
service (discussed below) to locate specific vehicles in real-time using a
telephone, and has access to all of the security features of the Company's
system. Fleet Reporter-TM- does not require the customer to have a computer and
does not provide customers with a communications system. The Company had
approximately 200 Fleet Reporter-TM- customer accounts at June 30, 1997,
constituting 10% of its commercial service customer accounts. WINFLEET-TM- is
the first generation of a Microsoft Windows-Registered Trademark--based software
system that the Company is currently developing. The first generation product,
which would not require a dedicated computer, is a simplified version of Fleet
Director-Registered Trademark-. The second generation of Winfleet-TM- is being
designed with an open client server architecture to permit it to operate on a
variety of hardware platforms and to be integrated with the customer's other
management information systems (such as billing, accounting and human
resources), allowing the customer to use location information to measure and
improve productivity in the field. The Company plans to introduce first
generation Winfleet-TM- to customers in the second half of 1997.
INTERNET SERVICES are currently being developed by the Company to allow
customers to monitor vehicle locations on a detailed map in real-time, but would
not allow communications between a customer and its drivers. This product would
be a lower cost alternative similar to Fleet Reporter-TM-, but would be marketed
to customers with existing computer and Internet capabilities. The Company plans
to introduce an Internet-based product in 1997.
COMMUNICATIONS. The Company offers two communication systems to its Fleet
Director-Registered Trademark- customers. The Mobile Data Terminal ("MDT") is
the Company's more advanced two-way messaging system. It allows for alphanumeric
communications from the fleet operator to its drivers and up to thirty-five pre-
programmed messages from the drivers to the fleet operator. The Status Messaging
Terminal ("SMT") is a low-cost alternative to the MDT. The SMT allows for four
pre-programmed messages which may be sent from the customer to the drivers and
eight pre-programmed messages which may be sent from the drivers to the
customer. The MDT and the SMT are both small terminals typically mounted on the
fleet vehicle's dashboard and are connected to the VLU.
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Both the MDT and the SMT automatically provide customers with an electronic
"receipt" when the message is received and therefore do not rely on drivers for
vehicle locations or message delivery. As a result, the Company's system
provides more reliable location information and messages than many competing
technologies. The Company's communication applications generally have lower
service costs than conventional real-time, two-way communication services, such
as cellular, SMR and ESMR services. In 1996, the Company sold approximately
3,200 MDTs and approximately 1,300 SMTs, and approximately 30% of all new units
sold to commercial customers in 1996 were SMTs or MDTs. In the first six months
of 1997, the Company sold approximately 3,900 MDTs and approximately 2,300 SMTs,
and approximately 40% of all new units sold to commercial customers in the
period were SMTs or MDTs.
Upon installation of the IBSU currently under development by Tadiran, the
Company's system will support two-way free text alphanumeric messaging between
the customer and its drivers. In order to offer two-way free text alphanumeric
messaging, however, the Company will also need to develop a new messaging unit
capable of composing free text alphanumeric messages. See "--Network and
Subscriber Equipment".
The following chart sets forth the list price of the Company's commercial
fleet equipment, software and services:
<TABLE>
<CAPTION>
LIST PRICE FOR MONTHLY SERVICE
FUNCTION PRODUCT EQUIPMENT FEE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Vehicle Location (required Vehicle Location Unit (VLU) $595 per vehicle $25 per vehicle
for all customers)
Fleet Management Fleet $2,695 for Fleet None
Director-Registered Trademark- Director-Registered Trademark-
Software
Fleet Reporter-TM- None $4 per vehicle
Communications Mobile Data Terminal (MDT) $300 per vehicle $14 per vehicle
Status Messaging Terminal $150 per vehicle $4 per vehicle
(SMT)
</TABLE>
SECURITY SERVICES. The Company offers its commercial fleet customers
several vehicle security and driver safety options that operate through the
Company's location networks. A VLU can be connected directly to a vehicle's
alarm system, triggering the Company's security system when the alarm is set
off, or connected to an alarm button either located in the vehicle or carried
remotely by the driver. Customers with Fleet Director-Registered Trademark- may
also establish a "zone of compliance" that activates the Company's security
system when vehicles leave the zone. When the security system is activated, a
signal is sent by the VLU to the Company's local network system which
automatically alerts the customer through Fleet Director-Registered Trademark-.
If the customer does not respond, or if the customer subscribes to Fleet
Reporter-TM-, the Company will telephone the customer directly. If the customer
believes that the vehicle has been stolen or a driver is in danger, the Company
will work directly with the local law enforcement authorities to track the
location of the vehicle in real-time. Many customers also attach VLUs directly
to valuable cargo or to expensive equipment such as construction equipment. The
Company believes it has developed excellent relations with local law enforcement
officials due to the past performance of the Company's location system, and that
such relations contribute to its ability to quickly recover stolen vehicles and
equipment.
SALES AND MARKETING; CUSTOMER SERVICE
The Company uses a direct sales force to sell its commercial vehicle
location and fleet management services, and has a sales force located in each
market where it operates. The Company's sales efforts rely on sales managers who
supervise the sales activities of sales representatives, contact and negotiate
with
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larger potential customers, and have authority to negotiate prices within
defined parameters. Sales commissions generally are directly linked to the
number of units a sales person sells.
Following a review conducted by outside consultants, the Company is refining
its sales and marketing efforts in certain respects. To reduce the incremental
cost of sales and customer service, sales representatives are now focusing
marketing and sales efforts primarily on fleets of at least ten vehicles. The
Company has also established a telemarketing staff to help target customers for
potential sales calls and, in a pilot program in its Chicago market, is
developing a customer service staff separate from the sales force to improve
customer support while allowing the sales force to focus efforts exclusively on
selling. In the Company's other markets, sales representatives continue to
participate in ongoing customer service. The Company expects that it will
significantly increase its sales force as it expands into new markets and offer
new services. As of June 30, 1997, the Company's direct sales force consisted of
approximately 100 employees and the Company expects that, as it expands into new
markets, the sales force will grow to approximately 130 employees by the end of
1997 and to approximately 200 employees by the end of 1998.
The Company's advertising and marketing efforts are generally directed to
local and regional markets and its strategy has focused on print advertising in
industry journals, direct mail, videos, telemarketing, industry trade shows and
on-site marketing promotions and demonstrations.
CONSUMER VEHICLE SERVICES
The Company is currently focusing on its core business of commercial fleet
management. As a legacy of the business acquired from AirTouch Teletrac, the
Company has continued providing consumer service (now sold under the name
Teletracer-TM-) and has allowed dealer arrangements in place at the time of the
Acquisition to continue, but has not launched any new marketing efforts. The
Company is exploring various potential strategies for marketing and distributing
its products to consumers, including through strategic partnerships or
third-party reseller arrangements, and expects to begin expanding its consumer
operations in late 1997 or early 1998.
TARGET MARKET
The demand for vehicle security products and services has grown as consumers
have become increasingly concerned with vehicle theft. The consumer vehicle
security industry encompasses a number of security products and services,
including mechanical theft-prevention devices such as The
Club-Registered Trademark-, installed automated vehicle alarms and vehicle
recovery services such as LoJack-Registered Trademark-.
The vehicle security industry has developed rapidly since the late 1970s, as
motor vehicle theft increased dramatically. According to industry sources, an
estimated 22% of all new automobiles (or approximately 2.26 million new
automobiles in 1994) and 62% of luxury vehicles purchased in the United States
are equipped with an electronic car alarm. Vehicle theft and the demand for
vehicle security are particularly high in the metropolitan centers and
surrounding suburbs serviced by the Company.
PRODUCTS AND SERVICES
The Company's proprietary location technology and VLU equipment can be used
for consumer applications without modification. A VLU is installed in a
consumer's vehicle and is generally connected to a security alarm and/or
integrated with the vehicle's internal ignition system. By connecting the unit
to a vehicle security alarm, vehicle recovery service can be initiated
automatically. If the vehicle alarm is triggered, the unit emits an emergency
locate signal, notifying the Company's control center of a potential vehicle
theft. Each regional control center is staffed twenty-four hours a day, seven
days a week with Company employees who contact local law enforcement authorities
and direct them to the location of the stolen vehicle. The Company currently
distributes its consumer product and services through auto dealers, electronic
retailers and other distributors.
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The Company's ability to offer automated, reliable and real-time service
differentiates its stolen vehicle recovery service from other available
services. The VLU provides automatic vehicle tracking at the time of theft. This
is in contrast to other vehicle recovery services, such as
LoJack-Registered Trademark-, that require a subscriber to report a vehicle
stolen in order to begin the tracking process. As a result, over the past two
years, of the approximately 214 Teletracer-TM--equipped vehicles that have been
stolen to date in Los Angeles and Miami, approximately 75% were recovered within
two hours of theft and approximately 90% were recovered overall.
The Company also offers a proprietary telephone-operated mobile information
service called OZZ-Registered Trademark-. This service allows its subscribers
telephone access to a computer that will locate a subscriber's vehicle in
real-time and report its location for compliance, security and convenience
purposes. The subscriber calls the Teletrac OZZ-Registered Trademark- telephone
number, enters a personal identification number for the vehicle to be located
and within seconds receives an automated voice response indicating the location
of the vehicle at that time. In addition to providing the customer with the
location of the vehicle, OZZ-Registered Trademark- is a "mobile yellow pages"
that provides the customer the location of nearby prominent businesses or
landmarks from a menu of choices. The customer can call
OZZ-Registered Trademark- and obtain information such as the location of the
nearest fast food restaurant, automatic teller machine, gas station, hospital,
police station, or interstate on-ramp. Teletrac offers OZZ-Registered Trademark-
to both consumer and commercial customers. The OZZ-Registered Trademark- service
can also be used to remotely instruct the VLU to lock/unlock the doors of the
vehicle. The firm that has contracted to provide roadside assistance service for
the Company estimates that 25% of roadside assistance calls are for keys locked
in the vehicle.
All of the Company's consumer customers can also telephone the Company's
call-in Roadside Assistance Program, through which the Company will have a tow
truck sent to the caller's location. Under its Automated Roadside Assistance
Program, offered to its customers at a higher monthly fee, the Company can
direct a tow truck directly to a subscribing customer's location when the
customer presses a roadside assistance button installed in his or her vehicle.
Monthly consumer service fees and equipment sales accounted for $2.5
million, or 16%, of the Company's revenues for 1996 and $1.2 million, or 11%, of
the Company's revenues for the first six months of 1997. The Company had 10,697
consumer VLUs in operation as of June 30, 1997.
POTENTIAL DISTRIBUTION STRATEGIES
AirTouch Teletrac distributed its consumer vehicle recovery system through
indirect channels such as car dealerships and electronics retailers. Before the
Acquisition, AirTouch Teletrac had scaled back its consumer sales efforts.
Current management stopped actively supporting consumer selling efforts in order
to concentrate its sales efforts on commercial markets. The Company is currently
exploring a variety of possible marketing and distribution strategies for a
consumer service, primarily focusing on third-party reseller arrangements or
strategic partnerships with businesses such as home security companies, alarm
companies and large regional auto dealerships. The Company believes such
third-party arrangements would require less overhead than previous distribution
efforts and could permit more cost-effective consumer operations.
TECHNOLOGY
The Company has developed a proprietary, accurate and reliable spread
spectrum-based wireless network architecture that provides for both location
determination and two-way messaging. The Company's low-cost wireless network
architecture permits cost-effective and accurate location and messaging services
in metropolitan areas. The Company's networks use multilateration-based
techniques and land-based receivers for position determination, avoiding the
"line-of-sight" problems that may arise for satellite-based systems in urban
areas where tall buildings can block a satellite's view of a vehicle. The
Company believes that its land-based multilateration techniques are uniquely
appropriate for precise
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location determination in urban settings and that it can accurately locate a
vehicle equipped with its equipment in real-time within a range of less than
one-half of an average city block (approximately 150 feet).
In order to locate a subscriber vehicle, the Company's local network
broadcasts a "paging" transmission (the "Forward Link") simultaneously from each
transmitter on the network. The Forward Link is used to transmit both location
commands and alphanumeric messages to the VLU. Each subscriber's vehicle is
equipped with a VLU, a videocassette-sized "transceiver" unit which responds to
the location command of the Forward Link by emitting a response signal (the
"Reverse Link"). The Reverse Link is received by at least four nearby BSU's
which calculate both the time of transmission of the Forward Link and the time
of arrival of the Reverse Link and relay this data, via wireline telephone
networks, to the Network Control Center ("NCC"), the local network's data
processing center. The NCC uses the Company's proprietary network software to
calculate the location of the VLU from the information received by the BSUs. The
NCC consists of the Company's radio-frequency control equipment,
telecommunication access connection computers, proprietary software and the
Company's customer database. The NCC is staffed twenty-four hours a day, seven
days a week by operators who are responsible for location monitoring, system
support and customer service. The NCC instantaneously relays the location
information to a subscriber's Fleet Director-Registered Trademark- software
application or OZZ-Registered Trademark-call-in request (via automated response)
and stores all location information for daily reports to Fleet Reporter-TM- and
Fleet Director-Registered Trademark- subscribers.
The Company's customers can also use the Forward Link to transmit
alphanumeric messages from their centralized dispatch office to their fleet
vehicles and the Reverse Link to transmit more limited messages from vehicles to
the centralized dispatch office. The network system can transmit alphanumeric
messages at a transmission speed of 2,400 bits per second. While the Company's
current networks' capacity is more than sufficient to support its existing
services, the Company's networks may be reconfigured in the future to permit
increased transmission speed and messaging and location capacity. For example,
the messaging capability of the Reverse Link is currently limited by the BSU,
which does not permit alphanumeric messaging. The Company is, however,
developing an advanced version of the BSU, the IBSU, which will permit
alphanumeric messaging through the Reverse Link. See "--Network and Subscriber
Equipment."
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TELETRAC NETWORK
The following diagram illustrates the sequence of events that occur when a
customer utilizes the Company's vehicle location and messaging network:
[Schematic chart illustrating the operation of Teletrac's Network.]
NETWORK AND SUBSCRIBER EQUIPMENT
The Company has established a strategic relationship with Tadiran for the
development and supply of several network components, including the VLUs and
BSUs. Tadiran is an Israeli technology company and defense contractor which
specializes in the development and production of communications equipment and
products and is a leading manufacturer of location equipment. Tadiran and the
Company are currently developing a miniaturized version of the VLU for use as a
portable location device. As part of such development, the Company and Tadiran
are also developing a simpler and lower cost VLU.
The Company currently acquires its BSUs exclusively from Tadiran and is
working with Tadiran to develop an upgrade for the BSU, the IBSU, which will
offer significant advantages over current BSUs. The IBSU is expected to
integrate a number of enhanced features, including multichannel capability, and
will permit the Company to use its spectrum more efficiently, increase its
overall network capacity, reduce site operating and build-out costs and permit
longer alphanumeric messages. The Company expects to begin the installation of
the IBSU in its current and planned markets in the second quarter of 1998. There
can be
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no assurance that the Company and Tadiran will successfully develop the IBSU or
that, if they do, it will be introduced on the current schedule. See "Risk
Factors--Reliance on Sole Supplier."
The Company's network also includes a number of components that are used in
the wireless messaging industry. The Company purchases standard transmitters
from Glenayre Technologies, Inc. and Motorola, Inc. The transmitters, which are
similar to transmitters used in one-way paging networks, transmit the Forward
Link in a manner similar to a paging network. Much of the Company's
communications equipment, its antennas and many other components of its networks
are also available through a number of existing suppliers of wireless messaging
equipment.
As part of ongoing capital improvements, the Company is working on several
enhancements of its operating systems. The Company is enhancing its location
monitoring system hardware and software to improve the operating networks'
functionality and generate overall network operating savings. The planned
network enhancements include a nationwide database to provide vehicle roaming
capabilities between markets. Additionally, the Company's network enhancements
will enable it to reduce its number of NCCs from one in each metropolitan market
to three to four regional NCCs.
COMPETITION
The Company currently faces competition for each type of service it offers.
The Company expects that in the future it will face competition from new
technologies as well as from existing products. Certain of the Company's
competitors are larger and have substantially greater financial and research and
development resources and more extensive marketing and selling organizations
than the Company. There can be no assurance that additional competitors will not
enter markets that the Company already serves or plans to serve or that the
Company will be able to withstand such competition. Moreover, changes in
technology could lower the cost of competitive services to a level where the
Company's services would become less competitive or where the Company would need
to reduce its service prices in order to remain competitive, which could have a
material adverse effect on the Company's business. See "Risk
Factors--Competition and Technological Change."
COMMERCIAL VEHICLE MARKET
The Company knows of three basic classes of products that offer commercial
location and messaging capabilities competitive with the Company's products: (i)
GPS, private satellite and Loran-C systems, (ii) LMS systems and (iii)
traditional wireless communication.
GPS, PRIVATE SATELLITE AND LORAN-C SYSTEMS. GPS, certain private satellite
networks and Loran-C can provide location information, and when paired with a
communications system, may provide a system competitive with the Company's
products. GPS systems receive signals from NAVSTAR satellites, U.S.
government-funded satellites used for position location. GPS systems and certain
private satellite systems use satellite ranging techniques to measure a GPS
device's distance relative to a group of satellites in space. Typically, a GPS
device must be in "sight" of several satellites to receive adequate transmission
data for the determination of relative location on earth. The Loran-C system
uses land-based transmitting stations to send a low-frequency radio signal which
is used by a vehicle to calculate its position relative to the location of other
Loran-C transmitters. Satellite and Loran-C systems are generally not as
effective as LMS networks such as the Company's in metropolitan areas. Because
GPS and other satellite services require "line of sight" to the orbiting
satellite, dense metropolitan areas, parking garages, tunnels or other covered
areas can impact the system's effectiveness and reliability. Loran-C systems
also frequently have difficulty penetrating "metropolitan canyons" and therefore
may provide inaccurate position readings in urban areas.
In most GPS, private satellite and Loran-C vehicle location systems,
vehicle-mounted equipment gathers location data and transmits it by a wireless
communication system to a dispatch center. There are a
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number of wireless systems that can be linked to a satellite system or a Loran-C
system to transmit location information to a dispatch center:
- CELLULAR AND PCS COMMUNICATION SYSTEMS--Cellular and PCS systems can
provide local or nationwide networks to transmit location information to a
dispatcher. However, cellular and PCS operators generally price their
airtime at price levels that do not allow for frequent location
information transmittals by vehicles equipped with GPS, private satellite
or Loran-C systems to dispatchers on a cost-basis competitive with the
Company. Most vehicle location systems that link a satellite or Loran-C
location system with a cellular or PCS communication system, such as
HighwayMaster, are best-suited for long-haul trucking fleets. In addition,
in certain U.S. markets, some cellular operators have added a data service
over their existing cellular infrastructure that can improve the cost and
delivery of location information over existing cellular networks. The data
service, called CDPD, is an overlay of a packet switched data service on a
traditional cellular system. CDPD is available in approximately 80
metropolitan markets throughout the U.S., including all the markets, other
than Los Angeles, in which the Company is currently operating or plans to
operate.
- SMR/ESMR--SMR has traditionally been used to serve the needs of local
dispatch services, such as taxis and couriers, which typically broadcast
short messages to a large number of units. Several SMR operators are
constructing Enhanced Specialized Mobile Radio ("ESMR") digital systems
that offer mobile telephone services. Some SMR and ESMR providers are
beginning to integrate GPS with their systems to determine location and
transmit the location information back to the subscriber via the SMR or
ESMR communications network. An ESMR system with GPS location features has
been developed by Geotek Communications, Inc. Geotek is offering an
automatic vehicle location service using its own dedicated ESMR network to
transmit location information. As of June 30, 1997, Geotek was available
in nine metropolitan markets in the U.S. In certain markets, Geotek has
developed a fleet management program incorporating GPS location
information, which is being marketed with monthly service fees compatible
with the Company's standard pricing.
- SATELLITE-BASED COMMUNICATIONS--Satellite-based communication is
accomplished through transmission of a signal from a vehicle-based
transmitter to a satellite, which automatically retransmits the signal to
a dispatcher. Such systems provide seamless nationwide service for
transmitting location information, but do not currently transmit location
data at a cost competitive with the Company's system. Vehicle location
products with satellite-based communications are currently offered by
Orbcomm Global, L.P. and Qualcomm, Inc.
- DEDICATED WIRELESS NETWORKS--ARDIS and RAM are dedicated wireless two-way
data networks that also can be used to transmit location information
through integration with GPS. ARDIS is owned by Motorola and RAM is owned
by a joint venture between RAM Broadcasting Corp. and BellSouth. Both
wireless providers cover primarily metropolitan markets. ARDIS covers
approximately the top 400 markets in the United States, and RAM reports
coverage in approximately the top 100 markets (in both cases, including
all the markets in which the Company currently operates or plans to
operate).
LMS SYSTEMS. The Company knows of other companies that are developing
competitive LMS location and messaging systems. Pinpoint Communications Inc.,
METS Inc./MobileVision, L.P. and Comtrak Inc. each have developed technologies
that use LMS spectrum to provide both location information and messaging. Such
alternative LMS systems are also land-based wireless systems suited for
providing accurate and cost-effective service in metropolitan areas. Current LMS
operators and prospective LMS operators may also benefit from an FCC auction of
three frequency bands, including the band on which the Company's system
operates, for LMS purposes. The Company believes that to date it is the only
company that has established a commercially operational LMS network in the U.S.
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TRADITIONAL WIRELESS COMMUNICATION. Many fleet managers use existing SMR,
ESMR, two-way radio, cellular or paging systems to communicate with vehicles and
obtain their location. Such systems are less reliable than the Company's
products, however, because they rely exclusively on drivers to accurately
identify their location.
CONSUMER VEHICLE MARKET
LOJACK-REGISTERED TRADEMARK-. The Company's principal competitor to date in
the consumer vehicle market has been LoJack-Registered Trademark-. The
LoJack-Registered Trademark- system is based on a VHF transponder (essentially a
homing device) with a range of approximately two miles. The
LoJack-Registered Trademark- vehicle recovery system requires a customer to
report a stolen vehicle to LoJack-Registered Trademark-in order to initiate the
location process. Once a stolen vehicle report is received,
LoJack-Registered Trademark- personnel activate the transponder unit located in
the stolen vehicle by transmitting a signal across the area in which the vehicle
was stolen. Police equipped with LoJack-Registered Trademark- equipment track
the signal from the stolen vehicle by the strength of the signal. The
LoJack-Registered Trademark- system is not an automatic, real-time, screen-based
tracking system, and it does not provide the service features of the Company's
OZZ-Registered Trademark- and roadside assistance products.
GPS/CELLULAR SYSTEMS. Several companies have begun to link GPS location
technology with cellular communications to create emergency location systems for
consumer vehicles. Carcop-Registered Trademark-, Onstar-TM- and Lincoln
Rescu-TM- all rely on this technology to provide emergency roadside assistance
and/or stolen car recovery. Such systems, because they are based on GPS locating
technology, can be less effective in metropolitan areas where most auto thefts
occur.
THEFT DETERRENTS. A number of products are currently sold for vehicle theft
deterrence. Consumer products range from The Club-Registered Trademark- to
automatic alarm systems. While such systems do not provide the location
information or range of services of the Company's consumer products, they are
often available at a significantly lower cost.
PRODUCT PROTECTION
The Company currently has no material patents and generally seeks to protect
its proprietary network software, software products and trade secrets by
requiring that its consultants, employees and others with access to such
software and trade secrets sign nondisclosure and confidentiality agreements.
Management believes that these actions provide appropriate legal protection for
the Company's intellectual property rights in its software and products.
Furthermore, management believes that the competitive position of the Company
depends primarily on the technical competence and creative ability of its
personnel and that its business is not materially dependent on patents,
copyright protection or trademarks. See "Risk Factors-- Proprietary Rights and
Patents."
MIS, ADMINISTRATIVE AND BILLING SYSTEMS
During 1996, the Company centralized all of its accounting, payables,
billing and management information systems in its corporate headquarters in
Kansas City, Missouri, and based its nationwide inventory and order fulfillment
operations at its Los Angeles office. The Company recently converted to a new
billing system which centralizes customer billing to one location, yet allows
the local offices the flexibility to handle customer data input and inquiry,
thus allowing for quicker and more efficient response for sales and customer
service. The Company has also implemented a wide-area network architecture to
provide quick and easy communication and transfer of data among all employees of
the Company.
REGULATION
The construction, operation and acquisition of radio-based systems in the
LMS industry in the U.S. are subject to regulation by the FCC under the
Communications Act. Multilateration LMS is a service operating under new FCC
rules. As such, the LMS rules have not been subject to any significant
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interpretation by the FCC in written decisions and remain subject to further
reconsideration. Several parties, including the Company, requested that the FCC
reconsider various aspects of the newly-adopted rules governing LMS. In some
cases, the reconsideration requests, if granted by the FCC, could have a
material adverse effect on the Company's business. In September 1997, the FCC
rejected most of the reconsideration requests and reaffirmed its existing rules,
but the decision remains subject to further reconsideration. As a pioneer in
this new service, the Company may operate under rules with significant
ambiguities. The application of largely uninterpreted rules in situations that
the Company may encounter will present matters of first impression to the FCC's
staff. The Company cannot predict how changes to or interpretations of these
rules may affect its operations or its business plans.
The FCC regulates LMS services pursuant to rules adopted in a February 1995
LMS Order and modified in a March 1996 LMS Reconsideration Order and in a
September 1997 LMS Clarification Order. The February 1995 LMS Order, the March
1996 LMS Reconsideration Order, and the September 1997 LMS Clarification Order
are hereinafter together referred to as the "LMS Order."
CONSTRUCTION AND OPERATION OF GRANDFATHERED SYSTEMS
The FCC's 1995 LMS Order established that LMS licenses would be granted in
the future on a geographic basis. LMS licenses granted prior to the 1995 rules,
including those under which the Company operates its system, were granted for
individual transmitter sites. The FCC announced that no further applications for
authorizations for new multilateration LMS transmitter sites will be accepted,
pending its development of rules and procedures for auctioning the LMS spectrum.
In its 1995 rules, the FCC established procedures for the "grandfathering" of
LMS systems that were in operation or authorized as of February 3, 1995. In
order to maintain grandfathered status, the Company was required, among other
things, to complete its construction of licensed transmitter sites by January 1,
1997, to a level where each system would be capable of locating a vehicle and
otherwise in compliance with the 1995 rules (as modified). By December 31, 1996,
the Company had constructed LMS systems capable of locating a vehicle in 26
markets, including the six markets in which the Company had systems operating
prior to the adoption of the LMS Order.
The grandfathered authorizations issued to the Company allow the operation
of multilateration LMS base stations at particular sites specified in the
authorization. Under present rules, the FCC will not authorize the relocation of
a base station to a site more than two kilometers from an initially authorized
site. To the extent that a previously authorized base site becomes unavailable
or is no longer suitable because of potential interference from nearby radio
facilities, the two-kilometer restriction will limit the ability of the Company
to find optimal alternative sites and, in some instances, could require that the
Company abandon the opportunity to construct or operate a previously authorized
site, or require that the Company accept diminished performance from some sites.
In a few instances, the Company has obtained waivers from the FCC to permit the
relocation of a transmitter site to a location more than two kilometers from the
original site. Due to minor variations in certain parameters for sites noted
during construction, the Company has submitted applications to the FCC for
correction or modification of its authorizations for such sites. At the
Company's request, the FCC granted special temporary authority for the operation
of those sites pending the processing of the applications, which the Company
anticipates will be processed in the normal course. The Company recently
discovered additional minor parameter violations and has submitted modification
applications and requests for special temporary authority relating to the
operation of these facilities.
To prevent grandfathered LMS licensees from expanding coverage into
auctionable territory, current FCC rules do not permit those licensees to
construct additional LMS transmitters. Consequently, grandfathered licensees are
prevented from adding supplemental, or "fill-in," transmitters in locations
where it is discovered that, due to terrain or other obstructions, gaps in
service coverage exists. The Company filed requests for the FCC to change and/or
waive those rules to allow grandfathered LMS licensees to construct "fill-in"
transmitters where the aggregate service territory boundaries are not
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increased. The inability of the Company to use "fill-in" transmitters could
create less than optimal signal coverage and penetration in certain of the
Company's markets. In the 1997 Clarification Order, the FCC declined to adopt a
general rule allowing fill-in transmitters, but said that it would accept
applications for fill-in transmitters on a case-by-case basis, so long as the
coverage footprint was not increased, a standard which the Company believes its
pending waiver request would meet. There is no assurance that the Company's
requests for waivers to use "fill-in" transmitters will be granted, and it has
been opposed in filings by other parties. There is also no assurance that the
petitions for reconsideration of the FCC's rules for multilateration LMS that
were filed by parties advocating changes that could have a material adverse
effect on the Company's business, though not granted in the 1997 Clarification
Order, will not be granted in whole or in part by the FCC after final review.
FREQUENCY CONVERSION
Grandfathered multilateration LMS systems that were constructed and in
operation as of February 3, 1995, must conform their already-constructed
facilities to a new radio frequency band plan established by the LMS Order. To
comply, the Company is required to change the frequency on which the Forward
Link operates and modify system equipment accordingly. The frequency conversion
must be complete by April 1, 1998, the date on which the authority to operate on
the previous LMS frequencies will expire. Although the frequency conversion only
affects the Company's Forward Link, transition of the Company's operating
facilities to the new band plan will require the modification of both
transmitting and subscriber equipment. The Company constructed transmission
equipment in 1996 that modified the frequency on which the Forward Link operates
in all of its existing markets. The Company's Forward Link in the existing
markets now operates on both the old and the new frequencies, but the Company
still must convert its existing customers' VLUs to conform to the new spectrum
band plan. The Company has begun an active program of converting its existing
customers' VLUs to operate within the new spectrum band plan. The Company
anticipates that the frequency conversion process for existing markets will be
completed prior to the April 1, 1998 deadline. The Company estimates that the
total cost of such conversion will be approximately $7.2 million. There can be
no assurance that the Company will complete its frequency conversion by April 1,
1998 or that the cost to the Company will not exceed $7.2 million. In addition,
non-multilateration LMS systems that were operating on segments of the frequency
band that the FCC allocated for multilateration LMS use in 1995 were
grandfathered until April 1, 1998. This means that multilateration LMS systems
may be required to share their frequencies with such non-multilateration LMS
systems until April 1998.
LMS SPECTRUM AUCTION
In the LMS Order, the FCC concluded that it would award the remaining
spectrum for multilateration LMS through competitive bidding in an auction, a
procedure that the FCC is using for other wireless communications services. The
FCC intends to auction one license in each of three spectrum bands allotted for
multilateration LMS on an "Economic Areas" (EAs) basis. There are 172 EAs
covering the continental United States. The FCC dropped its plans in the
September 1997 LMS Clarification Order to license spectrum using the larger
Major Trading Area geographic basis. Procedures for the LMS auctions that
generally conform with previously proposed generic competitive bidding rules
were proposed in the LMS Clarification Order, and the FCC has requested public
comment on the proposed rules for multilateration LMS auction. Members of the
FCC staff have told the Company that they expect such auctions to be held in
early 1998, although the schedule for such auctions has been subject to repeated
delays. The Company expects to participate in the auction process and to bid on
specific licenses to acquire the additional spectrum necessary to establish
coverage in major metropolitan areas nationwide. The extent of funding that may
be needed by the Company for a successful outcome in these auctions is not yet
known by the Company. The Company understands that the FCC will expect
cooperative arrangements for sharing between grandfathered licensees and the
eventual EA licensees resulting from the auction. To the extent that the Company
does not submit the winning bid for a license in an EA in which it operates a
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grandfathered system, the Company would be permitted to continue operating its
grandfathered facilities in that EA, but it would be precluded from expanding
its coverage area within such EA.
PERMISSIBLE USE RESTRICTIONS AND INTERCONNECTION
In the LMS Order, the FCC stated that it did not intend that LMS be used for
"general messaging purposes." The FCC did modify the existing permissible use
definition, however, so as to authorize multilateration LMS systems to transmit
status and instructional messages, either voice or non-voice, so long as they
are related to the location or monitoring functions of the system. This
restriction precludes the Company from offering messaging services other than as
part of its location and monitoring services.
The LMS Order also expanded the permissible use definition to include
location of non-vehicular traffic by multilateration LMS systems whose primary
operations involve location of vehicles. The requirement that an LMS system's
primary operations be location of vehicular traffic may preclude the Company
from having a majority of customers who have subscribed to non-vehicular
location or monitoring services, such as personal location services, and may be
interpreted to impose other restrictions on non-vehicular location and
monitoring services.
In addition, the FCC order requires that interconnection to the public
switched telephone network be on a "store and forward" basis. This requirement
limits the Company's ability to offer real-time voice communications services,
except with respect to emergency communications. LMS customers may engage in
delayed voice or data messaging over the telephone system. The FCC set a
thirty-second delay as the "safe harbor" for store-and-forward interconnection,
but acknowledged that other approaches may also be acceptable depending upon the
configuration of the system..
FOREIGN OWNERSHIP
The FCC has not declared whether multilateration LMS will be classified as a
private mobile radio service (PMRS) or as a commercial mobile radio service
(CMRS), but has proposed to classify LMS providers on a case-by-case basis. This
implies that the greater the level and nature of interconnection with the public
switched telephone network offered by the LMS provider, the more likely the
provider would be classified as CMRS. Because multilateration LMS is offered on
a for-profit basis and can be connected with the public switched telephone
network, however, the Company believes that it is likely that the FCC will
classify multilateration LMS as CMRS. If the Company's services were
reclassified as CMRS rather than as PMRS, the Company, which holds its FCC
authorizations through a wholly-owned subsidiary, Teletrac License, Inc., would
be subject to the foreign ownership restrictions under the Communications Act
that apply to the parent corporations of CMRS licensees. Under this restriction,
non-U.S. persons would not be permitted to hold, directly or indirectly, in the
aggregate, more than 25% of the ownership or 25% of the voting rights in the
Company, absent a waiver or determination by the FCC that a higher level of
foreign ownership would be in the public interest.
Although the Company is controlled by U.S. citizens, non-U.S. persons
currently hold slightly more than 25% of the ownership of the Company. If the
FCC were to reclassify its multilateration LMS as CMRS at a time when the
Company's level of foreign ownership or foreign voting rights exceeded 25%, the
Company would be required to obtain a public interest determination from the FCC
approving its level of foreign ownership or to restructure its ownership to meet
the 25% benchmark. The FCC recently instituted a rule making proceeding to
develop rules to implement the World Trade Organization ("WTO") agreements
scheduled to become effective January 1, 1998. It is anticipated that the WTO
agreements and the FCC's implementing rules will open additional opportunities
for foreign investment in U.S. entities that control CMRS licensees. However, it
is not clear that any relief granted as a result of the FCC's implementation of
the WTO agreements would necessarily exempt the Company from the requirement to
secure a public interest determination from the FCC approving its level of
foreign ownership or to restructure its ownership to meet the 25% benchmark if
the FCC should reclassify its service as CMRS.
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TECHNICAL REQUIREMENTS
Multilateration LMS systems must use equipment that is "type-accepted" by
the FCC. Under the type-acceptance procedure, the FCC confirms that the model of
equipment proposed for use in a particular radio service conforms to the
technical requirements for the service as specified in the FCC's rules. All
equipment used by the Company that is required to be type-accepted has been
type-accepted.
Multilateration LMS systems operate on frequencies that have been allocated
to LMS by the FCC on a secondary basis. This means that LMS operations cannot
cause interference to, and may be required to accept interference from, users of
those same or adjacent frequencies in the Industrial, Scientific, and Medical
radio service and in the Federal government's radiolocation service. In
addition, under Part 15 of the FCC's rules, certain unlicensed radio devices
(such as spread spectrum devices used for local area networks) operate on the
same or adjacent frequencies as LMS systems. Although multilateration LMS
systems generally have priority in the use of their frequencies over such Part
15 devices, the FCC's rules provide a "safe harbor" for the operation of Part 15
devices in LMS spectrum. If a Part 15 device is operated in a manner that
satisfies those safe harbor requirements (which were designed to avoid or
minimize the risk of interference to LMS services), an LMS system that
nonetheless suffers interference from such a Part 15 device may have no recourse
other than to negotiate with the Part 15 user on methods for eliminating or
reducing the interference. In addition, as a condition of the LMS license, the
FCC has stated that operators of new LMS systems must perform testing to
demonstrate that the system does not cause unacceptable interference to Part 15
devices. To date, the FCC has specifically declined to specify the nature of
such testing and how they might be used to determine whether the multilateration
LMS system is causing unacceptable interference to Part 15 devices. The FCC has
indicated that the purpose of the testing is to insure that multilateration LMS
licensees take efforts to minimize interference to existing Part 15 devices when
designing and constructing their systems; Part 15 devices remain secondary to
multilateration LMS operations. An association of entities operating Part 15
devices has asked that the Company engage in cooperative testing in certain of
the markets in which the Company is operating to ascertain the existence of any
potential for interference, and the Company has expressed its willingness to
cooperate in a testing program.
CURRENT FCC APPLICATIONS AND PROCEEDINGS
PENDING APPLICATIONS. The Company has pending before the FCC a request for
waiver to permit the addition of fill-in transmitter sites within the present
coverage area of its grandfathered facilities. In addition, the Company has
pending before the FCC various site-specific applications (together with related
waivers and request for special temporary authority) for minor corrections of
operating parameters and for the relocation of sites within the two kilometer
relocation restriction because of site unavailability and other causes. It is
anticipated that the Company will have other such applications from time to time
in the ordinary course of business.
RECONSIDERATION PROCEEDINGS FOR THE LMS RULES. The FCC released its
September 1997 LMS Clarification Order which clarified and modified various
issues relating to the provision of LMS and grandfathered operation. Interested
parties may seek further reconsideration of the order.
OTHER PROCEEDINGS. Other proceedings pending from time to time at the FCC
may affect the business and operations of the Company. These proceedings
include, but are not limited to, (i) pending proceedings to modify rules for low
power transmitters operating under Part 15 of the FCC's rules that also operate
in the 902-928 MHz frequency band in which the Company operates its LMS systems;
(ii) changes in spectrum allotments and usage restrictions that may permit the
operation of terrestrial location-related services in other bands; (iii) changes
in FCC rules and policies governing interconnection with the switched telephone
network; (iv) the anticipated institution of rule making proceedings to develop
the rules and policies that will govern the auction of the LMS spectrum; (v)
changes in the general licensing rules and policies of the FCC affecting LMS
applications; and (vi) changes in FCC regulatory policies generally
52
<PAGE>
governing the CMRS services (which would affect the Company, to the extent that
the FCC classified multilateration LMS as CMRS).
The Company cannot predict when the FCC will act on any of these matters or
what effect such action may have on its business.
LEGAL PROCEEDINGS
Prior to the Acquisition, PacTel Teletrac (predecessor to AirTouch Teletrac)
brought an action before the United States Patent and Trademark Trial and Appeal
Board against T.A.B. Systems ("TAB") opposing TAB's registration of the mark
"Teletrak." The Trademark Trial and Appeal Board granted PacTel Teletrac's
motion for summary judgment, but summary judgment was reversed by the U.S. Court
of Appeals for the Federal Circuit. Under the terms of the Asset Purchase
Agreement between AirTouch Teletrac and the Company, AirTouch Teletrac must pay
the costs of any litigation relating to this matter and must indemnify the
Company against any losses relating thereto. AirTouch Teletrac has notified the
Company that it intends to continue to litigate this matter on its own behalf as
well as on behalf of the Company, and that it will bear the cost of such
litigation. There can be no assurance that AirTouch Teletrac will be successful
in such litigation or that AirTouch Teletrac will honor its indemnification
obligations (including any costs or losses relating to a change of name, if
required as a result of the litigation).
The Company is from time to time subject to claims and suits arising in the
ordinary course of business. The Company is not currently a party to any
proceeding which, in management's opinion, is likely to have a material adverse
effect on the Company's business.
EMPLOYEES
On June 30, 1997, the Company had 325 employees. Substantially all of the
Company's employees are full-time. The Company's employees are not unionized and
the Company believes that its relations with its employees are good.
FACILITIES AND EQUIPMENT
The Company currently leases approximately 12,800 square feet of office
space in Kansas City, Missouri for its headquarters facility for a term expiring
in 2002. As of June 1997, the Company leased approximately 28,000 square feet in
Garden Grove, California for a term expiring in 2002, as well as office space in
Rolling Meadows, Illinois; Farmington Hills, Michigan; Arlington, Texas; Fort
Lauderdale, Florida; Houston, Texas; Orlando, Florida; San Francisco,
California; and San Diego, California.
As of June 30, 1997, the Company had approximately 400 site and tower leases
for the operation of its transmitters and other equipment on commercial
broadcast towers and at other fixed sites. The Company believes that in general
the terms of its leases are competitive based on market conditions. The Company
believes its facilities are suitable and adequate for its purposes. The Company
relocates its transmission and receiver sites from time to time and does not
anticipate any material problems in obtaining and retaining site and tower
leases in the future.
53
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
James A. Queen....................................... 46 Chairman of the Board, Chief Executive Officer and
Director
Lawrence P. Jennings................................. 42 Vice President of Operations
Alan B. Howe......................................... 36 Vice President of Finance and Corporate Development
Steven D. Scheiwe.................................... 36 General Counsel and Secretary
James E. Seng........................................ 52 Vice President of Engineering
Sanford Anstey....................................... 50 Director
Robert Benbow........................................ 60 Director
David J. Berkman..................................... 34 Director
Michael A. Greeley................................... 33 Director
Michael Markbreiter.................................. 34 Director
Marc H. Michel....................................... 36 Director
Brian A. Rich........................................ 36 Director
</TABLE>
Each Director of the Company has been elected pursuant to the terms of the
Stockholders' Agreement. See "Certain Relationships and Related
Transactions--Stockholders' Agreement."
Each Director of the Company is also a Director of Holdings. Mr. Queen is
also Chairman of the Board and Chief Executive Officer of Holdings. Mr. Howe and
Mr. Scheiwe are also Vice Presidents of Holdings and are the Treasurer and
Secretary of Holdings, respectively.
JAMES A. QUEEN has been Chairman of the Board, Chief Executive Officer and
Director of the Company since November 1995. From February through November
1995, Mr. Queen was Chief Executive Officer of Pentapage Inc. ("Pentapage"), a
company formed by Messrs. Queen, Jennings and Scheiwe to pursue business
opportunities in the communications industry. Pentapage was dissolved in
connection with the initial capitalization of the Company. Mr. Queen served as
Chairman of the Board and Chief Executive Officer of Premiere Page from its
inception in 1988 through December 1994.
LAWRENCE P. JENNINGS has been Vice President of Operations of the Company
since November 1995. From February through November 1995, Mr. Jennings was a
Vice President of Pentapage. Mr. Jennings served as Vice President of Operations
of Premiere Page from July 1992 through December 1994. Prior to joining Premiere
Page, Mr. Jennings was General Manager for Centel Cellular/United Telespectrum,
Inc. in Charleston, South Carolina.
ALAN B. HOWE has been Vice President of Finance and Corporate Development of
the Company since November 1995. From April through November 1995, Mr. Howe was
Chief Financial Officer of Pentapage. Mr. Howe served as a Director of Corporate
Development for Sprint Corp. as well as in various finance positions within
Sprint Corp.'s Wireless Task Force and Corporate Treasury Group. Mr. Howe's last
position at Sprint Corp. was with WirelessCo, L.P., the PCS joint venture among
Sprint Corp., Tele-Communications, Inc., Comcast Corporation and Cox
Communications, Inc.
STEVEN D. SCHEIWE has been General Counsel and Secretary of the Company
since November 1995. From February through November 1995, Mr. Scheiwe was a Vice
President of Pentapage. Mr. Scheiwe had served as General Counsel and Secretary
to Premiere Page and its predecessor companies from their inception in 1988.
JAMES E. SENG has been Vice President of Engineering of the Company since
February 1996. Prior to joining the Company, Mr. Seng was President of Project
Group 2000, an engineering consulting firm. From 1990 to 1994, Mr. Seng was Vice
President of Engineering at Premiere Page.
SANFORD ANSTEY has been a Director of the Company since December 6, 1996.
Mr. Anstey is Managing Director of BancBoston Capital, BancBoston's private
equity investing subsidiary, and is head of the firm's media and communications
investments team. Mr. Anstey has been employed by BancBoston Capital since
54
<PAGE>
1988 and is currently a member of the Advisory Board of Baring Communications
Equity, the Board of Directors of Six Flags Entertainment and the Board of
Advisors of Prime Enterprises.
ROBERT BENBOW has been a Director of the Company since November 1995. Mr.
Benbow has been a Vice President of Burr, Egan, Deleage & Co. and a General
Partner in certain funds affiliated with Burr, Egan, Deleage & Co. since 1990.
Mr. Benbow serves as a director of ST Enterprises, a local exchange company;
Golden Sky Systems, Inc.; Incom Communications Corp.; and Brooks Fiber
Properties, Inc. Mr. Benbow also served as a director of U.S. One Communications
Corp., which filed for bankruptcy in 1997, after Mr. Benbow had resigned from
the Board of Directors thereof.
DAVID J. BERKMAN has been a Director of the Company since November 1995.
Since 1994, Mr. Berkman has served as Executive Vice President and a member of
the Board of Directors of The Associated Group, Inc. For the prior fifteen
years, Mr. Berkman was employed by Associated Communications Corporation, the
predecessor of the Associated Group, Inc., most recently as a Vice President.
Mr. Berkman is currently Vice Chairman of the Board of Portatel del Sureste,
Mexico and Associated Communications, L.L.C. Mr. Berkman is a former member of
the Board of Directors, and a former member of the Executive Committee, of the
Cellular Telephone Industry Association.
MICHAEL A. GREELEY has been a Director of the Company since December 6,
1996. Mr. Greeley is the Senior Vice President of GCC Investments, the
investment arm of GC Companies, which operates General Cinema Theatres.
Additionally, Mr. Greeley serves as the Senior Investment Officer of GC
Companies, Inc. From June 1989 to June 1994, Mr. Greeley was a Vice President of
Wasserstein Perella & Co., Inc. Mr. Greeley is currently a director of Global
TeleSystems, Inc. and Crescent Communications.
MICHAEL MARKBREITER has been a Director of the Company since its formation
in November 1995. Mr. Markbreiter has been a portfolio manager at Kingdon
Capital Management Corp. for private equity investments since August 1995. Mr.
Markbreiter co-founded Ram Investment Corp., a venture capital company, from
March 1994 through March 1995, and had previously been a portfolio manager for
Asia at Kingdon Capital Management Corp. from February 1993 through January
1994.
MARC H. MICHEL has been a Director of the Company since its formation in
November 1995. Mr. Michel is currently a General Partner of Eos Partners SBIC,
L.P. and a Managing Director of Eos Partners, L.P. Prior to joining Eos in 1994,
Mr. Michel was a Vice President of Merrill Lynch Interfunding Inc., a subsidiary
of Merrill Lynch & Co. Mr. Michel is a director of a number of companies,
including Intervest Holdings.
BRIAN A. RICH has been a Director of the Company since its formation in
November 1995. Mr. Rich is Managing Director of Toronto Dominion Capital
(U.S.A.), Inc., Toronto Dominion Bank's U.S. merchant bank. Prior to this
position, Mr. Rich had been an investment banker in Toronto Dominion's
Communications Finance Group since 1991.
The Company's former Chief Financial Officer resigned in June 1997. During
the search for a replacement, Alan B. Howe, the Company's Vice President of
Finance and Corporate Development, is acting Chief Financial Officer of the
Company.
The executive officers of the Company are elected by the Board of Directors
and serve at its discretion.
All directors are elected annually and hold office until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. Directors do not receive an annual retainer or meeting attendance
fees. However, the Company reimburses non-management directors for expenses
incurred in attending meetings of the Board of Directors.
During 1996, the Board of Directors of the Company held eight meetings. The
only standing committees of the Board of Directors are the Audit Committee and
the Compensation Committee. The current members of the Audit Committee are
Messrs. Benbow, Greeley and Michel. The Audit Committee periodically consults
with the Company's management and independent public accountants on financial
matters, including the Company's internal financial controls and procedures. The
Audit Committee held one meeting in 1996. The current members of the
Compensation Committee are Messrs. Anstey, Berkman and Rich. The Compensation
Committee approves compensation arrangements for the Company's executive
officers and administers the Company's stock option plans. The Compensation
Committee held two meetings in 1996.
55
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information as to the
Chief Executive Officer and the four other highest paid executive officers of
the Company for the fiscal year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
------------------------------------------------------ UNDERLYING
NAME AND OTHER ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION (#)
- ---------------------------------------------- --------- ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
James A. Queen Chairman of the Board Chief
Executive Officer........................... 1996 201,000 38,000 -- 24,671
James E. Seng Vice President of Engineering... 1996 87,500 18,500 -- 1,699
Lawrence P. Jennings Vice President of
Operations.................................. 1996 158,000 29,000 -- 3,876
Alan B. Howe Vice President of Finance and
Corporate Development....................... 1996 106,000 19,000 -- 1,699
Steven D. Scheiwe General Counsel and
Secretary................................... 1996 117,000 21,000 -- 4,442
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION (1) ($)
- ---------------------------------------------- ---------------
<S> <C>
James A. Queen Chairman of the Board Chief
Executive Officer........................... 1,000
James E. Seng Vice President of Engineering... 1,000
Lawrence P. Jennings Vice President of
Operations.................................. 1,000
Alan B. Howe Vice President of Finance and
Corporate Development....................... 1,000
Steven D. Scheiwe General Counsel and
Secretary................................... 1,000
</TABLE>
- ------------------------
(1) Amounts shown for each officer consist of amounts accrued by the Company for
contribution to the Company's 401(k) Savings Plan that are allocable to such
officer.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options to the named executive officers during the fiscal year ended
December 31, 1996:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(1) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ----------------------------- ------------------- ------------------------- --------------- ------------- --------- ----------
James A. Queen............... 8,224 57.3% 100 2003 464,000 1,724,000
8,224 125
8,223 150
James E. Seng................ 567 3.9% 100 2003 32,000 119,000
566 125
566 150
Lawrence P. Jennings......... 1,292 9.0% 100 2003 73,000 271,000
1,292 125
1,292 150
Alan B. Howe................. 567 3.9% 100 2003 32,000 119,000
566 125
566 150
Steven D. Scheiwe............ 1,481 10.3% 100 2003 84,000 310,000
1,481 125
1,480 150
</TABLE>
- ------------------------
(1) See "--Stock Option Plans."
56
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the number of options exercised and the value
realized upon exercise by the named executive officers during the fiscal year
ended December 31, 1996 and the value of outstanding options held by such
executive officers as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
NUMBER OF SHARES YEAR AT FISCAL YEAR END
ACQUIRED ON EXERCISE END EXERCISABLE/ EXERCISABLE/
NAME OF OPTIONS VALUE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------- ------------------------- ------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
James A. Queens...................... -- -- 0/24,671 0/$ 1,190,400
James E. Seng........................ -- -- 0/1,699 0/$ 82,000
Lawrence P. Jennings................. -- -- 0/3,876 0/$ 187,000
Alan B. Howe......................... -- -- 0/1,699 0/$ 82,000
Steven D. Scheiwe.................... -- -- 0/4,442 0/$ 214,400
</TABLE>
- ------------------------
(1) Assumes a price per share of $173.25, the price per share of the Preferred
Stock sold on December 6, 1996.
EMPLOYMENT AGREEMENTS
In November 1995, the Company and Mr. Queen entered into an agreement
pursuant to which Mr. Queen agreed to serve as the Chief Executive Officer of
the Company through December 31, 1998. Under the agreement, Mr. Queen is paid
compensation of $200,000 per year (plus the cost of health insurance) and is
eligible to receive a bonus of up to 25% of his base salary at the discretion of
the Board of Directors. In addition, in 1996 Mr. Queen was granted options to
purchase 24,671 shares of Class A Common Stock at prices ranging from $100 to
$150 per share. One-third of the options granted vest on each of the following
three one-year anniversaries of the date of grant. The agreement also includes a
confidentiality provision and a non-compete provision.
In January 1996, the Company and Mr. Scheiwe entered into an agreement
pursuant to which Mr. Scheiwe agreed to serve as the General Counsel and
Secretary of the Company through December 31, 1998. Under the agreement, Mr.
Scheiwe is paid compensation of $114,200 per year (plus the cost of health
insurance) and is eligible to receive a bonus of up to 20% of his base salary at
the discretion of the Board of Directors. In addition, in 1996 Mr. Scheiwe was
granted options to purchase 4,442 shares of Class A Common Stock at prices
ranging from $100 to $150 per share. One-third of the options granted vest on
each of the following three one-year anniversaries of the date of grant. The
agreement also includes a confidentiality provision and a non-compete provision.
In January 1996, the Company and Mr. Jennings entered into an agreement
pursuant to which Mr. Jennings agreed to serve as the Vice President of
Operations of the Company through December 31, 1998. Under the agreement, Mr.
Jennings is paid compensation of $154,000 per year (plus the cost of health
insurance) and is eligible to receive a bonus of up to 20% of his base salary at
the discretion of the Board of Directors. In addition, in 1996 Mr. Jennings was
granted options to purchase 3,876 shares of Common Stock at prices ranging from
$100 to $150 per share. One-third of the options granted vest on each of the
following three one-year anniversaries of the date of grant. The agreement also
includes a confidentiality provision and a non-compete provision.
STOCK OPTION PLANS
In November 1995, the Company adopted a Stock Option Plan (the "1995 Stock
Plan") which provides for the granting of options to purchase up to 43,060
shares of Class A Common Stock to qualified employees of the Company, all of
which were granted by November 1996. Under the terms of Option Agreements
between the Company and each of Messrs. Queen, Seng, Jennings, Howe and Scheiwe
to date, the Company has granted each of them the right to purchase from the
Company up to 24,671; 1,699; 3,876; 1,699; and 4,442 shares of Class A Common
Stock, respectively, under the terms of the 1995 Stock Plan. In each case,
one-third of the shares may be purchased at an option price of $100 per share,
one-third may be purchased at $125 per share, and the final one-third may be
purchased at $150 per share. One-third of the options granted vest on each of
the following three one-year anniversaries of the date of grant. The
57
<PAGE>
Company also has Option Agreements with certain other employees with similar
terms under which it has granted options to purchase an additional 4,599 shares
of Class A Common Stock pursuant to the 1995 Stock Plan.
In November 1996, the Company adopted the Teletrac, Inc. and its
Subsidiaries 1996 Stock Option and Restricted Stock Purchase Plan (the "1996
Stock Plan") so as to promote the interests of the Company and its stockholders
by providing an opportunity to selected employees, officers and directors of the
Company or any subsidiary thereof to purchase Class A Common Stock of the
Company. The 1996 Stock Plan provides for the granting of non-qualified stock
options and/or incentive stock options ("ISOs") to acquire Class A Common Stock
of the Company and/or by the granting of rights to purchase Class A Common Stock
of the Company subject to certain restrictions ("Restricted Stock").
The 1996 Stock Plan is administered by the Compensation Committee of the
Board of Directors of the Company (the "Compensation Committee"). The
Compensation Committee, upon the approval of the Board of Directors, has the
discretion under the Plan (i) to select the employees who will be granted an
option or right to purchase Class A Common Stock of the Company; (ii) to
designate whether the options will be granted as ISOs or as non-qualified stock
options; (iii) to establish the number of shares of Class A Common Stock of the
Company that may be issued under each option or right; (iv) to determine the
time and the conditions subject to which options may be exercised in whole or in
part; (v) to determine the form of consideration that may be used to purchase
shares of Class A Common Stock of the Company issued upon exercise of an option
or right; (vi) to impose restrictions and/or conditions upon shares of Class A
Common Stock of the Company acquired upon exercise of an option or right; (vii)
to determine the circumstances under which shares of Class A Common Stock of the
Company acquired upon exercise of any option or right may be subject to
repurchase by the Company; (viii) to determine the circumstances under which
shares acquired upon exercise of an option or right may be sold or transferred;
(ix) to establish a vesting provision for any option relating to the time, or
circumstance, when the option may be exercised by a participant; and (x) to
accelerate the time when outstanding options may be exercised.
The Company is currently authorized to issue up to 25,397 shares of Class A
Common Stock under the 1996 Stock Plan. As of June 30, 1997, options to purchase
1,500 shares of Class A Common Stock were outstanding under the 1996 Stock Plan,
all of which were ISOs. Of such options granted, one-third of the shares may be
purchased at an option price of $175.00 per share, one-third may be purchased at
$218.75 per share, and the final one-third may be purchased at $262.50 per
share. None of the named officers has received stock options under the 1996
Stock Plan. The Company has not issued any Restricted Stock under the Plan.
In connection with the creation of a holding company structure for the
Company, the 1995 Stock Plan and the 1996 Stock Plan assumed by Holdings and all
of the outstanding options granted under such Plans were converted to options to
purchase shares of the Class A Common Stock of Holdings on identical terms and
conditions.
401(K) PLAN
The Company maintains a 401(k) Savings Plan for its full-time employees
which permits employee contributions up to 15% of annual compensation to the
plan on a pre-tax basis. In addition, the Company may make a matching
contribution of up to 50% of each participating employee's annual compensation,
not to exceed $1,000, before taxes. The Company may also make additional
discretionary contributions to the Plan in any plan year up to the annual 401(k)
plan contribution limits as defined in the Internal Revenue Code of 1986, as
amended (the "Code"). The Plan is administered by the Compensation Committee.
For the plan year ended December 31, 1996, the Company has accrued an
aggregate of $121,000 for contributions to the Plan in 1997, of which $1000 was
accrued on behalf of each of Messrs. Queen, Seng, Jennings, Howe and Scheiwe,
and all of which has been contributed.
58
<PAGE>
SECURITIES OWNERSHIP
As of the Closing, Holdings will own all the issued and outstanding capital
stock of Teletrac. The following table sets forth certain information regarding
the beneficial ownership of Holdings' Class A Common Stock and Preferred Stock
as of the Closing by (i) certain stockholders or groups of related stockholders
who, individually or as a group, are the beneficial owners of 5% or more of any
class of Holdings Common Stock, (ii) the executive officers and directors of
Holdings and (iii) the executive officers and directors of Holdings as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A COMMON STOCK(1)
PREFERRED STOCK
------------------------- -------------------------
<CAPTION>
NUMBER OF PERCENT NUMBER OF PERCENT
NAME(2) SHARES OF CLASS SHARES OF CLASS
- ------------------------------------------------------------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Burr, Egan, Deleage Funds(3)...................................... 73,088.02 28.0% 23,088.02 12.2%
c/o Burr, Egan Deleage & Co.
One Post Office Square
Boston, MA 02109
Alta Communications Funds(4)...................................... 23,088.01 8.5 23,088.01 12.1
c/o Alta Communications, Inc.
One Embarcadero Center,
Suite 4050
San Francisco, CA 94111
Kingdon Associates, L.P. ......................................... 13,398.99 5.3 5,898.99 3.1
Kingdon Partners, L.P............................................. 13,435.06 5.4 935.06 *
M. Kingdon Offshore NV............................................ 52,025.97 19.2 22,025.97 11.6
52 West 57th Street
New York, NY 10019
Toronto Dominion Capital (U.S.A.), Inc............................ 55,772.01 21.9 5,772.01 3.0
31 West 52nd Street
20th Floor
New York, NY 10019
TruePosition, Inc................................................. 55,772.01 21.9 5,772.01 3.0
3 Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Eos Partners SBIC, L.P............................................ 34,772.01 13.6 5,772.01 3.0
320 Park Avenue
22nd Floor
New York, NY 10022
BancBoston Ventures Inc........................................... 34,632.03 12.2 34,632.03 18.2
100 Federal Street
Boston, MA 02110
Chestnut Hill Wireless, Inc....................................... 40,404.04 14.0 40,404.04 21.2
1300 Boylston Street
Chestnut Hill, MA 02167
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------------------------
CLASS A COMMON STOCK(1)
PREFERRED STOCK
------------------------- -------------------------
NUMBER OF PERCENT NUMBER OF PERCENT
NAME(2) SHARES OF CLASS SHARES OF CLASS
- ------------------------------------------------------------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS:
<S> <C> <C> <C> <C>
James A. Queen(5)................................................. 18,023.00 7.2 0 0
Steven D. Scheiwe(5).............................................. 3,135.00 * 0 0
Lawrence P. Jennings(5)........................................... 2,351.00 * 0 0
James E. Seng(5).................................................. 404.00 * 0 0
Alan B. Howe(5)................................................... 404.00 * 0 0
Sanford Anstey(6)................................................. 34,632.03 13.9 34,632.03 18.2
Robert Benbow(7).................................................. 96,176.03 32.6 46,176.03 15.2
David J. Berkman(8)............................................... 55,772.01 22.4 5,772.01 3.0
Michael A. Greeley(9)............................................. 40,404.04 16.2 40,404.04 21.2
Michael Markbreiter(10)........................................... 78,860.02 31.7 28,860.02 15.2
Marc H. Michel(11)................................................ 34,772.01 14.0 5,772.01 3.0
Brian A. Rich(12)................................................. 55,772.01 22.4 5,772.01 3.0
All executives officers and directors as a group 323,394.12 76.2 167,388.15 63.6
(14 persons)(13)................................................
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes all shares issuable upon conversion of the Preferred Stock.
(2) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all shares set forth in
the table. The shares listed include shares of Class A Common Stock that may
be acquired upon exercise of presently exercisable options, or options that
will become exercisable within 60 days from the date hereof.
(3) Includes (i) 18,525, shares of Common Stock and 8,554.11 shares of
Preferred Stock owned by Alta Subordinated Debt Partners III, L.P., (ii)
31,145 shares of Common Stock and 14,381.53 shares of Preferred Stock owned
by Alta V Limited Partnership and (iii) 330 shares of Common Stock and
152.38 shares of Preferred Stock owned by Customs House Partners. Alta
Subordinated Debt Partners III, L.P., Alta V Limited Partnership and Customs
House Partners are part of an affiliated group of investment funds referred
to, collectively, as the Burr, Egan, Deleage Funds. The general partner of
Alta Subordinated Debt Partners III, L.P. is Alta Subordinated Debt
Management III, L.P. The general partner of Alta V Limited Partnership is
Alta V Management Partners, L.P. Each of Alta Subordinated Debt Management
III, L.P. and Alta V Management Partners, L.P. exercises sole voting and
investment power with respect to all of the shares held of record by the
investment fund for which it serves as general partner. Burr, Egan, Deleage
& Co., directly or indirectly, provides investment advisory services to each
of the investment funds comprising the Burr, Egan, Deleage Funds. Certain of
the principals of Burr, Egan, Deleage & Co. are partners in Alta
Subordinated Debt Management III, L.P. and Alta V Management Partners, L.P.
and, as such, may be deemed to have or share voting or investment power with
respect to the shares held by the investment fund for which such entity
serves as general partner. The principals of Burr, Egan, Deleage & Co.
disclaim beneficial ownership of all of such shares except to the extent of
their proportionate pecuniary interests therein. Certain principals of Burr,
Egan, Deleage & Co. are general partners of Customs House Partners and may
be deemed to share voting and investment power with respect to the shares
held of record by Customs House Partners. Such principals of Burr, Egan,
Deleage & Co. disclaim beneficial ownership of all of such shares except to
the extent of their proportionate pecuniary interests therein. In addition,
certain principals of Burr, Egan, Deleage & Co. are affiliated with Alta
Communications, Inc.
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(4) Includes (i) 22,574.16 shares of Preferred Stock owned by Alta
Communications VI, L.P. and (ii) 513,85 shares of Preferred Stock owned by
Alta Comm S by S, L.L.C. Alta Communications VI, L.P. and Alta Comm S by S
are part of an affiliated group of investment funds referred to,
collectively, as the Alta Communications Funds. The general partner of Alta
Communications VI, L.P. is Alta Communications VI Management Partners, L.P.
Alta Communications VI Management Partners, L.P., exercises sole voting and
investment power with respect to all of the shares held of record by Alta
Communications VI, L.P. Alta Communications, Inc. provides investment
advisory services to each of the funds comprising the Alta Communications
Funds. Certain of the principals of Alta Communications, Inc. are partners
of Alta Communications VI Management Partners, L.P. and as such may be
deemed to have or share voting or investment power with respect to the
shares held by Alta Communications VI, L.P. The principals of Alta
Communications, Inc. disclaim beneficial ownership of all of such shares
except to the extent of their proportionate pecuniary interests therein.
Certain principals of Alta Communications, Inc. are members of Alta Comm S
by S and may be deemed to share voting and investment power with respect to
the shares held of record by Alta Comm S by S. Such principals of Alta
Communications, Inc. disclaim beneficial ownership of such shares except to
the extent of their proportionate pecuniary interests therein. In addition,
certain principals of Alta Communications, Inc. are affiliated with Burr,
Egan, Deleage & Co.
(5) Includes options to purchase shares of Common Stock that are presently
exercisable, or that will become exercisable within 60 days from the date
hereof.
(6) Mr. Anstey may be deemed to beneficially own the shares of capital stock
owned by BancBoston Ventures. Mr. Anstey disclaims beneficial ownership of
such shares.
(7) Mr. Benbow is a general partner of Alta Subordinated Debt Management III,
L.P., Alta V Management Partners, L.P. and Alta Communications VI Management
Partners, L.P. As a general partner of these funds, he may be deemed to
share voting and investment power with respect to the shares of Common Stock
and Preferred Stock owned by the investment funds for which these funds
serve as general partner. Mr. Benbow disclaims beneficial ownership to such
shares except to the extent of his proportionate pecuniary interests
therein. In addition, Mr. Benbow disclaims all beneficial ownership to all
the shares held by Customs House Partners and Alta Comm S by S, L.L.C.
(8) Mr. Berkman may be deemed to beneficially own the shares of capital stock
owned by TruePosition, Inc., a subsidiary of the Associates Group, Inc. Mr.
Berkman disclaims beneficial ownership of such shares.
(9) Mr. Greeley may be deemed to beneficially own the shares of capital stock
owned by Chestnut Hill Wireless, Inc., a subsidiary of GCC Investments, Inc.
Mr. Greeley disclaims beneficial ownership of such shares.
(10) Mr. Markbreiter may be deemed to beneficially own the shares of capital
stock owned by Kingdon Associates, L.P., Kingdon Partners, L.P. and M.
Kingdon Offshore NV. Mr. Markbreiter disclaims beneficial ownership of such
shares.
(11) Mr. Michel may be deemed to beneficially own the shares of capital stock
owned by Eos Partners SBIC, Inc. Mr. Michel disclaims beneficial ownership
of such shares.
(12) Mr. Rich may be deemed to beneficially own the shares of capital stock
owned by Toronto Dominion Capital (U.S.A.), Inc. Mr. Rich disclaims
beneficial ownership of such shares.
(13) Includes shares held by (i) BancBoston Ventures Inc. that may be deemed to
be beneficially owned by Mr. Anstey, (ii) TruePosition, Inc. that may be
deemed to be beneficially owned by Mr. Berkman, (iii) Chestnut Hill
Wireless, Inc. that may be deemed to be beneficially owned by Mr. Greeley,
(iv) Kingdon Associates, L.P., Kingdon Partners, L.P. and M. Kingdon
Offshore NV that may be deemed to be beneficially owned by Mr. Markbreiter,
(v) Eos Partners SBIC, L.P. that may be deemed to be beneficially owned by
Mr. Michel and (vi) Toronto Dominion Capital (U.S.A.), Inc. that may be
deemed to be beneficially owned by Mr. Rich. Does not include shares held by
Alta Subordinated Debt Partners III, L.P., Alta V Limited Partnership,
Customs House Partners, Alta Communications VI, L.P. and Alta Comm S by S
that may be deemed to be beneficially owned by Mr. Benbow.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PREFERRED STOCK PURCHASE AGREEMENT
In December 1996, the Company sold 190,476.19 shares of Series A Redeemable
Convertible Participating Preferred Stock to Alta Subordinated Debt Partners,
L.P., Alta V Limited Partnership, Customs House Partners, Alta Communications
VI, L.P., Alta Comm S by S, LLC, Kingdon Associates, L.P., Kingdon Partners
L.P., M. Kingdon Offshore NV, Toronto Dominion Capital (U.S.A), Inc., Associated
RT, Inc. (the predecessor of TruePosition, Inc.), Eos Partners SBIC, L.P.,
BancBoston Ventures Inc., Northwood Ventures, Chestnut Hill Wireless, Inc.,
Westbury Capital Partners, L.P., Boston Capital Ventures III, L.P., High Point
Keller Limited Partnership, R.B. Keller and Richard B. Keller II (the "Preferred
Investors") pursuant to a Stock Purchase Agreement (the "Preferred Stock
Purchase Agreement") dated December 6, 1996 for an aggregate purchase price of
$33.0 million. The Preferred Stock Purchase Agreement was amended and assigned
by the Company to, and assumed by, Holdings pursuant to the terms of the
Exchange Agreement discussed below.
In the Preferred Stock Purchase Agreement assumed by Holdings, Holdings made
certain covenants to the Preferred Investors which survive until such time as
all of the shares of Preferred Stock have either been redeemed or converted to
shares of Common Stock. Such covenants include, among others, a covenant by
Holdings not to declare or pay any dividends or make any distributions of cash,
property or securities of Holdings with respect to any shares of its capital
stock, or directly or indirectly redeem, purchase, or otherwise acquire for
consideration any shares of its capital stock, except as expressly provided in
the Preferred Stock Purchase Agreement or Holdings' Certificate of Incorporation
and except for repurchases of Common Stock at cost by Holdings under employee
stock plans and programs. Holdings also covenanted that, until February 1, 2008
it will not, and will not permit any subsidiary to, without the consent of the
holders of a majority of the outstanding shares of Preferred Stock: (i) issue
any shares of its capital stock senior to or on parity with the Preferred Stock
with respect to dividends, conversions, liquidation, redemptions or special
voting rights, (ii) create, incur, assume, become liable for, or permit to exist
any indebtedness for borrowed money, capital leases, or other similar
commitments or obligations which, for any one such borrowing or series of
related borrowings, is in excess of $250,000, except under the Indenture or the
Credit Facility or as permitted by the Indenture as in effect on the Closing
Date or by the Credit Facility as in effect on the date of execution and
delivery of definitive documentation with respect thereto or indebtedness
incurred to refinance any of the same; PROVIDED, that any such refinancing
indebtedness (a) shall not have an original principal amount exceeding the sum
of the aggregate principal amount of indebtedness refinanced thereby, plus
accrued interest and any applicable premiums, penalties, fees and costs payable
in respect of the indebtedness refinanced thereby, plus out-of-pocket expenses
payable as a result of such refinancing; and (b) having a maturity later than
February 1, 2008 shall not by its terms expressly restrict payments due to the
holders of the Series A Preferred Stock in connection with redemption of such
shares at the option of such holders on or after February 1, 2008 (any such
refinancing indebtedness being hereinafter called "Refinancing Indebtedness"),
(iii) grant or permit to exist any material liens, security interests or
encumbrances on any of Holdings' assets or properties, except under the
Indenture or the Credit Facility or as permitted by the terms of the Indenture
or the Credit Facility (including, without limitation, under any Refinancing
Indebtedness), (iv) enter into any agreement with any party which by its terms
restricts the payments due to the holders of the Preferred Stock as set forth in
Holdings' Certificate of Incorporation, except under the Indenture or the Credit
Facility or as permitted by the Indenture or the Credit Facility (including,
without limitation, under any Refinancing Indebtedness), or (v) authorize any
merger or consolidation of Holdings with or into any other corporation,
partnership or entity (with the result that less than a majority of the
outstanding voting power of the surviving corporation is held by persons who
were stockholders of Holdings immediately prior to such event) or permit the
sale of all or any material portion of the capital stock or assets of Holdings
(other than sales in the ordinary course of business and consistent with past
practices). Holdings also covenanted to the Preferred Investors that it will
not, without the consent of the holders of 66 2/3% of the outstanding shares of
Preferred Stock, authorize or permit the voluntary bankruptcy, reorganization,
liquidation, dissolution or winding up of
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Holdings. Furthermore, Holdings covenanted not to make any amendment to its
Certificate of Incorporation or By-laws (a) so as to adversely affect the rights
of the holders of the Preferred Stock with respect to dividends, liquidation
preferences or redemption without the consent of 80% of the outstanding shares
of Preferred Stock, or (b) that adversely affects any other preference, powers,
rights or privileges of holders of the Preferred Stock without the consent of
holders of at least 66 2/3% in interest of the Preferred Stock. Holdings also
covenanted that it would not make any expenditures for fixed or capital assets,
or any commitments for such expenditures, in excess of $1.0 million for a single
or series or related expenditures without the prior approval of the Board of
Directors. Following February 1, 2008, if any shares of Preferred Stock remain
outstanding, the amendments to the Preferred Stock Purchase Agreement effected
by the Exchange Agreement will be of no further force and effect, and certain of
the covenants discussed above will be modified.
In addition, Holdings made certain affirmative covenants to the Preferred
Investors pursuant to the terms of the Preferred Stock Purchase Agreement. Such
covenants include covenants to provide the Preferred Investors with the
financial statements and budget forecasts of Holdings, to pay all taxes owed by
Holdings, to comply with applicable laws and regulations, and to keep its
property insured by financially sound and reputable insurers.
Certain of the Preferred Investors are Small Business Investment Companies
(each an "SBIC") licensed by the Small Business Administration pursuant to 13
C.F.R. Parts 107 and 121 (the "SBIC Regulations"). In the event that, prior to
December 7, 1997, Holdings changes its principal business activity to an
ineligible business activity (within the meaning of the SBIC Regulations),
Holdings will be required to repurchase each share of Preferred Stock held by an
SBIC at the purchase price under the Preferred Stock Purchase Agreement plus all
accrued and unpaid dividends thereon.
STOCKHOLDERS' AGREEMENT
The Company and the current holders of its issued and outstanding capital
stock (the "Stockholders") have entered into a Stockholders' Agreement, dated as
of December 6, 1996 (the "Stockholders' Agreement"). The Stockholders' Agreement
was amended and assigned by the Company to Holdings pursuant to the terms of the
Exchange Agreement described below.
Under the terms of the Stockholders' Agreement, the Stockholders have
certain rights of last refusal and co-sale rights with respect to sales of
Common Stock and/or Preferred Stock of Holdings by other Stockholders. In
addition, the Stockholders' Agreement creates drag-along obligations in the
event that the holders of specified percentages of Common Stock and Preferred
Stock agree to (i) sell or otherwise dispose of the assets of Holdings or a
majority of its capital stock to a non-affiliate of Holdings or certain
Stockholders or (ii) merge Holdings with or into a non-affiliate of Holdings or
certain Stockholders.
Under the Stockholders' Agreement, Holdings also granted the Stockholders
preemptive rights to purchase their pro rata portion of the issuance by Holdings
of (i) shares of capital stock of Holdings, (ii) securities convertible into or
exchangeable for capital stock of Holdings, or (iii) options, warrants or rights
carrying any rights to purchase capital stock of Holdings, all except in
connection with an acquisition or joint venture with a non-affiliate, an
issuance under a Holdings stock option plan, or certain other issuances. The
Stockholders have waived all such preemptive rights with respect to the issuance
of the Warrants (and underlying shares) and certain additional warrants
(including any underlying shares) issued (or which the Company has committed to
issue) at any time within 90 days of the Closing Date.
The Stockholders' Agreement has fixed the number of directors of the Board
of Directors of Holdings at eight and will require each of the Stockholders to
vote their shares of Preferred Stock and/or Common Stock for the election to the
Board of Directors of: one individual nominated by certain members of
management, one individual nominated by Burr, Egan, Deleage & Co. and its
affiliates, one individual nominated by Eos Partners SBIC, L.P., one individual
nominated by Kingdon Associates, L.P. and its affiliates, one individual
nominated by TruePosition, Inc. and one individual nominated by Toronto Dominion
Capital (U.S.A.), Inc. In addition, the Stockholders who are holders of
Preferred Stock further agreed to vote their shares of Preferred Stock for the
election to the Board of Directors, as representatives
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of the holders of Preferred Stock, one individual nominated by BancBoston
Ventures Inc. and one individual nominated by GCC Investments, Inc. As soon as
practicable after the effective date of the registration statement filed with
the Commission in connection with the Exchange Offer, the number of directors
shall be increased to nine and each of the Stockholders will be required to vote
its shares of Common Stock and/or Preferred Stock to elect to the Board of
Directors an outside nominee selected by a majority of the Board of Directors.
The consent of a majority of the holders of Holdings' Common Stock and
Preferred Stock, voting as a single class, is required under the Stockholders'
Agreement for Holdings to: (i) authorize or issue any equity security senior to
or on parity with the Preferred Stock, (ii) incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any new or additional
indebtedness or liability except as permitted by the Preferred Stock Purchase
Agreement, as amended, (iii) redeem, purchase or otherwise acquire for value any
shares of Common Stock or of any class of capital stock of Holdings or any of
its outstanding options, warrants or convertible or exchangeable securities,
except for repurchases of Common Stock at cost by Holdings under employee stock
plans and programs, (iv) enter into any transaction or agreement with any
officer, director or shareholder of Holdings, or any wholly or partially owned
subsidiary of Holdings, or any other affiliate of Holdings, except transactions
that are on terms no less favorable than would be available in an arms-length
transaction and that are approved by the Audit Committee, (v) authorize any
merger or consolidation of Holdings with or into any other corporation,
partnership or entity (with the result that less than a majority of the
outstanding voting power of the surviving corporation is held by persons who
were stockholders of Holdings immediately prior to such event) or permit the
sale of all or any material portion of the capital stock or assets of Holdings
(other than sales in the ordinary course of business and consistent with past
practices), or (vi) increase or decrease the total number of authorized shares
of Preferred Stock.
The consent of both the holders of a majority of the issued and outstanding
shares of Common Stock and Preferred Stock voting together as a single class,
and the holders of 66 2/3% of the issued and outstanding shares of Preferred
Stock, is required for Holdings to permit or authorize the voluntary
reorganization, liquidation, dissolution or winding up of Holdings. Furthermore,
Holdings is not permitted to amend its Certificate of Incorporation or By-laws
(a) so as to adversely affect the rights of the holders of the Preferred Stock
with respect to dividends, liquidation preferences or redemption without the
consent of the holders of a majority of the issued and outstanding shares of
Common Stock and Preferred Stock, voting together as a single class, and the
consent of the holders of 80% of the outstanding shares of Preferred Stock, or
(b) so as to adversely affect any other preference, powers, rights or privileges
of holders of the Preferred Stock without the consent of holders of a majority
of the issued and outstanding shares of Common Stock and Preferred Stock, voting
together as a single class, and the consent of the holders of at least 66 2/3%
of the outstanding shares of Preferred Stock.
The rights and obligations of Holdings and the Stockholders pursuant to the
Stockholders' Agreement will remain in effect until the earlier of the sale of
the Company and certain qualified public offerings of the Company's Common
Stock.
REGISTRATION RIGHTS AGREEMENT
The Company and the Stockholders have also entered into an Amended and
Restated Registration Rights Agreement, dated December 6, 1996 (the
"Registration Agreement"). The Registration Agreement was amended and assigned
by the Company to Holdings pursuant to the terms of the Exchange Agreement
described below.
Under the Registration Agreement, the Holdings has agreed, subject to
certain conditions, to effect up to three demand registrations of the Common
Stock held by the Stockholders for a sale to the public under applicable federal
and state securities laws. In addition, the Stockholders have certain
"piggy-back" registration rights and rights to registration on Form S-3. In
consideration for such registration rights, under the Registration Agreement the
Stockholders have agreed not to sell or otherwise dispose of shares of Holdings'
Common Stock for seven days prior to and 180 days following any initial public
offering by
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Holdings without the prior written approval of the underwriter for such
offering. The addition of any new holders of Holdings' securities as parties to
the Registration Agreement will require the approval of 75% of existing holders
of Common Stock (or securities exchangeable therefor or convertible thereto).
The approval of the holders of a majority of the shares of Holdings' capital
stock will be required under the Registration Agreement in order for Holdings to
grant registration rights to any other person that are superior to the
registration rights contained in the Registration Agreement. The Registration
Agreement will terminate as to any party thereto (other than Holdings) after an
initial public offering of Holdings' securities at such time as such party holds
less than one percent of Holdings' outstanding Common Stock. The Stockholders
have waived all such registration rights with respect to any registration of the
Notes or Warrants.
EXCHANGE AGREEMENT
The Company, Holdings and the Stockholders have entered into an Exchange
Agreement establishing the holding company structure. Under the terms of the
Exchange Agreement, each of the Stockholders has exchanged their shares of
Company Common Stock and Preferred Stock for substantially similar shares of
Holdings Common Stock and Preferred Stock. The Exchange Agreement also assigned
the Preferred Stock Purchase Agreement, the Stockholders' Agreement and the
Registration Agreement from the Company to Holdings and released the Company
from any liabilities thereunder arising after the date of assignment. Certain
provisions of the Stockholders' Agreement, the Registration Agreement and the
Preferred Stock Purchase Agreement have also been amended to facilitate the Unit
Offering, as described above. Under the Exchange Agreement, each Stockholder has
also subordinated the payment of any amount due to such Stockholder, and all
other rights and claims of such Stockholder, arising under the Exchange
Agreement, the Preferred Stock Purchase Agreement, the Stockholders' Agreement
or the Registration Agreement to the indebtedness of the Company under or
relating to the Notes or otherwise arising under the Indenture or the Credit
Facility.
Under the terms of the Exchange Agreement, Holdings has filed an amendment
to its Certificate of Incorporation. Such amendment extends to February 1, 2008
the date on which the holders of a majority in interest of the Series A
Preferred Stock may require Holdings to redeem all of the outstanding shares of
Series A Preferred Stock. In addition, such amendment includes certain
provisions requiring the affirmative vote of the holders of a majority of the
shares of Preferred Stock, voting as a single class on an as-converted basis,
for Holdings to: (i) authorize or issue, or obligate itself to issue, any equity
security senior to or on parity with the Series A Preferred Stock, (ii) incur,
create, assume, become or be liable in any manner with respect to any new or
additional indebtedness or liability, except under the Indenture or the Credit
Facility, or as permitted by the Indenture as in effect on the Closing Date or
the Credit Facility as in effect on the date of execution and delivery of a
definitive agreement with respect thereto and Refinancing Indebtedness, (iii)
redeem, purchase or otherwise acquire for value any shares of Common Stock or of
any class of capital stock of Holdings, or any of its outstanding options,
warrants or convertible or exchangeable securities, except for repurchases of
shares of Common Stock at cost by Holdings under employee stock plans and
programs, (iv) enter into any transaction or agreement with any officer,
director or stockholder of Holdings, or any wholly or partially owned subsidiary
of Holdings, or any other affiliate of Holdings, except in an arms-length
transaction approved by the Audit Committee, (v) authorize any merger or
consolidation of Holdings with or into any other corporation, partnership or
entity (with the result that less than a majority of the outstanding voting
power of the surviving corporation is held by persons who were stockholders of
Holdings immediately prior to such event) or permit the sale of all or any
material portion of the capital stock or assets of Holdings (other than sales in
the ordinary course of business and consistent with past practices), or (vi)
increase or decrease the total number of authorized shares of Preferred Stock.
In addition, the consent of the holders of 66 2/3% of the issued and outstanding
shares of Preferred Stock is required for Holdings to permit or authorize the
voluntary reorganization, liquidation, dissolution or winding up of Holdings.
Furthermore, Holdings is not permitted to amend its Certificate of Incorporation
or By-laws (a) so as to adversely affect the rights of the holders of the
Preferred Stock with respect to dividends, liquidation preferences or redemption
without the consent of
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80% of the outstanding shares of Preferred Stock, or (b) so as to adversely
affect any other preference, powers, rights or privileges of holders of the
Preferred Stock without the consent of holders of at least 66 2/3% of the
outstanding shares of Preferred Stock.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the agreements governing the outstanding long-term
indebtedness of the Company and its subsidiaries does not purport to be complete
and is qualified in its entirety by reference to the various agreements
described herein.
CREDIT FACILITY
On September 18, 1997, Teletrac, Inc. entered into a bank credit facility
(the "Credit Facility") pursuant to which Banque Paribas, Fleet National Bank
and certain other banks (the "Banks") have agreed to provide the Company a five
and one-half year $30 million secured revolving line of credit.
The loans under the Credit Facility are, at the election of the Company,
domestic loans or Eurodollar loans. During the first year of the facility, loans
bear interest (i) in the case of domestic loans, at 2.50% per annum plus a
reference rate (which is the prime rate) and (ii) in the case of Eurodollar
loans, at 3.50% per annum plus a reference Eurodollar loan rate. For the
remaining term of the facility, the applicable margin rates may be increased or
decreased quarterly depending upon the Company's debt to operating cash flow
ratio. The applicable margins may range between 1.00% and 2.50% for domestic
loans and 2.00% and 3.50% for Eurodollar loans. The Company will also be
required to pay a commitment fee for all unused committed amounts under the
facility. During the period from November 15, 1997 through February 14, 1998,
the commitment fee will be 0.50% per annum, and the commitment rate may be
increased or decreased thereafter, and may range between 0.375% and 0.50%,
depending upon the Company's debt to operating cash flow ratio.
The maximum aggregate commitment of the Banks under the Credit Facility is
reduced each quarter, beginning December 31, 1999, until all amounts borrowed
thereunder are paid in full on March 31, 2003. All amounts outstanding in excess
of the commitment as so reduced must be paid by the Company in full. The
aggregate commitment of the Banks under the Credit Facility will be reduced by a
total of $6.0 million over the four quarters ended September 30, 2000, by a
total of $9.0 million over each of the four quarters ended September 30, 2001
and 2002, and by a total of $6.0 million over the two quarters ended March 31,
2003.
The Credit Facility contains restrictive covenants that, among other things,
impose limitations on the Company and its subsidiaries with respect to (i) the
incurrence and maintenance of indebtedness, including guarantees, (ii) the
incurrence, creation or maintenance of liens, (iii) the making of dividends and
certain payments, (iv) transactions with affiliates, (v) the disposition of
assets, (vi) the types of acquisitions that can be made and the amount which can
be invested in acquisitions, (vii) the amount of rental payments that can be
incurred, and (viii) consolidations and mergers.
The obligations of the Company under the Credit Facility are secured by a
first priority security interest in and a lien upon all of the assets of the
Company. Furthermore, the obligations of the Company have been fully guaranteed
by Teletrac Holdings, Inc., which has secured such guarantee with a pledge of
all of the capital stock of Teletrac, Inc.
The Credit Facility provides for events of default customary in facilities
of its type, including, among others: (i) failure by the Company to make
payments thereunder when due, (ii) failure by the Company or any subsidiary to
perform or observe covenants, (iii) breach of representations or warranties in
any material respect when made, (iv) failure by the Company or any of its
subsidiaries to make payments or observe covenants in respect of certain
indebtedness, (v) change of ownership or control, (vi) bankruptcy, insolvency or
similar events with respect to Holdings or any of its subsidiaries, (vii)
judgments in excess of certain threshold amounts with respect to the Company or
any of its subsidiaries which remain unsatisfied or unstayed for a certain
period of time, (viii) ERISA defaults with respect to the Company or any of its
subsidiaries, and (ix) impairment of loan documentation or security.
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DESCRIPTION OF NEW NOTES
GENERAL
The New Notes will be issued pursuant to the Indenture between the Company
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
The terms of the New Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The New Notes are subject to all such
terms, and Holders of New Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the New Notes, the Indenture, the Registration Rights Agreement
and the Pledge Agreement does not purport to be complete and is qualified in its
entirety by reference to the New Notes, the Indenture, the Registration Rights
Agreement and the Pledge Agreement, including the definitions in each of such
instruments and agreements of certain terms used below. Copies of the Indenture,
Registration Rights Agreement and Pledge Agreement will be made available to
purchasers of New Notes upon request. The definitions of certain terms as used
in the following summary are set forth below under "--Certain Definitions."
The New Notes will represent senior, unsecured obligations of the Company,
will rank PARI PASSU in right of payment with all existing and future senior
indebtedness of the Company and will rank senior in right of payment to all
existing and future subordinated indebtedness of the Company. Although the
Indenture will limit the ability of the Company and its subsidiaries to incur
additional indebtedness, the Indenture will permit the Company to incur secured
indebtedness under the Credit Facility which, if incurred, will effectively rank
senior to the New Notes with respect to the assets securing such indebtedness.
In such a case, if the Company's debt under the Credit Facility were to be
accelerated, subject to FCC approval if required, the holders of such secured
indebtedness would be entitled to payment in full out of the assets securing
such indebtedness prior to payment to holders of the New Notes. If the lenders
party to, or the holders of, any such secured indebtedness were to foreclose on
the collateral securing the Company's obligations to them, there can be no
assurance that there would be sufficient assets remaining after payment of all
such secured indebtedness to satisfy the claims of holders of the New Notes in
full. The Company currently has no indebtedness that is expressly subordinated
in right and priority of payment to the New Notes.
Under certain circumstances, the Company will be able to designate future
Subsidiaries that it creates or acquires as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to the restrictive covenants set
forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The New Notes will be issued in an aggregate principal amount of $105
million. The New Notes will mature on August 1, 2007. Interest on the New Notes
will accrue at the rate of 14% per annum and will be payable semi-annually in
arrears on February 1 and August 1 of each year, commencing on February 1, 1998,
to Holders of record on the immediately preceding January 15 and July 15.
Interest on the New Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 6, 1997
(the "Issue Date"). Interest on the New Notes will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal of, premium (if any), interest and Liquidated Damages (if any) on,
the New Notes will be payable at the office or agency of the Company maintained
for such purpose within the City and the State of New York or, at the option of
the Company, payment of interest and Liquidated Damages (if any) may be made by
check mailed to the Holders of the New Notes at their respective addresses set
forth in the register of Holders of the New Notes; provided that if the Holder
of any New Notes has given wire transfer instructions to the Company, the
Company will be required to make all payments with respect to such New Notes by
wire transfer of immediately available funds to the account specified by such
Holder. Until otherwise designated by the Company, the Company's office or
agency will be the office of the Trustee
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maintained for such purpose. The New Notes will be issued in registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
The New Notes will not be redeemable prior to August 1, 2002. Thereafter,
the New Notes will be subject to redemption at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages (if any) thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- -------------------------------------------------------------------------------- ----------------
<S> <C>
2002............................................................................ 107.000%
2003............................................................................ 104.667%
2004............................................................................ 102.333%
2005 and thereafter............................................................. 100.000%
</TABLE>
Notwithstanding the foregoing, prior to August 1, 2000, the Company may
redeem outstanding New Notes with the net proceeds of one or more sales of
Capital Stock (other than Disqualified Stock) of the Company or Holdings
(provided that, in the case of Holdings, proceeds from the sale of such Capital
Stock shall have been contributed to the capital of the Company other than as
Disqualified Stock or Indebtedness) to one or more Persons at a redemption price
equal to 114% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages (if any) thereon to the redemption date; provided,
however, that: (i) not less than $68.3 million aggregate principal amount of New
Notes remain outstanding immediately after any such redemption; and (ii) such
redemption shall occur within 30 days after the date of closing of such sale of
Capital Stock.
MANDATORY REDEMPTION
The Company will not be required to make mandatory redemption or sinking
fund payments with respect to the New Notes. However, as described below, the
Company may be obligated, under certain circumstances, to make an offer to
purchase: (i) all outstanding New Notes at a redemption price of 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages (if any) thereon to the date of purchase, upon a Change of Control; and
(ii) outstanding New Notes with a portion of the Net Proceeds of Asset Sales at
a redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages (if any) thereon to the date of purchase.
See "-- Repurchase at the Option of Holders--Change of Control" and
"--Limitation on Sales of Assets and Subsidiary Interests."
SECURITY
In accordance with the terms of the Indenture, the Company has purchased and
pledged the Pledged Securities to the Trustee as Collateral Agent ("Collateral
Agent") pursuant to a Pledge Agreement ("Pledge Agreement") for the benefit of
the Holders of the Notes in such amount as will be sufficient upon receipt of
scheduled interest and principal payments of such securities, in the opinion of
a nationally recognized firm of independent certified public accountants
selected by the Company, to provide for payment in full of the first six
scheduled interest payments due on the Notes. The Company used $39.9 million of
the net proceeds of the Unit Offering to acquire the Pledged Securities. The
Pledged Securities were pledged by the Company to the Collateral Agent for the
benefit of the Holders of Notes pursuant to the Pledge Agreement and will be
held by the Collateral Agent in the Pledge Account. Pursuant to the Pledge
Agreement, immediately prior to an interest payment date on the Notes, the
Company may either deposit with the Collateral Agent from funds otherwise
available to the Company cash sufficient to pay the
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interest scheduled to be paid on such date or the Company may direct the
Collateral Agent to release from the Pledge Account proceeds sufficient to pay
interest then due. In the event that the Company exercises the former option,
the Company may thereafter direct the Collateral Agent to release to the Company
from the Pledge Account proceeds or Pledged Securities in like amount.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants selected by the Company, to
provide for payment in full of the first six scheduled interest payments due on
the Notes (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of any interest payments
remaining, up to and including the sixth scheduled interest payment) the
Collateral Agent will be permitted to release to the Company at the Company's
request any such excess amount. The New Notes are secured by a first priority
security interest in the Pledged Securities and in the Pledge Account and,
accordingly, the Pledged Securities and the Pledge Account also secure repayment
of the principal amount of the New Notes to the extent of such security.
Under the terms of the Pledge Agreement, assuming that the Company makes the
first six scheduled interest payments on the Notes in a timely manner, all of
the Pledged Securities will be released from the Pledge Account.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of New Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's New Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages (if any) thereon to the date of purchase
(the "Change of Control Payment"). Within 20 days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase New Notes pursuant to the procedures required by the Indenture and
described in such notice. The Company will 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 the New Notes as a result of a Change of Control.
On the Change of Control Payment date, the Company will, to the extent
lawful:
(i) accept for payment all New Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all New Notes or portions thereof so tendered;
and
(iii) deliver or cause to be delivered to the Trustee the New Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of New Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each Holder of New Notes so tendered
the Change of Control Payment for such New Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new New Note equal in principal amount to any unpurchased portion of the New
Note surrendered, if any; provided that each such new New Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
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The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the time and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all New Notes validly tendered and not withdrawn under such Change of
Control Offer.
Subject to the limitations discussed below, the Company could in the future
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit ratings.
Due to the highly leveraged structure of the Company, the Company may not have
sufficient funds to be able to repurchase all of the New Notes tendered in a
Change of Control Offer. The failure of the Company to purchase any New Notes
tendered in a Change of Control Offer will constitute an Event of Default under
the Indenture. See "--Events of Default and Remedies."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of New Notes to require the Company to repurchase such New Notes as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of the Company to another Person may be uncertain.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY INTERESTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale unless:
(i) the Company or such Restricted Subsidiary, as the case may be,
engaging in such Asset Sale 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; and
(ii) at least 80% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents;
provided, however, that any notes or similar obligations received by any of
the Company or such Restricted Subsidiaries from such transferees that are
immediately converted by the Company or such Restricted Subsidiaries into
cash, shall be deemed to be cash (to the extent of the net cash received)
for purposes of this clause (ii).
Within 180 days after the receipt of any Net Proceeds, the Company may apply
such Net Proceeds to: (i) repay, and thereby permanently reduce the commitments
or amounts available to be reborrowed under, the Bank Credit Facility pursuant
to clause (vi) of the covenant entitled "Incurrence of Indebtedness or Issuance
of Disqualified Stock;" or (ii) an investment in Related Assets or a Related
Business. Pending the final application of any such Net Proceeds, the Company
may temporarily invest such Net Proceeds in any manner that is not prohibited by
the Indenture. Any Net Proceeds that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate cumulative amount of Excess Proceeds exceeds $5
million, the Company will be required to make an offer to all Holders of New
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of New
Notes that may be purchased out of the Excess Proceeds (and not solely the
amount in excess of $5 million), at an offer price in cash in an amount equal to
100% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages (if any) thereon to the date of purchase, in accordance with
the procedures set forth in the Indenture. To the extent that the aggregate
amount of New Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes in any manner provided by the Indenture. If the aggregate
amount of New Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee will select the New Notes to be purchased on a pro rata
basis. Upon completion of
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such offer to purchase, on a pro rata basis the amount of Excess Proceeds will
be reset at zero. The Asset Sale Offer shall remain open for a period of 20
business days or such longer period as may be required by law.
The foregoing provisions will not apply to the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company,
which will be governed by the provisions of the Indenture described below in
"--Merger, Consolidation or Sale of Assets."
SELECTION AND NOTICE OF NEW NOTES FOR REDEMPTION OR REPURCHASE
If less than all of the New Notes are to be redeemed or repurchased pursuant
to any purchase offer required under the Indenture at any time, selection of New
Notes for redemption or repurchase will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which the New Notes are listed or, if the New Notes are not so listed, on a pro
rata basis; provided that no New Note with a principal amount of $1,000 or less
shall be redeemed or repurchased in part.
Notices of redemption or repurchase shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption or repurchase date to
each Holder of New Notes to be redeemed or repurchased at its registered
address. If any New Note is to be redeemed or repurchased in part only, the
notice that relates to such New Note shall state the portion of the principal
amount thereof to be redeemed or repurchased. A new New Note in principal amount
equal to the unredeemed or unrepurchased portion will be issued in the name of
the Holder thereof upon cancellation of the original New Note. On and after the
redemption or repurchase date (unless the Company shall default in the payment
of the redemption price, together with accrued and unpaid interest and
Liquidated Damages (if any) to the redemption date), interest will cease to
accrue on the New Notes or portions thereof called for redemption or repurchase.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
Equity Interests (including, without limitation, any payment in connection
with any merger or consolidation involving the Company or any of its
Restricted Subsidiaries), other than dividends or distributions payable (a)
in Equity Interests (other than Disqualified Stock) of the Company or (b) to
the Company or to any Restricted Subsidiary of the Company;
(ii) purchase, redeem, defease, retire or otherwise acquire or return
for value any Equity Interests of the Company or any Affiliate of the
Company, other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company;
(iii) make any principal payment on (including at maturity) or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness
that is subordinated (whether pursuant to its terms, by operation of law,
structurally or otherwise) to the New Notes; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
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(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the immediately preceding fiscal quarter, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Indebtedness to Cash Flow Ratio test set forth in the first paragraph of the
covenant entitled "Incurrence of Indebtedness or Issuance of Disqualified
Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clause
(iii) of the next succeeding paragraph), is less than the sum of:
(1) (without duplication) 50% of the Consolidated Net Income of the
Company (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which financial
statements are available at the time of such Restricted Payment (or, if
such aggregate Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale since the Issue Date of Equity Interests of the
Company or Holdings or of debt securities of the Company or Holdings that
have been converted into such Equity Interests (other than (A) Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and (B) Disqualified Stock or debt securities that have been
converted into Disqualified Stock; and provided that, in the case of
Holdings, proceeds from the sale of Equity Interests shall have been
contributed to the capital of the Company other than as Disqualified
Stock or Indebtedness), plus
(3) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition and taxes, if any)
and (B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the 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); provided that the amount of any such proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (2) of the preceding paragraph;
(iii) the repayment, defeasance, redemption or repurchase of
Intercompany Indebtedness (as defined in clause (iv) of the covenant
entitled "Incurrence of Indebtedness or Issuance of Disqualified Stock") or
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to
a Subsidiary of the Company) of Equity Interests of the Company or Holdings
(other than Disqualified Stock ); provided that the amount of any such net
cash proceeds that are utilized for any such repayment, defeasance,
redemption or repurchase shall be excluded from clause (2) of the preceding
paragraph;
(iv) payments by the Company to Holdings pursuant to the terms of the
Tax Sharing Agreement; and
(v) the purchase of employee stock or incentive options, or capital
stock issued pursuant to the exercise of employee stock or incentive
options, in an aggregate amount not to exceed $500,000 in any calendar year
and in an aggregate amount not to exceed $2.0 million since the date of the
Indenture;
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provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (i), (ii) and (v), no Default or
Event of Default shall have occurred and be continuing.
The Company may designate any of its Restricted Subsidiaries to be an
Unrestricted Subsidiary if such designation would not cause a Default and, at
the time of and after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness under the applicable provisions of the first
paragraph of the covenant entitled "Incurrence of Indebtedness or Issuance of
Disqualified Stock;" provided that (i) in no event shall all or any portion of
the material assets or properties (other than cash) owned by the Company on the
Issue Date be transferred to or held by an Unrestricted Subsidiary of the
Company and (ii) notwithstanding the foregoing, the Company may designate any
Restricted Subsidiary which receives the proceeds of an Investment made pursuant
to clause (v) of the definition of Permitted Investments as an Unrestricted
Subsidiary if (1) such designation would not cause a Default and (2) prior to
the date on which such Investment is made, the Company shall not have
transferred to such Subsidiary all or any portion of its material assets as of
the Issue Date. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of:
(i) the net book value of such Investments at the time of such
designation;
(ii) the Fair Market Value of such Investments at the time of such
designation; and
(iii) the original Fair Market Value of such Investments at the time
they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments, if not made in cash, shall be the
Fair Market Value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this covenant were computed,
which calculations may be based upon the latest available financial statements
of the Company.
INCURRENCE OF INDEBTEDNESS OR ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable, contingently
or otherwise, with respect to (collectively, "incur") any Indebtedness
(including, without limitation, Acquired Debt) and that the Company and its
Restricted Subsidiaries will not issue any Disqualified Stock and will not
permit any of their respective Subsidiaries (other than their Unrestricted
Subsidiaries) to issue any shares of preferred Equity Interests; provided,
however, that the Company may incur Indebtedness (including, without limitation,
Acquired Debt) or issue Disqualified Stock if, after giving pro forma effect to
the incurrence of such Indebtedness or the issuance of such Disqualified Stock
and the use of proceeds thereof, the aggregate Indebtedness to Cash Flow Ratio
of the Company does not exceed 5.0 to 1.
The foregoing limitations will not apply to:
(i) Indebtedness represented by the New Notes and the Indenture and any
guarantees of the New Notes issued by any Subsidiary under the terms of the
Indenture;
(ii) Existing Indebtedness;
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(iii) Indebtedness incurred by the Company under (A) Hedging
Obligations, provided that (1) the notional principal amount of any interest
rate protection agreement does not significantly exceed the principal amount
of the Indebtedness to which such interest rate protection agreement relates
and (2) any agreements related to fluctuations in currency rates do not
increase the outstanding Indebtedness other than as result of fluctuations
in foreign currency exchange rates, and (B) performance, surety and workers'
compensation bonds or other obligations of a like nature incurred in the
ordinary course of business consistent with past practice;
(iv) Indebtedness of the Company owed to and held by any of its Wholly
Owned Restricted Subsidiaries and Indebtedness of any Wholly Owned
Restricted Subsidiary of the Company owed to and held by the Company or any
of its Wholly Owned Restricted Subsidiaries (the Indebtedness incurred
pursuant to this clause (iv) being hereafter referred to as "Intercompany
Indebtedness"); provided that an incurrence of Indebtedness shall be deemed
to have occurred upon (i) any sale or other disposition of Intercompany
Indebtedness to a Person other than the Company or any of its Restricted
Subsidiaries, (ii) any sale or other disposition of Equity Interests of any
Restricted Subsidiary of the Company which holds Intercompany Indebtedness
such that such Restricted Subsidiary ceases to be a Restricted Subsidiary
after such sale or other disposition or (iii) designation of a Restricted
Subsidiary as an Unrestricted Subsidiary;
(v) Non-Recourse Debt by the Company incurred to finance purchase money
obligations;
(vi) Indebtedness incurred by the Company under a Bank Credit Facility,
provided that the aggregate principal amount at any time outstanding under
this clause (vi) does not exceed $30.0 million less the amount of any such
Indebtedness retired with the Net Cash Proceeds from any Asset Sale (or less
the permanent reduction of any commitments under the Bank Credit Facility),
and less the aggregate principal amount of Indebtedness under this clause
(vi) which is refinanced under clause (vii) below;
(vii) Indebtedness incurred by the Company ("Permitted Refinancing
Indebtedness") incurred to refinance, replace or refund Indebtedness
("Refinanced Indebtedness") incurred pursuant to the Indebtedness to Cash
Flow Ratio test set forth in the first paragraph of this covenant or
pursuant to clauses (i), (ii) or (vi) of this covenant; provided that:
(a) the aggregate principal amount of such Permitted Refinancing
Indebtedness does not exceed the aggregate principal amount of the
Refinanced Indebtedness (including accrued and unpaid interest thereon)
plus the amount of fees and reasonable expenses incurred in connection
therewith;
(b) such Permitted Refinancing Indebtedness shall have a final
maturity equal to or later than, and a Weighted Average Life to Maturity
equal to or greater than, the final maturity and Weighted Average Life to
Maturity of the Refinanced Indebtedness, respectively; and
(c) such Permitted Refinancing Indebtedness shall rank no higher
relative to the New Notes than the Refinanced Indebtedness and in no
event may any Indebtedness of the Company be refinanced with Indebtedness
of any Restricted Subsidiary under this clause (vii);
(viii)Indebtedness incurred by the Company in respect of Capital Lease
Obligations in an aggregate principal amount for all such Persons not to
exceed $10.0 million at any one time outstanding; and
(ix) other Indebtedness of the Company in an aggregate principal amount
not to exceed $5.0 million at any one time outstanding.
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LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom, or assign or convey any right to receive income
therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will 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 Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits;
(ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(iii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(iv) 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:
(a) the Indenture, the Pledge Agreement and the New Notes;
(b) Existing Indebtedness;
(c) applicable law;
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries 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;
(e) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practice;
(f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (iv) above on the property so acquired;
(g) 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 Refinanced Indebtedness; or
(h) in the case of clauses (a), (b), (d), (e), (f) and (g) above, any
amendments, modifications, restatements, renewals, increases,
supplements, modifications, restatements or refinancings thereof,
provided that such amendments, modifications, restatements or
refinancings are not materially more restrictive with respect to such
dividend and other payment restrictions than those contained in such
instruments as in effect on the date of their incurrence.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to, issue,
transfer, convey, sell or otherwise dispose of any shares of Capital Stock of a
Restricted Subsidiary or securities convertible or exchangeable into, or
options, warrants, rights or any other interest with respect to, Capital Stock
of a Restricted Subsidiary to any person other than the Company or a
Wholly-Owned Restricted Subsidiary except (i) in a transaction consisting of a
sale of all the Capital Stock of such Restricted Subsidiary and that complies
with the provisions described under"--Limitation on Sales of Assets and
Subsidiary Interests" above to the extent such provisions apply; (ii) if
required, the issuance, transfer, conveyance, sale or other
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disposition of directors' qualifying shares; and (iii) in a transaction in
which, or in connection with which, the Company or a Restricted Subsidiary
acquires at the same time sufficient Capital Stock of such Restricted Subsidiary
to at least maintain the same percentage ownership interest it had prior to such
transaction (and provided that the terms of such Capital Stock, and under which
such Capital Stock is held, are not more disadvantageous to the Company).
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 Person), 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 Person 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 and 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 under the New Notes, the Pledge
Agreement and the Indenture pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee;
(iii) immediately after such transaction, no Default or Event of Default
exists; and
(iv) the Company 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 (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) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the immediately preceding
fiscal quarter, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Indebtedness to Cash Flow Ratio test set forth
in the first paragraph of the covenant entitled "Incurrence of Indebtedness
or Issuance of Disqualified Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or directly, sell, lease, license,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or such Restricted Subsidiary than those that would have been
obtained in a comparable arms' length transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $2.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and such Affiliate
Transaction is approved by a majority of the disinterested members of the
Board of Directors; and
(b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $5.0 million (other than the execution of a
Bank Credit Facility if Toronto Dominion Capital (U.S.A.), Inc., or an
Affiliate thereof, is a lender thereunder), an opinion as to the fairness
of such Affiliate Transaction to the Company or Restricted Subsidiary
involved in such Affiliate
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Transaction from a financial point of view issued by an Independent
Financial Advisor or, with respect to communications-related matters, a
recognized expert in the communications industry;
provided that the following shall be deemed not to be Affiliate Transactions:
(1) any reasonable employment agreement or stock option agreement
entered into by the Company or any of its Restricted Subsidiaries with any
of their respective employees in the ordinary course of business;
(2) transactions between or among the Company and its Wholly Owned
Restricted Subsidiaries;
(3) Restricted Payments permitted by clauses (i) and (ii) of the second
paragraph of the covenant entitled "Restricted Payments" and Permitted
Investments of a type referred to in clauses (i) and (iii) of the definition
of Permitted Investments;
(4) the payment of reasonable fees to directors of the Company or any of
its Restricted Subsidiaries; and
(5) Affiliate Transactions pursuant to agreements in effect on the date
of the Indenture and described in this Prospectus and renewals and
extensions of such agreements on terms no less favorable to the Holders than
the terms of such original agreements and transactions.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES AND HOLDINGS
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the New Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives, and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; PROVIDED that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) PARI PASSU with the New Notes,
then the Guarantee of such Guaranteed Indebtedness shall be PARI PASSU with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the New Notes,
then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the New Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
that resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
Holdings will not, directly or indirectly, Guarantee any Indebtedness of the
Company unless (i) Holdings simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a Guarantee of payment of the New Notes
by Holdings and (ii) Holdings waives and will not in any manner whatsoever claim
to take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any Restricted Subsidiary
as a result of any payment by Holdings under its Guarantee. If the Guaranteed
Indebtedness is (A) PARI PASSU with the New Notes, then the Guarantee of such
Guaranteed Indebtedness shall be PARI PASSU with, or subordinated to, the
Holdings Guarantee or (B) subordinated to the New Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Holdings Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the New
Notes.
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BUSINESS ACTIVITIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in any business other than that which is
related to the design, development, procurement, installation, operation or
marketing of location, fleet management or related two-way messaging systems and
businesses and reasonably related extensions thereof.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any New Notes are outstanding, the
Company will furnish to the Holders of New Notes:
(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 a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations
of the Company and its Restricted Subsidiaries and, with respect to the
annual information only, a report thereon by the Company's independent
certified public accountants; and
(ii) all information that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
In addition, together with the information provided in clauses (i) and (ii)
above, the Company will provide supplemental financial information to the extent
permitted by the Commission in the Management's Discussion and Analysis of
Financial Condition and Results of Operations section of such reports or other
section of such reports as appropriate consisting of revenue, expense, earnings
before interest and taxes, net income, capital expenditures, cash, debt,
depreciation and amortization and units in service data for the Company. In the
event the Commission does not permit such supplemental financial information to
be included in such reports, then the Company will supply such information
supplementally to the registered Holders, unless providing such information
supplementally would, in the reasonable judgment of counsel to the Company,
violate applicable law.
In addition, whether or not required by the rules and regulations of the
Commission, but only if then permitted by the Commission, the Company will file
a copy of all such information and reports with the Commission for public
availability and make such information available to securities analysts,
investors and prospective investors upon request. The Company will furnish to
the Holders or beneficial holders of New Notes 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 until such time
as the Company either exchanges all of the New Notes for the Exchange New Notes
or has registered all of the New Notes for resale under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest on, or
Liquidated Damages (if any) with respect to, any of the New Notes;
(ii) default in payment when due (whether at maturity, upon redemption
or repurchase, or otherwise) of the principal of or premium (if any) on any
of the New Notes;
(iii) failure to comply with the provisions described under the captions
"--Repurchase at the Option of Holders--Change of Control," "--Repurchase at
the Option of Holders--Limitations on Sales of Assets and Subsidiary
Interests" or "--Certain Covenants--Merger, Consolidation or Sale of
Assets;"
(iv) failure by the Company or any of its Restricted Subsidiaries for 30
days after notice to comply with any of their other covenants in the
Indenture or the New Notes other than those referred to in clauses (i), (ii)
and (iii) above;
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(v) 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 (a "Payment Default"); or
(b) results in the acceleration (which acceleration has not been
rescinded) of such Indebtedness prior to its express maturity, and, in
each case described in clauses (a) and (b) of this clause (v), 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 $3.5 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments (other than any judgments as to which a reputable insurance
company has accepted full liability and whose bond, premium or similar
charge therefor is not in excess of $3.5 million) aggregating in excess of
$3.5 million, which judgments are not paid, discharged or stayed within 60
days after their entry;
(vii) breach by the Company of any representation or warranty set forth
in the Pledge Agreement, or default by the Company in the performance of any
covenant set forth in the Pledge Agreement, or repudiation by the Company of
any of its obligations under the Pledge Agreement or the unenforceability of
the Pledge Agreement against the Company for any reason which in any one
case or in the aggregate results in a material impairment of the rights
intended to be afforded thereby;
(viii)termination or loss, for any reason, of any material FCC license
or permit necessary for the operation of the Company's business in the
manner and in accordance with the plan of operations described in this
Prospectus (unless (i) the Company or any of its Subsidiaries is contesting
in good faith the loss of such license or permit at the FCC and has not
exhausted its remedies at the FCC; and (ii) the Company (together with any
Subsidiary) continues to have the right to use such license or permit if
previously obtained); and
(ix) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing with respect to the New
Notes, the Trustee or the Holders of at least 25% of the aggregate principal
amount of the then outstanding New Notes may declare all the New 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, any Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding New Notes will become due and payable without further action or
notice. Holders of the New Notes may not enforce the Indenture or the New Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding New Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the New Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal,
premium, interest or Liquidated Damages, if any) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the New Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable upon the acceleration of the New
Notes. If an Event of Default occurs prior to August 1, 2002 by reason of any
such willful action (or inaction), by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the New Notes prior to
August 1, 2002, then the
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premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the New Notes.
The Holders of a majority in aggregate principal amount of the New Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the New Notes 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, premium, interest or Liquidated Damages, if
any, on the New Notes.
The Company is required to deliver to the Trustee quarterly 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, INCORPORATORS 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 New 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 New Notes, by accepting a New
Note, waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the New 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 outstanding New Notes ("Legal
Defeasance") except for:
(i) the rights of Holders of outstanding New Notes to receive payments
in respect of the principal of, premium (if any), interest and Liquidated
Damages (if any) on, such New Notes when such payments are due from the
trust referred to below;
(ii) the Company's obligations with respect to the New Notes concerning
issuing temporary New Notes, registration of New Notes, mutilated,
destroyed, lost or stolen New 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 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
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the New Notes. In the event Covenant Defeasance
occurs, certain events (other than non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "--Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the New
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the New Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust for
the benefit of the Holders of the New 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 certified public accountants, to pay the principal of, premium
(if any), interest and Liquidated Damages (if any) on, the outstanding New
Notes on the stated maturity or on the applicable redemption date, as the
case may be, and the Company must specify whether the New Notes are being
defeased to maturity or to a particular redemption date;
(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:
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(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, and based thereon such opinion of counsel shall
confirm, that the Holders of the outstanding New 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 New 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 (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to 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 will not result in a
breach or violation of, or constitute default under any material agreement
or instrument (other than the Indenture) 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 (or such other applicable
date) 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;
(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 New 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 New 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 New Notes selected for redemption. Also, the Company is not required to
transfer or exchange any New Notes for a period of 15 days before a selection of
New Notes to be redeemed.
The registered Holder of a New Note will be treated as the owner of such New
Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture, the New
Notes and the Pledge Agreement may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the New Notes then
outstanding (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, New Notes), and any existing default or
compliance with
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any provision of the Indenture, the New Notes or the Pledge Agreement may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding New Notes (including consents obtained in connection with a
tender offer or exchange offer for New Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Note held by a non-consenting Holder):
(i) reduce the principal amount of New Notes whose Holders must consent
to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any New
Note or alter the provisions with respect to the redemption of the New Notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders") or reduce the prices at
which the Company shall offer to purchase such New Notes pursuant to the
covenants described above under the caption "--Repurchase at the Option of
Holders";
(iii) reduce the rate of or change the time for payment of interest on
any New Note;
(v) make any New Note payable in money other than that stated in the New
Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of New Notes to receive
payments of principal of, premium (if any), interest or Liquidated Damages
(if any) on, the New Notes;
(vii) waive a redemption payment with respect to any New Note; or
(viii)make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of New
Notes, the Company and the Trustee may amend or supplement the Indenture, the
New Notes or the Pledge Agreement to cure any ambiguity, defect or
inconsistency, to provide for uncertificated New Notes in addition to or in
place of certificated New Notes, to provide for the assumption of the Company's
obligations to Holders of New Notes in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of New Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
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 will be permitted to engage in other
transactions; however, if the Trustee 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 New
Notes will 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 will be 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 New 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.
"ACQUIRED DEBT" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or
into or becoming a Restricted Subsidiary of such specified Person; and
(ii) Indebtedness secured by a Lien 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 purposes 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 that
beneficial ownership of 10% or more of the voting securities (or the equivalent)
of a Person shall be deemed to be control.
"ASSET SALE" means:
(i) the sale, lease, conveyance or other disposition (collectively,
"dispositions") of any assets (including, without limitation, by way of a
sale and leaseback) in one or a series of related transactions; and
(ii) the issuance by any of the Company's Restricted Subsidiaries of
Equity Interests or the disposition by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of their Subsidiaries;
in the case of either clause (i) or (ii) above, whether in a single transaction
or a series of related transactions: (a) that have a Fair Market Value in excess
of $5.0 million; or (b) for net proceeds in excess of $5.0 million.
Notwithstanding the foregoing: (i) the sale of inventory in the ordinary course
of business; (ii) a disposition of assets by the Company to a Wholly Owned
Restricted Subsidiary of the Company or by a Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company; (iii) an issuance of Equity Interests by a Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company; (iv) a Restricted Payment that is permitted by the covenant entitled
"Restricted Payments"; and (v) the sale of assets that have become worn out,
obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company will be deemed not to be Asset Sales. A disposition of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the covenants described above
under the captions "--Repurchase at the Option of Holders--Change of Control"
and/or "-- Certain Covenants--Merger, Consolidation or Sale of Assets" and not
by the provisions of the covenant described under the caption "--Repurchase at
the Option of Holders--Limitation on Sales of Assets and Subsidiary Interests."
"BANK CREDIT FACILITY" means one or more credit facilities (whether a term
or a revolving facility) of the type customarily entered into with commercial
banks, between the Company, on the one hand, and any commercial banks, financial
institutions or other lenders, on the other hand, which Bank Credit Facilities
are by their terms designated as a "Bank Credit Facility" for purposes of the
Indenture.
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"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 required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(iii) in the case of a partnership, partnership interests (whether
general or limited); and
(iv) 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, the issuing Person.
"CASH CONSIDERATION" means any consideration received from an Asset Sale in
the form of cash or Cash Equivalents, in either case in U.S. dollars or freely
convertible into U.S. dollars.
"CASH EQUIVALENTS" means:
(i) United States dollars;
(ii) Government Securities;
(iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Eligible Institution;
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any Eligible Institution;
(v) commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within six months after the date of
acquisition; and
(vi) shares of any mutual funds or other pooled investment vehicles, in
each case having assets in excess of $500 million, investing solely in
investment of the types described in (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one
transaction or a series of related transactions, directly or indirectly,
including through a liquidation or dissolution, of all or substantially all
of the assets of the Company and its Restricted Subsidiaries to any Person
or group (as such term is used in Section 13(d) of the Exchange Act);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) any Person or group (as defined above), other than any of the
Existing Stockholders or their respective Affiliates, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total voting power of the Voting Equity
Interests of the Company, including by way of merger, consolidation or
otherwise; or
(iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"COLLATERAL AGENT" means the collateral agent under the Pledge Agreement.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period, plus, to the extent
deducted or otherwise excluded in computing such Consolidated Net Income:
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(i) an amount equal to any extraordinary loss plus any net loss realized
in connection with a sale of assets;
(ii) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period;
(iii) Consolidated Interest Expense less consolidated interest income of
such Person and its Restricted Subsidiaries for such period; and
(iv) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve
for cash charges in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period; in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Restricted Subsidiary shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to
the extent (and in the same proportion) that the Net Income of such
Restricted 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 distributed by dividend to such Person by
such Restricted 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 such Restricted Subsidiary or its stockholders.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, noncash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financing, and net payments (if any) pursuant
to Hedging Obligations).
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that:
(i) the Net Income of any Person that is accounted for by the equity
method of accounting shall be included, but only to the extent of the amount
of dividends or distributions actually paid in cash to the referent Person
or a Wholly Owned Restricted Subsidiary thereof;
(ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such Net Income is not at the
date of determination permitted without any prior governmental approval
(which has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary or its stockholders;
(iii) 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;
(iv) the cumulative effect of a change in accounting principles shall be
excluded; and
(v) the Net Income of any Unrestricted Subsidiary shall be included only
to the extent of the amount of dividends or distributions actually paid in
cash to the referent Person or a Restricted Subsidiary thereof.
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"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date:
(i) the consolidated equity of the equity holders 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 Equity Interests (other
than Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such
preferred stock; minus
(iii) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going-concern business
made within 12 months after the acquisition of such business) subsequent to
the date of the Indenture in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person; minus
(iv) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Restricted Subsidiaries; minus
(v) all unamortized debt discount and expense and unamortized deferred
charges as of such date.
"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, with respect to any Person, 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: (i)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise; or (ii) is redeemable or is convertible or exchangeable for
Indebtedness at the option of the Holder thereof, in whole or in part, on or
prior to the date on which the New Notes mature.
"ELIGIBLE INSTITUTION" means a domestic commercial banking institution that
has combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A" or higher according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"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).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company in existence on
the Issue Date, until such amounts are repaid.
"EXISTING STOCKHOLDERS" means any stockholder of the Company who or which
beneficially owned more than 5.0% of the Class A Common Stock as of the date of
the Indenture.
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arms'-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined by the Board of Directors of the
Company, acting in good faith, and which determination shall be evidenced by an
Officers' Certificate delivered to the Trustee.
"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
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by such other entity as have been approved by a significant segment of the
accounting profession and which are in effect on the Issue Date.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" OR "GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"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) foreign currency hedge
obligations; and (iii) other agreements or arrangements designed to protect such
Person against fluctuations in interest and foreign currency rates.
"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 bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable to the
extent that any such accrued expense or trade payable is not more than 90 days
overdue or is otherwise being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
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 and, in the event such indebtedness is not assumed by, and is otherwise
non-recourse to, such Person, the amount of such indebtedness shall be deemed to
equal the greater of book value or Fair Market Value of such asset) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person.
"INDEBTEDNESS TO CASH FLOW RATIO" means, with respect to any Person as of
any date of determination, the ratio of:
(i) total Indebtedness of such Person and its Restricted Subsidiaries as
of such date to;
(ii) four times Consolidated Cash Flow of such Person and its Restricted
Subsidiaries for the most recently ended fiscal quarter for which financial
statements of such Person are available (the "Measurement Period");
provided, however, that: (a) in making such computation, the total Indebtedness
of such Person and its Restricted Subsidiaries shall include the total amount of
funds outstanding and available under any credit facilities; and (b) in the
event such Person or any of its Restricted Subsidiaries consummates a material
acquisition or sale of assets subsequent to the commencement of the Measurement
Period, then the Indebtedness to Cash Flow Ratio shall be calculated giving pro
forma effect to such material acquisition or sale of assets as if the same had
occurred at the beginning of the Measurement Period.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the good faith
judgment of the Board of Directors of the Company (evidenced by a unanimous
resolution of the Board of Directors of the Company as set forth in an Officers'
Certificate delivered to the Trustee), qualified to perform the task for which
it has been engaged and is disinterested and independent with respect to the
Company and its Affiliates.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans, Guarantees, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course
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of business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"JOINT VENTURE" means a Person in a Related Business in which the Company
holds 50% or less of the Voting Equity Interests.
"LIEN" 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).
"MOODY'S" means Moody's Investors Service, Inc.
"NET INCOME" means, with respect to any Person, the net income (or 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 sale of assets (including, without limitation, dispositions
pursuant to sale and leaseback transactions); or
(b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such Person or
any of its Subsidiaries; and
(ii) any extraordinary or nonrecurring gain (but not loss), together
with any related provision for taxes on such extraordinary or nonrecurring
gain (but not loss).
"NET PROCEEDS" means the aggregate cash consideration received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale in
the form of cash or Cash Equivalents (including, without limitation, any cash
received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale), net of the direct costs relating to such Asset Sale
(including, without limitation, 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 and
provided that any such amount not so required to be paid for taxes shall be
deemed to constitute Net Proceeds at the time such amount is not retained for
such purpose), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets (including Equity Interests) that were
the subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or asset (including Equity Interests) established in
accordance with GAAP (provided that the amount of any such reserve shall be
deemed to constitute Net Proceeds at the time such reserve shall have been
released or is not otherwise required to be retained for such purpose).
"NON-RECOURSE DEBT" means Indebtedness:
(i) as to which neither the Company nor any of its Restricted
Subsidiaries:
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness);
(b) is directly or indirectly liable (as a guarantor or otherwise);
or
(c) constitutes the lender;
(ii) 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
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or both) any holder of any other Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(iii) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate
signed by the Chief Executive Officer or President and the chief financial
and/or accounting officer of such Person.
"PERMITTED INVESTMENT" means:
(i) any Investment in the Company or in any Wholly Owned Restricted
Subsidiary of the Company;
(ii) any Investments in cash or Cash Equivalents;
(iii) Investments by the Company or any of its Restricted Subsidiaries in
a Person if, as a result of such Investment:
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly Owned Restricted Subsidiary of
the Company;
(iv) any Investment made solely as a result of the receipt of non-Cash
Consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "Repurchase at the
Option of Holders--Limitation on Sales of Assets and Subsidiary Interests;"
and
(v) any Investment made by the Company or any of its Restricted
Subsidiaries in a Related Business; provided that at the time any such
Investment is made, such Investment will not cause the aggregate amount of
Investments at any one time outstanding under this clause (v) to exceed $6.0
million.
"PERMITTED LIENS" means:
(i) Liens securing the New Notes;
(ii) Liens in favor of the Company;
(iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any of its Restricted
Subsidiaries; provided that such Liens were in existence prior to the
contemplation 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 or such Restricted Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by
the Company or any of its Restricted Subsidiaries, provided that such Liens
were in existence prior to the contemplation of such acquisition;
(v) Liens to secure the performance of statutory obligations, surety,
appeal or performance bonds or other obligations of a like nature or
mechanics' or purchase money Liens incurred in the ordinary course of
business;
(vi) Liens existing on the Issue Date;
(vii) Liens on inventory or accounts receivable securing Indebtedness
incurred under clause (vi) of the covenant entitled "Incurrence of
Indebtedness or Issuance of Disqualified Stock," or
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securing Permitted Refinancing Indebtedness incurred pursuant to the
Indenture to refinance Indebtedness incurred under clause (vi) of the
covenant entitled "Incurrence of Indebtedness or Issuance of Disqualified
Stock;"
(viii) 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;
(ix) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; and
(x) Liens securing Indebtedness under the Bank Credit Facility incurred
in accordance with clause (vi) of the covenant entitled "Incurrence of
Indebtedness or Issuance of Disqualified Stock."
"PERSON" means any individual, corporation, limited liability company,
limited liability partnership, partnership (general or limited), joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PLEDGE ACCOUNT" means the account established with the Collateral Agent
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities.
"PLEDGE AGREEMENT" means the Pledge Agreement dated as of the date of the
Indenture by and between the Company and the Collateral Agent governing the
Pledge Account.
"PLEDGED SECURITIES" means the U.S. government securities purchased by the
Company with a portion of the net proceeds from the Unit Offering to be
deposited in the Pledge Account and pledged as security for the New Notes.
"RELATED ASSETS" means all assets used in connection with the design,
development, procurement, installation, operation or marketing of location or
related two-way messaging systems and any activities or assets ancillary
thereto.
"RELATED BUSINESS" means any business relating to the design, procurement,
installation and operation of location, fleet management or related two-way
messaging systems and business and reasonably related extensions thereof.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"SUBSIDIARY" means, with respect to any Person:
(i) any corporation, association or other business entity 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 such Person (or a combination thereof); and
(ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
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"TAX SHARING AGREEMENT" means the Tax Sharing Agreement between the Company
and Holdings as in effect on the date of the Indenture.
"UNRESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person
that is designated by such Person as an Unrestricted Subsidiary pursuant to a
resolution of its Board of Directors, but only if and for so long as such
Subsidiary:
(i) has no Indebtedness other than Non-Recourse Debt;
(ii) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company;
(iii) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation:
(1) to subscribe for additional Equity Interests; or
(2) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results;
(iv) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(v) in the case of a corporate entity or limited liability company, has
at least one director on its board of directors and at least one executive
officer, in each case who is not a director or executive officer of the
Company or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee within 45 days of such
designation a certified copy of the resolution of the Board of Directors 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 entitled "Incurrence
of Indebtedness or Issuance of Disqualified Stock," the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate an Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if:
(i) such Indebtedness is permitted under the covenant entitled
"Incurrence of Indebtedness or Issuance of Disqualified Stock;" and
(ii) no Default or Event of Default would be in existence following such
designation.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee within 45 days of such
designation a certified copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate that such designation
complied with the conditions of the immediately preceding sentence.
"VOTING EQUITY INTERESTS" means the Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect or appoint the board of directors, executive committee
or other governing body of such corporation or Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(i) the sum of the products obtained by multiplying: (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(ii) the then outstanding principal 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 directors' qualifying shares) shall at
the time be owned by such Person and one or more other Wholly Owned Restricted
Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes were initially issued in the form of one or more global notes
(the "Global Note"). The Global Note was deposited on the date of the closing of
the sale of the Old Notes, or on behalf of, the Depositary and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company which was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Purchasers),
banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participant") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of New Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such New Notes.
Payments in respect of the principal of, premium, if any, and interest on
any New Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the Persons in
whose names the New Notes, including the Global Note, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, none of the Company or the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of New Notes (including principal, premium, if any, and
interest), although the Company understands that it is the Depositary's practice
to immediately credit the accounts of the relevant Participants with such
payment in accounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of the New Notes
will be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
An entire Global Security may be exchanged for definitive New Notes in
registered, certificated form ("Certificated Securities") if (i) DTC (x)
notifies the Issuers that it is unwilling or unable to continue as
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depositary for the Global Securities and the Issuers thereupon fail to appoint a
successor depositary within 90 days or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) the Issuers, at their option, notify the
Trustee in writing that they elect to cause the issuance of Certificated
Securities or (iii) there shall have occurred and be continuing to occur a
Default or an Event of Default with respect to the New Notes. In any such case,
the Issuers will notify the Trustee in writing that, upon surrender by the
Participant and Indirect Participants of their interest in such Global Security,
Certificated Securities will be issued to each person that such Participant and
Indirect Participants and DTC identify as being the beneficial owner of the
related New Notes. In addition, subject to certain conditions, any Person having
a beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for New Notes in definitive form. Upon any
such issuance, the Trustee is required to register such New Notes in the name
of, and cause the same to be delivered to, such Person or Persons (or the
nominee of any thereof). Such New Notes would be issued in fully registered
form.
Neither the Issuers nor the Trustee will be liable for any delay by the
holder of the Global Securities or DTC in identifying the beneficial owners of
New Notes, and the Issuers and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of the Global Security or
DTC for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the New Notes (including
principal, premium, if any, and interest) be made in immediately available
funds. Secondary trading in long-term notes and debentures of corporate issuers
is generally settled in clearing-house or next-day funds. In contrast, the New
Notes are expected to be eligible to trade in the PORTAL Market and to trade in
the Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the New Notes will therefore be required by the
Depositary to be settled in immediately available funds. No assurance can be
given as to the effect, if any, of such settlement arrangements on trading
activity in the New Notes.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the New Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar is not required to
transfer or exchange any New Note selected for redemption. Also, the Registrar
is not required to transfer or exchange any New Note for a period of 15 days
before a selection of the New Notes to be redeemed.
The registered holder of a New Note will be treated as the owner of it for
all purposes.
GOVERNING LAW
The Indenture and the New Notes are governed by and construed in accordance
with the laws of the State of New York.
THE TRUSTEE
The Trustee acts as trustee under the Indenture and may, from time to time,
act as depositary for funds of, make loans to, and perform other services for,
the Company in the ordinary course of business.
93
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences of the exchange of Old Notes for New Notes as of the date hereof.
The discussion below is based upon the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in federal income tax consequences
different from those discussed below. PERSONS CONSIDERING THE EXCHANGE OF OLD
NOTES FOR NEW NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
EXCHANGE OF NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an "exchange" for federal income tax purposes because the New
Notes will not be considered to differ materially in kind or extent from the Old
Notes. Rather, the New Notes received by a holder of Old Notes will be treated
as a continuation of the Old Notes in the hands of such holder. As a result,
there will be no federal income tax consequences to a holder exchanging Old
Notes for the New Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 90 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. In
addition for a period of 90 days after the Expiration Date, all dealers
effecting transactions in the New Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New 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 New 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 New Notes. Any broker-dealer
that resells New 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 New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such person 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 no
arrangement or understanding with any broker or dealer to distribute the New
Notes received in the Exchange Offer.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal.
94
<PAGE>
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company by
Reboul, MacMurray, Hewitt, Maynard & Kristol, New York, New York. Reboul,
MacMurray, Hewitt, Maynard & Kristol owns an aggregate 458 shares of Class A
Common Stock of Holdings, constituting less than 1% of the outstanding shares of
Class A Common Stock of Holdings.
INDEPENDENT AUDITORS
The consolidated balance sheets of AirTouch Teletrac General Partnership as
of December 28, 1995 and Teletrac, Inc. as of December 31, 1996 and the related
consolidated statements of operations, stockholders' equity (partners'
capital/deficiency) and cash flows for the years then ended included in this
Prospectus and elsewhere in this Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent auditors, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated balance sheet of AirTouch Teletrac General Partnership as
of December 31, 1994 and the related consolidated statements of operations,
partners' capital/deficiency and cash flows for the year then ended included in
this Prospectus and elsewhere in this Registration Statement have been audited
by Coopers & Lybrand LLP, independent auditors.
95
<PAGE>
GLOSSARY
ACQUISITION--the purchase of the assets of AirTouch Teletrac by the Company
on January 17, 1996.
AIRTOUCH TELETRAC--AirTouch Teletrac, a California general partnership, its
predecessor, PacTel Teletrac, and its successor, AirTouch Services.
RPU--Average revenue per subscriber unit per month.
BSU--Base Station Unit, a wireless transmission receiver which records the
Reverse Link communications from a VLU.
CMRS--Commercial Mobile Radio Service, a FCC classification of wireless
telecommunications services.
COMMON STOCK--Class A Common Stock, par value $.01 per share, and Class B
Common Stock, par value $.01 per share, of the Company.
COMPANY--Teletrac, Inc., its predecessors and its subsidiary, Teletrac
License, Inc.
COMMUNICATIONS ACT--The Communications Act of 1934, as amended.
ESMR--Enhanced Specialized Mobile Radio, an advanced, digital version of
Specialized Mobile Radio ("SMR").
FCC--The Federal Communications Commission.
FLEET DIRECTOR-REGISTERED TRADEMARK---A product of the Company that allows
fleet customers to track the real-time location of fleet vehicles and
communicate with those vehicles. Fleet Director-Registered Trademark- can be
combined with a Mobile Data Terminal ("MDT") or a Status Messaging Terminal
("SMT") to provide two-way communication between a customer and its drivers.
FLEET REPORTER-TM---A lower cost alternative to Fleet
Director-Registered Trademark-, Fleet Reporter-TM- is a service offered by the
Company to provide daily vehicle location reports to customers.
FORWARD LINK--A wireless digital radio transmission, emitted simultaneously
from each transmitter on the Company's network, which transmits location
commands and/or messages to a VLU.
GPS--The Global Positioning Satellite system, which uses U.S.
government-funded satellites to provide location information.
IBSU--Integrated Base Station Unit, an advanced version of the BSU receiver,
currently under development, which will permit multichannel capability and
free-text alphanumeric messaging.
LMS--Location and Monitoring Services.
LORAN-C--A system that uses land-based transmitting stations emitting
low-frequency radio signals to provide location information.
MDT--Mobile Data Terminal, the Company's more advanced two-way messaging
system, is a small terminal, connected to the VLU, and typically mounted on a
vehicle's dashboard.
MSA--Metropolitan Statistical Area, as defined in the 1993 Rand-McNally
Commercial Atlas.
MTA--Major Trading Area, as defined in the 1993 Rand-McNally Commercial
Atlas.
MULTILATERATION--a technique that locates a transceiver by measuring its
distance from a number of known locations.
NCC--the local Network Control Center located in each metropolitan market,
which consists of RF control equipment, telecommunications access connection
computers and the Company's data base. The
96
<PAGE>
NCC uses algorithms and multilateration techniques to determine the location of
VLUs and relays the information to the subscriber.
OZZ-REGISTERED TRADEMARK---A product of the Company marketed to both
consumer and commercial customers, which provides a telephone-operated mobile
information service. In addition, OZZ-Registered Trademark- provides a "mobile
yellow pages," informing the customer of the prominent businesses or landmarks
near a vehicle's location.
PCS--A type of wireless telephone system that uses light-weight, inexpensive
handheld sets and communicates via low power antennas.
PMRS--Private Mobile Radio Service, a FCC classification of wireless
telecommunications services.
PORTAL--The Private Offering, Resale and Trading through Automated Linkages
market.
PREFERRED STOCK--The Series A Redeemable Convertible Participating Preferred
Stock, par value $.01 per share, of the Company or Holdings, as applicable, and
one or more series of undesignated preferred stock, par value $.01 per share, of
the Company or Holdings, as applicable, which has been reserved for issuance
upon automatic conversion of the Series A Preferred Stock as provided in the
Certificate of Incorporation.
REVERSE LINK--A response signal, providing location and messaging
information, emitted from a VLU after the receipt of a Forward Link.
SMR--Specialized Mobile Radio, a two-way wireless voice communications
system.
SMT--Status Messaging Terminal, the Company's lower cost two-way messaging
system offered as an alternative to the MDT, is a small terminal, connected to
the VLU and typically mounted on a vehicle's dashboard.
TADIRAN--Tadiran Telematics, Ltd., a leading Israeli technology supplier and
a wholly-owned subsidiary of Tadiran Limited, a publicly traded Israeli company
a majority of the stock of which is owned by Koor Industries Ltd.
TELETRACER-TM---The name under which the Company markets its consumer
product.
VLU--Vehicle Location Unit, a "transceiver" unit which receives location
commands and messages, transmits response signals to the base stations
indicating its location and initiates preprogrammed messages.
WINFLEET-TM---A product currently under development by the Company, expected
to be introduced in the second half of 1997. Winfleet-TM- is a Microsoft
Windows-Registered Trademark--based application similar to Fleet
Director-Registered Trademark-, but which does not require a dedicated computer.
97
<PAGE>
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
TELETRAC, INC.
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
Condensed Consolidated Balance Sheet as of June 30, 1997 (unaudited)....................................... F-2
Condensed Consolidated Statements of Operations for the six months ended June 30, 1996 and 1997
(unaudited).............................................................................................. F-3
Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 1996 and 1997
(unaudited).............................................................................................. F-4
Notes to Condensed Consolidated Financial Statements....................................................... F-5
FISCAL YEAR 1996
Report of Arthur Andersen LLP, Independent Auditors........................................................ F-6
Consolidated Balance Sheet as of December 31, 1996......................................................... F-7
Consolidated Statement of Operations for the year December 31, 1996........................................ F-8
Consolidated Statement of Stockholder Equity for the year ended December 31, 1996.......................... F-9
Consolidated Statement of Cash Flows for the year ended December 31, 1996.................................. F-10
Notes to Consolidated Financial Statements................................................................. F-11
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
FISCAL YEAR 1995
Report of Arthur Andersen LLP, Independent Auditors........................................................ F-17
Balance Sheet as of December 28, 1995...................................................................... F-18
Statement of Operations for the period from January 1, 1995 through December 28, 1995...................... F-19
Statement of Cash Flows for the period from January 1, 1995 through December 28, 1995...................... F-20
Notes to Financial Statements.............................................................................. F-21
FISCAL YEAR 1994
Report of Coopers & Lybrand LLP, Independent Auditors...................................................... F-26
Balance Sheet as of December 31, 1994...................................................................... F-27
Statement of Operations for the year ended December 31, 1994............................................... F-28
Statement of Partners' Deficit............................................................................. F-29
Statement of Cash Flows for the year ended December 31, 1994............................................... F-30
Notes to Financial Statements.............................................................................. F-31
</TABLE>
F-1
<PAGE>
TELETRAC, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $4,260,617
Accounts receivable, net of allowance.......................................... 5,338,196
Inventory...................................................................... 5,049,063
Prepaid expenses and other..................................................... 3,230,160
----------
Total current assets................................................... 17,878,036
RESTRICTED CASH................................................................ 1,756,304
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $2,200,580.......... 21,704,545
LICENSES AND OTHER, net of amortization........................................ 683,099
----------
Total assets........................................................... $42,021,984
----------
----------
</TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable............................................................... $ 3,450,075
Current portion of long-term obligations....................................... 221,934
Accrued expenses............................................................... 1,841,262
Unearned revenue and contracts................................................. 2,069,468
Refrequency liability.......................................................... 4,683,327
Other current liabilities...................................................... 361,031
-----------
Total current liabilities.................................................. 12,627,097
-----------
LONG-TERM OBLIGATIONS.......................................................... 1,746,397
PREFERRED STOCK, redeemable cumulative, 15% dividend, 190,477 shares authorized
and 190,476.19 shares issued and outstanding................................. 35,815,000
PREFERRED STOCK, undesignated, 190,477 shares authorized, none issued and
outstanding.................................................................. --
STOCKHOLDERS' EQUITY:
Common stock, Class A $.01 par value, 507,934 shares authorized and 249,000
issued and outstanding..................................................... 2,490
Common stock, Class B, $.01 par value 70,000 shares authorized, none issued
or outstanding............................................................. --
Paid-in-capital.............................................................. 22,022,656
Accumulated deficit.......................................................... (30,191,656)
-----------
Total stockholders' deficit................................................ (8,166,510)
-----------
Total liabilities and stockholders' deficit................................ $42,021,984
-----------
-----------
</TABLE>
The accompanying notes are an intergral part of these condensed consolidated
financial statements.
F-2
<PAGE>
TELETRAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------
<S> <C> <C>
1996 1997
------------- --------------
OPERATING REVENUES................................................................. $ 5,941,049 $ 11,369,923
OPERATING EXPENSES:
Cost of revenues................................................................. 1,757,416 5,193,562
Selling and advertising.......................................................... 1,830,403 6,210,714
General and administrative....................................................... 6,233,735 10,045,381
Research & development costs..................................................... -- 2,040,047
Refrequencing costs.............................................................. 405,639 --
Depreciation and amortization.................................................... 543,430 999,234
------------- --------------
Loss from operations........................................................... (4,829,574) (13,119,015)
OTHER EXPENSE (INCOME):
Interest expense................................................................... 10,077 86,429
Interest and other income.......................................................... (72,476) (404,784)
------------- --------------
Loss before income taxes....................................................... (4,767,175) (12,800,660)
INCOME TAXES....................................................................... -- --
------------- --------------
NET LOSS........................................................................... $ (4,767,175) $ (12,800,660)
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
F-3
<PAGE>
TELETRAC, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------
1996 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................................................... $ (4,767,175) $ (12,800,660)
Adjustments to reconcile net loss to net cash used in operating activities--
Depreciation and amortization.................................................. 543,430 999,234
Changes in working capital and other assets and liabilities, net of acquisition
and refrequencing liability.................................................. (1,683,863) (2,158,911)
Refrequency liability.......................................................... 405,639 (2,550,894)
------------- --------------
Total adjustments............................................................ (734,794) (3,710,571)
------------- --------------
Cash used in operating activities.......................................... (5,501,969) (16,511,231)
------------- --------------
INVESTING ACTIVITIES:
Acquisition of property and equipment............................................ (4,124,383) (5,867,320)
Acquisition of Airtouch Teletrac................................................. (2,098,875) (1,000,000)
------------- --------------
Cash used in investing activities.......................................... (6,223,258) (6,867,320)
------------- --------------
FINANCING ACTIVITIES:
Issuance of common stock, net.................................................... 12,272,314 --
------------- --------------
Cash provided by financing activities...................................... 12,272,314 --
------------- --------------
NET CHANGE IN CASH................................................................. 547,087 (23,378,551)
CASH AND CASH EQUIVALENTS, beginning of period..................................... 310,688 27,639,168
------------- --------------
CASH AND CASH EQUIVALENTS, end of period........................................... $ 857,775 $ 4,260,617
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-4
<PAGE>
TELETRAC, INC.
NOTES TO CONDENSED CONSOLIDATED
UNAUDITED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements include the
accounts of Teletrac, Inc. and its wholly-owned subsidiary. All significant
intercompany transactions have been eliminated.
The unaudited condensed consolidated financial statements for the six months
ended June 30, 1996 and 1997 do not include all of the information and
disclosures required by generally accepted accounting principles for complete
financial statements and should be read in connection with the annual 1996
financial statements and related notes included elsewhere in this Prospectus.
The unaudited condensed consolidated financial statements presented herein
include, in the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results of
operations for such period.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results of operations for the full year.
2. CHANGE IN EQUIPMENT REVENUE RECOGNITION
Operating results for the six months ended June 30, 1997 reflect a change in
equipment revenue recognition for sales of commercial systems. Revenues are
recognized upon installation. Previously, revenues were recognized upon order of
the equipment. The impact of the change is not material to the Company's current
and prior operating results and is consistent with industry practices. For the
six months ended June 30, 1997, the effects of the change reduced reported
revenues and cost of revenues by $1.8 million and $1.3 million, respectively.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Teletrac, Inc.:
We have audited the accompanying consolidated balance sheet of Teletrac,
Inc. (a Delaware corporation) and subsidiary, as of December 31, 1996, and the
related consolidated statements of operations, stockholders' equity 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.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Teletrac, Inc., and
subsidiary as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
February 5, 1997
F-6
<PAGE>
TELETRAC, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................... $27,639,168
Accounts receivable- less allowances of $460,000............................. 2,504,173
Inventory- less reserves of $155,642......................................... 2,782,932
Prepaid expenses and other current assets.................................... 2,113,076
----------
Total current assets..................................................... 35,039,349
RESTRICTED CASH................................................................ 1,256,285
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1,221,666.......... 16,845,801
LICENSES AND OTHER, net of accumulated amortization of $38,355................. 571,899
----------
Total assets............................................................. $53,713,334
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................. $1,547,566
Accrued expenses............................................................. 1,483,338
Notes payable................................................................ 1,001,015
Current portion of leases payable............................................ 381,325
Refrequencing liability...................................................... 7,234,158
----------
Total current liabilities................................................ 11,647,402
----------
LONG-TERM LEASES PAYABLE....................................................... 1,615,344
PREFERRED STOCK, undesignated, 190,477 shares authorized, none issued or
outstanding.................................................................. --
PREFERRED STOCK, redeemable cumulative, 15% dividend, 190,477 shares authorized
and 190,476.19 shares issued and outstanding................................. 33,340,000
STOCKHOLDERS' EQUITY:
Common stock, Class A, $0.01 par value, 507,934 shares authorized and 249,000
issued and outstanding..................................................... 2,490
Common stock, Class B, $0.01 par value, 70,000 shares authorized and none
issued or outstanding...................................................... --
Paid-in capital.............................................................. 22,024,094
Accumulated deficit.......................................................... (14,915,996)
----------
Total stockholders' equity............................................... 7,110,588
----------
Total liabilities and stockholders' equity............................... $53,713,334
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-7
<PAGE>
TELETRAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
OPERATING REVENUES............................................................. $15,956,984
OPERATING EXPENSES:
Cost of revenues............................................................. 7,030,847
Selling, general and administrative.......................................... 14,035,038
Engineering.................................................................. 5,149,488
Research and development..................................................... 1,001,000
Refrequencing costs.......................................................... 1,340,315
Depreciation and amortization................................................ 1,254,049
-----------
Loss from operations....................................................... (13,853,753)
-----------
OTHER EXPENSE (INCOME):
Interest expense............................................................. 108,600
Interest income.............................................................. (170,884)
-----------
Total other income......................................................... (62,284)
-----------
Loss before income taxes................................................... (13,791,469)
INCOME TAXES................................................................... --
-----------
NET LOSS....................................................................... $(13,791,469)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-8
<PAGE>
TELETRAC, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- PAID-IN ACCUMULATED
CLASS A CLASS B CAPITAL DEFICIT
--------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995..................................... $ 190 $ 37 $ 2,267,025 $ (784,527)
Issuance of common stock....................................... 1,980 283 21,634,814 --
Conversion of Class B common to Class A common................. 320 (320) -- --
Cost of issuance of preferred stock............................ -- -- (1,877,745) --
Net loss....................................................... -- -- -- (13,791,469)
Preferred stock dividends...................................... -- -- -- (340,000)
--------- ----- ------------- --------------
BALANCE, December 31, 1996..................................... $ 2,490 $ -- $ 22,024,094 $ (14,915,996)
--------- ----- ------------- --------------
--------- ----- ------------- --------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-9
<PAGE>
TELETRAC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss..................................................................... $(13,791,469)
Adjustments to reconcile net loss to cash used in operating activities--
Depreciation and amortization.............................................. 1,254,049
Changes in working capital and other assets and liabilities, net of
acquisition--
Receivables.............................................................. (1,668,164)
Restricted cash.......................................................... 66,904
Inventory................................................................ (2,674,519)
Prepaids and other....................................................... (1,448,858)
Accounts payable and accrued expenses.................................... 2,084,258
Deferred revenue......................................................... (745,221)
Refrequencing liability.................................................. 1,298,088
Other liabilities........................................................ (609,872)
Cash used in operating activities...................................... (16,234,804)
-----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net.............................. (7,097,173)
Acquisition of AirTouch Teletrac............................................. (2,098,875)
-----------
Cash used in investing activities...................................... (9,196,048)
-----------
FINANCING ACTIVITIES:
Issuance of common stock, net................................................ 21,637,077
Issuance of preferred stock, net............................................. 31,122,255
-----------
Cash provided by financing activities.................................. 52,759,332
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................................... 27,328,480
CASH AND CASH EQUIVALENTS, beginning of year................................... 310,688
-----------
CASH AND CASH EQUIVALENTS, end of year......................................... $27,639,168
-----------
-----------
SUPPLEMENTAL DISCLOSURE:
Cash paid during the year for interest....................................... $ 107,549
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-10
<PAGE>
TELETRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND BUSINESS ACTIVITIES:
Teletrac, Inc. (the Company), and its wholly owned subsidiary, Teletrac
Licensing, Inc., are licensed by the Federal Communications Commission (FCC) to
construct and operate radio location networks for the purpose of locating,
tracking and communicating with commercial fleet and consumer vehicles as a
result of its acquisition of AirTouch Teletrac (see Note 2). The Company has
operating networks in six U.S. cities, Chicago, Dallas, Detroit, Houston, Los
Angeles and Miami, and has site specific licenses in approximately 20 additional
cities. The networks consist of antennas, transmission and receiving equipment,
customer-owned vehicle locating units (VLUs) that receive and transmit signals,
and operating centers that interpret and relay the transmissions.
SIGNIFICANT RISKS AND UNCERTAINTIES
The Company and its predecessors have incurred losses in each year of
operations. The Company expects to continue to incur net losses as it pursues
plans to expand its operating networks, product offerings and customer base.
There can be no assurance that the Company will be profitable in the future.
The Company is facing increased competition for its services. Certain of the
Company's competitors are larger and have substantially greater financial,
research and development and sales and markting capabilities. Additionally,
there can be no assurance additional competitors will not enter markets that the
Company serves or plans to serve and that the Company will be able to withstand
the competition. Moreover, changes in technology could lower the cost of
competitive services to a level where the Company's services would be less
competitive, which could have a material adverse effect on the Company's
business and the ability to realize its assets.
2. PURCHASE OF AIRTOUCH TELETRAC:
On January 17, 1996, the Company purchased the assets of AirTouch Teletrac, a
California general partnership, from AirTouch Services, for $3,099,000 in cash,
and the assumption of certain liabilities and working capital as defined. An
amount of $2,099,000 was paid at closing, with $1,000,000 due one year from the
date of closing. Funds necessary for the closing were provided by the current
common stockholders of the Company through sales of common stock. The allocation
of purchase price was made first to the current assets and liabilities and
assumed liabilities, and the remainder to the long-term assets in proportion to
the fair values of the assets, as follows (in thousands):
<TABLE>
<CAPTION>
ASSETS AND
LIABILITIES
ACQUIRED
JANUARY 17,
1996
---------------
<S> <C>
Working capital.............................................................. $ 217
Property and equipment....................................................... 8,218
Licenses..................................................................... 600
Refrequencing liability...................................................... (5,936)
-------
Total.................................................................. $ 3,099
-------
-------
</TABLE>
F-11
<PAGE>
TELETRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. ACCOUNTING POLICIES:
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company services the commercial market for use in fleet management and the
consumer market for individual vehicle tracking. The commercial systems include
VLUs, computer hardware, and vehicle tracking software. The sales of commercial
systems are recognized upon shipment of the system, and the commercial service
fee revenues are recognized monthly as the services are provided.
The VLUs for the consumer market are sold along with monthly service contracts.
Service revenues for the consumer market may be paid in advance and are
recognized monthly as earned. Unearned service fees are recorded as deferred
revenue and included in accrued expenses in the accompanying balance sheet.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to be temporary cash investments
with an original maturity of three months or less.
INVENTORIES
Inventories consist of VLUs, computer systems and other receiving and
transmitting equipment held for sale. Inventory is stated at the lower of cost
or market using the first-in, first-out method of valuation.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consist of the following (in
thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
COST LIVES
--------- -----------
<S> <C> <C>
System equipment...................................................... $ 4,832 7
Computers and office equipment........................................ 2,412 3
Furniture and fixtures................................................ 578 7
Other................................................................. 471 3-7
Construction in progress.............................................. 9,774
---------
Property and equipment................................................ 18,067
Less--Accumulated depreciation........................................ 1,221
---------
Net property and equipment............................................ $ 16,846
---------
---------
</TABLE>
Repairs, maintenance and renewal of minor items are charged to expense as
incurred. Major renewals and improvements are capitalized and depreciated over
their remaining useful lives. Leasehold improvements
F-12
<PAGE>
TELETRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
are amortized using the straight-line method over the lesser of the estimated
useful life of the asset or the remaining term of the underlying lease.
LICENSES
Licenses, as acquired from AirTouch Services, represent a long-term intangible
asset that allows FCC authorization to broadcast at designated frequencies. They
are amortized using the straight-line method over 15 years. FCC license terms
are for 5-year periods with unlimited options to renew for subsequent 5-year
periods.
INCOME TAXES
The Company is a C corporation for federal income tax purposes. Deferred tax
assets or liabilities are computed based on the difference between the financial
statement and income tax basis of assets and liabilities applying tax
regulations existing at the end of the reporting period. The Company has fully
reserved its deferred tax asset, principally the net operating loss carryforward
generated, as of December 31, 1996.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include Teletrac, Inc., and
its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
4. STOCKHOLDERS' EQUITY:
The Company's Restated Certificate of Incorporation, dated December 4, 1996,
provides for 958,888 authorized shares of capital stock, consisting of 507,934
shares of authorized Class A common stock at $0.01 par value per share, 70,000
shares of authorized Class B common stock at $0.01 par value per share, 190,477
shares of authorized Series A Redeemable Convertible Participating preferred
stock at $0.01 par value per share, and 190,477 shares of authorized
undesignated preferred stock at $0.01 par value per share.
COMMON STOCK
The Class A common stock and Class B common stock are substantially identical in
all respects and entitle the holders to the same rights, preferences and
privileges. However, owners of Class B common stock have no right to vote on any
matters to be voted on by the Company's stockholders except as a separate class
on any proposed merger or consolidation of the Company, or any recapitalization
or reorganization in which shares of Class B common stock would receive
treatment different from or be exchanged for consideration different on a per
share basis from the consideration received with respect to or in exchange for
shares of Class A common stock. Owners of Class B common stock, upon the
occurrence of certain conversion events, have the right to exchange equivalent
shares of their Class B common stock for shares of Class A common stock. In
December 1996 all then outstanding Class B common stock was converted into Class
A common stock.
F-13
<PAGE>
TELETRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
PREFERRED STOCK
During December 1996, 190,476.19 shares of $0.01 par value Series A Redeemable
Convertible Participating preferred stock were issued for net cash proceeds of
$31,122,255. They entitle holders to receive cumulative, compounding dividends
at the rate of 15 percent per annum. Dividends accrue on a daily basis from the
issuance date and are payable as declared by the board of directors. As of
December 31, 1996, $340,000 was accrued for dividends. Holders are entitled to
voting rights, preference on liquidation, voluntary equal share conversion into
common stock at a defined conversion price, and automatic equal share conversion
into common stock after either a qualified public stock offering or a certain
non-qualified public stock offering as defined. Additionally, on or after
December 4, 2001, at the election of the holders of a majority of the
outstanding preferred stock, the Company is obligated to redeem the preferred
stock at a cash price equal to the liquidation preference amount of $173.25 per
share plus cumulative unpaid dividends. From and after December 4, 2003 the
redemption price will be equal to the greater of the liquidation preference
amount or the fair market value of the preferred stock.
STOCK OPTIONS
The Company has two stock option plans, the 1995 Stock Option Plan (the 1995
Plan) and the 1996 Stock Option Plan (the 1996 Plan). The Company accounts for
these plans in accordance with Accounting Principles Board Opinion No. 25 under
which no compensation cost has been recognized in 1996. Had compensation cost
been recognized in accordance with Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock Based Compensation," the Company's
operating loss would have been increased by $506,000 for the year ended 1996.
The plans permit grants of nonqualified, and incentive stock options. The
Company has reserved 43,060 and 25,083 shares of its common stock under the 1995
Plan and the 1996 Plan, respectively. Under the 1995 Plan the exercise prices
and vesting periods of the options are as follows:
<TABLE>
<CAPTION>
DATE PRICE VESTING AMOUNT
- --------------------------------------------------------------- --------- ---------------------
<S> <C> <C>
One year after grant........................................... $ 100 One-third of grant
Two years after grant.......................................... 125 One-third of grant
Three years after grant........................................ 150 One-third of grant
</TABLE>
During 1996, 43,060 options were granted under the 1995 Plan at a weighted
average price of $125. The weighted average fair value of the options issued
during 1996 was $119. No options were canceled or exercised during 1996. During
1996, 510 options were forfeited. The options outstanding at December 31, 1996,
have a weighted average remaining contract life of approximately seven years and
none were exercisable as of December 31, 1996.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for the 1996 grants: risk-free interest rate from 5.48 to 6.87
percent; an expected option life of 7 years; and no expected dividend yields.
Options granted under the 1996 Plan must have exercise prices equal to the fair
market value as determined by the board of directors, and the term of the
options shall not exceed ten years from grant date. No shares under the 1996
Plan have been granted.
F-14
<PAGE>
TELETRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
5. CAPITAL LEASES:
The Company holds leases on telephony and frequency receiving and transmitting
equipment for periods greater than one year. Minimum payments under such capital
leases are as follows (in thousands):
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
1997........................................ $ 381 $ 187 $ 568
1998........................................ 403 147 550
1999........................................ 446 104 550
2000........................................ 494 56 550
Thereafter.................................. 273 10 283
----------- ----- ---------
$ 1,997 $ 504 $ 2,501
----------- ----- ---------
----------- ----- ---------
</TABLE>
6. REFREQUENCING LIABILITY:
In 1995 the FCC issued an order which requires the Company to relocate its
existing operating frequency from a portion of the 925 MHz band to a portion of
the 927 MHz band. As a result, the Company has recorded a liability, including
$5,936,000 assumed in the acquisition, for the cost of implementing the order so
that the Company can continue to deliver its contractual service obligation to
its customers. The cost recorded during 1996 of $1,340,000 represents the
estimated costs to comply with this obligation for all customers added to
service during 1996.
7. EMPLOYEE BENEFIT PLANS:
The Company sponsors a defined contribution profit sharing 401(k) plan which
covers all full-time employees. The benefits of this plan are based on years of
service, the employee's compensation, employee contributions and earnings of
plan assets. The Company's funding policy is to contribute an amount equal to
$0.50 for every dollar contributed by the employees up to $1,000 annually. The
Company has accrued $121,000 during 1996.
8. INCOME TAXES:
Deferred income taxes are provided for temporary differences between the
financial accounting basis and tax basis of assets and liabilities and temporary
differences in reporting income and expense.
The Company has net operating losses (NOLs) which it can carryforward up to 15
years to reduce taxable income in the future. The Company's NOLs and Alternative
Minimum Tax (AMT) NOLs total approximately $13,300,000 and $12,700,000,
respectively. The NOLs and AMT NOLs may be utilized through 2011. The Company
has fully reserved these deferred tax assets and has provided no income tax
benefit related thereto.
F-15
<PAGE>
TELETRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
The components of net deferred tax assets (liabilities) are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------
<S> <C> <C> <C>
CURRENT NONCURRENT TOTAL
----------- ----------- ---------
Deferred tax asset--
NOL.......................................................... $ -- $ 5,040
Allowance for doubtful accounts.............................. 175 --
Start-up costs, capitalized for income tax purposes, net .... -- 279
Other........................................................ 88 --
Deferred tax liabilities..................................... (32) (26)
----------- -----------
Net deferred tax assets...................................... $ 231 $ 5,293 $ 5,524
----------- -----------
----------- -----------
Tax asset reserve............................................ (5,524)
---------
Net deferred taxes........................................... $ --
---------
---------
</TABLE>
The Company's utilization of its NOLs many be limited in the future due to its
issuance of preferred stock and the IRS regulations pertaining to change in
control.
9. COMMITMENTS AND CONTINGENCIES:
The Company has operating leases for office space and antenna sites for periods
greater than one year. Minimum payments under such operating leases are as
follows (in thousands):
<TABLE>
<S> <C>
1997................................................ $ 2,399
1998................................................ 2,353
1999................................................ 1,844
2000................................................ 1,265
Thereafter.......................................... 841
---------
$ 8,702
---------
---------
</TABLE>
The Company purchases all of its VLU's from a single foreign supplier, and has
entered into a commitment with the supplier to purchase 200,000 units beginning
October 1996, through October 1998. The agreement allows the Company to extend
this period until November 2000 and has a provision to buy-out of the commitment
at a nominal fee. As of December 31, 1996, the remaining purchase commitment is
approximately $35,700,000, including $1,500,000 which has been prepaid by the
Company. Related to this commitment, at December 31, 1996, the Company
maintained a $1,750,000 irrevocable letter of credit to support the purchase of
the VLU's, of which $1,250,000 is funded and is recorded as restricted cash in
the accompanying balance sheet. Additionally, the Company has committed to
acquire other equipment and fund certain research and development activities of
approximately $2,900,000 and $3,500,000, respectively.
The Company is party to certain litigation and claims arising in the normal
course of business. In the opinion of management, the amount of liability
arising from these lawsuits would not be material to the financial position or
results of operations of the Company.
F-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Teletrac, Inc:
We have audited the accompanying balance sheet of AirTouch Teletrac General
Partnership as of December 28, 1995, and the related statements of operations
and changes in partners' deficit and cash flows for the period from January 1,
1995, to December 28, 1995. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 AirTouch Teletrac General
Partnership as of December 28, 1995, and the results of its operations and its
cash flows for the period from January 1, 1995, to December 28, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
May 1, 1996
F-17
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
BALANCE SHEET
DECEMBER 28, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash........................................................................ $ --
Accounts receivable, net of allowance for doubtful accounts of $290,094..... 1,804,213
Inventory................................................................... 501,915
Other current assets........................................................ 394,916
------------
Total current assets.................................................. 2,701,044
PROPERTY, PLANT AND EQUIPMENT, net............................................ 7,836,070
INTANGIBLE ASSETS, net........................................................ 600,000
------------
Total assets.......................................................... $ 11,137,114
------------
------------
<CAPTION>
LIABILITIES AND PARTNERS' DEFICIT
<S> <C>
CURRENT LIABILITIES:
Accounts payable--Trade..................................................... $ 183,875
Due to affiliates........................................................... 15,995,945
Accrued salaries and benefits............................................... 2,910,760
Other current liabilities................................................... 1,203,747
------------
Total current liabilities............................................. 20,294,327
REFREQUENCING LIABILITY....................................................... 5,936,070
CONVERTIBLE DEBT.............................................................. 226,100,585
OTHER NON-CURRENT LIABILITIES................................................. 224,088
------------
Total liabilities..................................................... 252,555,070
COMMITMENTS AND CONTINGENCIES (Notes 1 and 5)
PARTNERS' DEFICIT............................................................. (241,417,956)
------------
Total liabilities and partners' deficit............................... $ 11,137,114
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
STATEMENT OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
FOR THE PERIOD FROM JANUARY 1, 1995 TO DECEMBER 28, 1995
<TABLE>
<S> <C>
REVENUES...................................................................... $ 13,244,367
OPERATING EXPENSES:
Cost of products sold....................................................... 4,322,710
Selling, general and administrative......................................... 23,673,935
Depreciation and amortization............................................... 4,458,454
Asset impairment............................................................ 10,966,716
Refrequencing costs......................................................... 5,936,070
------------
Loss from operations...................................................... (36,113,518)
OTHER EXPENSES:
Interest expense............................................................ 21,239,650
Other, net.................................................................. 26,988
------------
Net loss.................................................................. (57,380,156)
PARTNERS' DEFICIT:
Balance, December 31, 1994.................................................. (184,037,800)
------------
Balance, December 28, 1995.................................................. $(241,417,956)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1995 TO DECEMBER 28, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss..................................................................... $(57,380,156)
Adjustments to reconcile net loss to net cash used for operating activities--
Depreciation and amortization.............................................. 4,458,454
Asset impairment........................................................... 10,966,716
Refrequencing costs........................................................ 5,936,070
Changes in operating assets and liabilities--
Accounts receivable, net................................................. 633,387
Inventory................................................................ 1,046,485
Other current assets..................................................... (45,916)
Accounts payable--Trade.................................................. (461,118)
Due to affiliates........................................................ 11,150,645
Increase in other liabilities.............................................. 165,371
-----------
Net cash used for operating activities................................. (23,530,062)
-----------
INVESTING ACTIVITIES:
Retirements of property, plant and equipment, net............................ 110,160
-----------
Net cash provided by investing activities.............................. 110,160
-----------
FINANCING ACTIVITIES:
Proceeds from convertible debt............................................. 22,905,585
Other...................................................................... (31,483)
-----------
Net cash provided by financing activities.............................. 22,874,102
-----------
NET DECREASE IN CASH........................................................... (545,800)
CASH, December 31, 1994........................................................ 545,800
-----------
CASH, December 28, 1995........................................................ $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest to affiliate.......................................... $ 9,763,242
Cash paid for income taxes................................................... --
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1995
1. ORGANIZATION AND NATURE OF BUSINESS:
NATURE OF OPERATIONS
AirTouch Teletrac General Partnership (the Partnership) was formed on December
16, 1987, under the laws of the State of California. The Partnership has been
licensed by the Federal Communications Commission (FCC) to construct and operate
radio location networks. During 1995 the Partnership operated in six U.S. cities
as follows: Chicago, Dallas, Detroit, Houston, Los Angeles and Miami.
The set up of the location network is capital intensive, and the Partnership has
been dependent upon the financial support of its majority partner, Location
Technologies Inc. (LTI), and its parent, AirTouch Communications.
The principal operation consists of tracking vehicles through signals sent by
Vehicle Location Units (VLUs) placed in a vehicle and received by a base unit.
The system processes the signals and provides the location and movement of a
vehicle on an electronic map grid display.
OWNERSHIP
During 1995 certain of the partners, North American Teletrac and International
Teletrac Services, sold all ownership interests in the Partnership to AirTouch
Services (ATS) and LTI. LTI also transferred two percent of its ownership
interest in the Partnership to ATS during 1995. Prior to the dissolution of the
Partnership on December 28, 1995, the partners' ownership interests were as
follows:
<TABLE>
<S> <C>
Location Technologies, Inc., a wholly owned subsidiary
of AirTouch Services............................................... 73%
AirTouch Services, a wholly owned subsidiary of
AirTouch Communications............................................ 27%
</TABLE>
On December 28, 1995, LTI merged with ATS, thereby dissolving the Partnership by
operation of law. Accordingly, the accompanying financial statements are as of
December 28, 1995, and for the period from January 1, 1995, to December 28,
1995. No material transactions or events of the business occurred between
December 28, 1995, and December 31, 1995.
SUBSEQUENT SALE OF ASSETS
On January 17, 1996, ATS sold substantially all of the assets previously owned
by the Partnership to Teletrac, Inc., a Delaware corporation, for $2,500,000,
the assumption of the refrequencing liability, and an adjustment for working
capital, as defined. An amount of $1,500,000 was paid in cash at closing, with
$1,000,000 due on the earlier of one year from the date of closing or the date
on which the order issued by the FCC addressing emission mask standards for
multilateration vehicle location systems shall have become final.
As a result of the subsequent sale, management determined that the net
realizable value of the long- term assets (property, plant, equipment and
intangible assets) was less than net book value. The impairment of property,
plant and equipment, FCC licenses, and goodwill of $2,249,000, $2,610,000, and
$6,108,000, respectively, was recorded in the 1995 statement of operations.
F-21
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 28, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Partnership serviced the commercial market for use in fleet management and
the consumer market for individual vehicle tracking. The commercial systems
include VLUs, computer hardware, and vehicle tracking software. The sales of
commercial systems are recognized upon shipment of the system, and the
commercial service fee revenues are recognized monthly as the services are
provided based on the number of VLUs in the fleet.
The VLUs for the consumer market were manufactured by third parties and were
sold to consumers through unrelated retailers. The Company's service contracts
to individual consumers were initiated by the retailers. Service revenues for
the consumer market may be paid in advance and are recognized monthly as earned.
Unearned service fees are recorded as deferred revenue and included in other
current liabilities in the accompanying balance sheet.
INVENTORIES
Inventories consist of VLUs, computer systems and related components. Inventory
is stated at the lower of cost or market using the first-in, first-out method of
valuation.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment were recorded at cost. Subsequent to 1995
substantially all of the Partnership's assets were sold (Note 1). As a result,
property, plant and equipment were determined to be impaired and were recorded
at their net realizable values as of December 28, 1995. Property, plant and
equipment includes the following:
<TABLE>
<S> <C>
Equipment...................................................... $22,896,113
Office furniture and equipment................................. 1,276,205
Vehicles....................................................... 349,296
Leasehold improvements......................................... 190,085
----------
24,711,699
Less- Accumulated depreciation and amortization................ (16,875,629)
----------
Net property, and equipment.................................. $7,836,070
----------
----------
</TABLE>
F-22
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 28, 1995
Repairs, maintenance and renewal of minor items were charged to expense as
incurred. Major renewals and improvements are capitalized and depreciated over
their remaining useful lives. Depreciation is recorded using the straight-line
method over the applicable estimated useful lives as follows:
<TABLE>
<S> <C>
Equipment......................................................... 3-7 years
Office furniture and equipment.................................... 5 years
Vehicles.......................................................... 3 years
</TABLE>
Leasehold improvements were amortized using the straight-line method over the
lesser of the estimated useful life of the asset or the remaining terms of the
underlying lease.
INTANGIBLE ASSETS
Intangible assets represent the cost of acquiring FCC licenses as well as
goodwill resulting from an acquisition of a previous network partner. Both FCC
licenses and goodwill were amortized using the straight-line method over 20
years. FCC license terms are for a five-year period with unlimited options to
renew for subsequent five-year periods. As discussed above, subsequent to 1995
substantially all of the Partnership's assets were sold (Note 1). As a result,
the intangible assets were determined to be impaired and were recorded at their
net realizable values as of December 28, 1995. The goodwill previously recorded
was fully impaired and the FCC licenses were written down to $600,000.
PARTNERSHIP INCOME ALLOCATION
Partnership profits and losses were allocated based on the partners' percentage
ownership interest in the Partnership during the year.
INCOME TAXES
No provision has been made for federal or state income taxes since such taxes,
if any, are the responsibility of the individual partners.
3. RELATED-PARTY TRANSACTIONS:
CONVERTIBLE DEBT
The Partnership had convertible debt payable to LTI. Interest on the debt was at
prime plus 2 percent on the outstanding debt balance. Included in the due to
affiliate balance at December 28, 1995, is interest payable of approximately
$15,900,000.
The debt was collateralized by the equipment, inventory, accounts receivable,
and all proceeds and products of the Partnership. The debt was not assumed by
the new owners (Note 1).
The outstanding principal balance could have been converted into shares of
AirTouch Teletrac stock if the Partnership would have elected to undertake an
initial public offering. In conjunction with the merger of ATS and LTI,
discussed in Note 1, the debt was eliminated.
INSURANCE
The Partnership was covered under an insurance policy held by an affiliate.
Insurance expense passed through by this affiliate for the period from January
1, 1995, to December 28, 1995, was $244,000.
F-23
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 28, 1995
4. EMPLOYEE BENEFITS:
EMPLOYEE INCENTIVE PLANS
The Partnership maintained a short-term incentive plan (STIP) for certain
employees which was based on the achievement of certain performance measures and
targets. Costs related to the STIP of approximately $673,000 have been recorded
in the 1995 statement of operations.
The Partnership also maintained an Equity Incentive Plan (EI Plan) for certain
key employees. Under the EI Plan the Partnership was authorized to grant stock
appreciation rights (SARs) to the key employees which are exercisable over a
specified period of time based on the price of the AirTouch Communications
stock. Cost of approximately $211,000 is included in the 1995 statement of
operations.
SEVERANCE AND STAY-ON PROGRAM
As a result of a planned downsizing of the Partnership's operations and the
subsequent sale of the assets, the Partnership severed its employment
relationships with substantially all of its employees during 1995 and through
early 1996. The severance program provided for severance payments to be made to
employees in accordance with a formula that considers years of service and
salary. Severance payments were made when the employment relationships were
severed, which in certain instances occurred in 1996. All costs related to the
severance program, which totaled approximately $2,400,000, have been recorded in
the 1995 statement of operations.
In addition to the severance program, certain employees were provided an added
incentive to continue working for the Partnership after the sale was announced
to provide closure and transition of the Partnership's activities (Stay-On
Plan). Generally, those eligible employees were paid 25% of their monthly salary
times the number of months worked subsequent to June 1, 1995, with partial
months being credited as full months. Costs related to the Stay-On Plan which
relate to services provided in 1995 were approximately $804,000.
5. COMMITMENTS AND CONTINGENCIES:
SIGNIFICANT SUPPLIER AGREEMENTS
The Partnership entered into several purchase agreements with a foreign
supplier, the Partnership's sole supplier of VLUs, whereby VLUs would be
supplied at a set price, provided prepayments were made to finance the
production of the units. At December 28, 1995, the total open commitments under
these agreements were approximately $1,900,000.
The Partnership entered into an agreement with a software company to develop and
update the mapping software utilized in all of the Partnership's operating
locations to track vehicles. In 1995 the Partnership paid a fee of $325,000 for
the service which expired in January 1996.
The Partnership also had various other purchase commitments outstanding at
year-end of approximately $1,185,000.
Substantially all significant supplier agreements were assumed by or
renegotiated by Teletrac, Inc.
LEASES
The Partnership leased various facilities under noncancellable operating leases
expiring through 2000. Most of the leases were either assumed by or subleased to
Teletrac, Inc.
F-24
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 28, 1995
Total rental expense under all operating leases was $2,027,000 for the period
from January 1, 1995, to December 28, 1995.
OTHER
The Partnership was party to a dispute regarding the registration of the
trademark "Teletrac" by an unrelated party. No accrual has been made in the
accompanying financial statements for this contingency since management is
unable to establish the likelihood of loss, if any, which may be incurred.
The Partnership was a party to various other lawsuits arising in the ordinary
course of business. In the opinion of management, based on a review of such
litigation with legal counsel, any losses resulting from these actions are not
expected to materially impact the financial position or results of operations of
the Partnership.
6. REFREQUENCING COSTS:
In 1995 the FCC issued an order which required the Partnership to relocate its
existing operating frequency from a portion of the 925 MHz band to a portion of
the 927 MHz band. As a result, the Partnership has recorded a liability and a
related expense for the cost of implementing the order in order to continue
delivering the Partnership's contractual service obligation to its customers.
The cost recorded of $5,936,070 represents the estimated cost to comply with
this obligation to customers at December 28, 1995.
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
AirTouch Teletrac General Partnership
We have audited the accompanying balance sheet of AirTouch Teletrac General
Partnership (the "Partnership") as of December 31, 1994, and the related
statements of operations, partners' deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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.
The Partnership is currently in negotiations for the sale of substantially
all of the Partnership's assets and assumption of certain liabilities. See Note
11.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AirTouch Teletrac General
Partnership as of December 31, 1994, and results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going-concern. As discussed in Note 2, the
Partnership has incurred net losses and negative cash flows from operations. In
addition, the Partnership is highly leveraged and has relied substantially on
continued financial support from its general partner, which is a wholly-owned
subsidiary of AirTouch Communications. As discussed in Note 2, this financial
support may not continue. These factors raise substantial doubt about the
Partnership's ability to continue as a going-concern. Plans in regard to these
matters are also described in Note 2 as well as Note 11. The financial
statements do not include any adjustment that might result from the outcome of
this uncertainty.
COOPERS & LYBRAND LLP
Newport Beach, California
February 3, 1995, except for
Note 11, as to which the
date is September 8, 1995
F-26
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1994
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash........................................................................... $ 545,800
Accounts receivable, less allowance for doubtful accounts of $479,700.......... 2,437,600
Inventory, net of reserve of $154,200.......................................... 1,548,400
Other current assets........................................................... 349,000
----------
Total current assets......................................................... 4,880,800
Property, plant and equipment, net............................................. 14,017,400
Intangible assets, net......................................................... 9,954,000
----------
Total assets................................................................. $28,852,200
----------
----------
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable--trade........................................................ $ 791,000
Due to affiliates.............................................................. 4,845,300
Accrued salaries and benefits.................................................. 2,467,000
Other current liabilities...................................................... 1,501,500
-----------
Total current liabilities.................................................... 9,604,800
Net indebtedness to ITS........................................................ 49,500,000
Convertible debt............................................................... 153,695,000
Capital leases, net of current portion......................................... 82,800
Loan payable................................................................... 7,400
-----------
Total liabilities............................................................ 212,890,000
Commitments and contingencies (Notes 7 and 10)................................. --
Partners' deficit.............................................................. (184,037,800)
-----------
Total liabilities and partners' deficit........................................ $28,852,200
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Revenues....................................................................... $15,336,000
Operating expenses:
Cost of revenues........................................................... 6,356,800
Selling and advertising.................................................... 1,814,100
Salaries and benefits...................................................... 14,747,700
General and administration................................................. 11,672,300
Depreciation and administration............................................ 5,218,200
-----------
Loss from operations..................................................... (24,473,100)
Other expense (income):
Interest expense........................................................... 15,610,100
Interest income............................................................
Other...................................................................... (258,700)
-----------
Net loss................................................................. ($39,824,500)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
STATEMENT OF PARTNERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Balance, December 31, 1993.................................................... ($144,713,300)
Capital contribution.......................................................... 500,000
Net loss for the year......................................................... (39,824,500)
------------
Balance, December 31, 1994.................................................... ($184,037,800)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
CASH FROM (USED FOR) OPERATING ACTIVITIES:
Net loss..................................................................... $(39,824,500)
Adjustments to reconcile net loss for items current not affecting operating
cash flows:
Depreciation and amortization.............................................. 5,218,200
Loss on disposal of fixed assets........................................... 1,263,200
Changes in operating assets and liabilities:
Accounts receivable, net................................................. 701,000
Inventory, net........................................................... 47,900
Other current assets..................................................... 1,128,200
Accounts payable--trade.................................................. (750,800)
Due to affiliates........................................................ 1,598,800
Accrued salaries and benefits............................................ (2,405,700)
Other current liabilities................................................ (289,600)
-----------
Cash used for operating activities....................................... (33,313,300)
-----------
CASH USED FOR INVESTING ACTIVITIES:
Additions to property, plant and equipment................................... (858,600)
-----------
Cash used for investing activities....................................... (858,600)
-----------
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from convertible debt............................................... 32,695,000
Partner capital contributions................................................ 500,000
Loan repayment............................................................... (9,300)
Payment on capital lease obligation.......................................... (53,500)
-----------
Cash provided by financing activities.................................... 33,132,200
-----------
Change in cash........................................................... (1,039,700)
-----------
Beginning cash................................................................. 1,585,500
-----------
Ending cash.................................................................... $ 545,800
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS:
AirTouch Teletrac General Partnership (the "Partnership") was formed on
December 16, 1987 under the laws of the State of California. The Partnership has
been licensed by the Federal Communications Commission ("FCC") to construct and
operate radio location networks in 127 U.S. cities. Since its inception, the
Partnership was subcontracting the operations of the network to International
Teletrac Systems, Inc. ("ITS"), a wholly-owned subsidiary of North American
Teletrac ("NAT"), an affiliate, under an operating and supply agreement.
Effective March 31, 1992, the Partnership exercised its option to acquire
substantially all operations, assets, and liabilities (except certain debt--see
Note 6) of ITS (the "Acquisition").
Prior to October 1991, the Partnership was precluded by a judicial consent
decree from, among other things, having an investment in, or participating in
the management of, ITS or obtaining any information about ITS not available to
the general public. However, the Partnership purchased an option to acquire ITS
and guaranteed ITS' debt (Note 6) thereby assuming most of ITS' business risk.
Accordingly, the acquired assets, liabilities, and results of operations of ITS
have been consolidated in the Partnership's financial statements for all periods
presented herein.
At the time of exercise of the option, the Partnership recorded goodwill of
$6,913,800 which approximates the cash paid to ITS. During 1993, an additional
$603,500 was paid on behalf of ITS and, accordingly, has been recorded as
goodwill.
In consideration for its contribution of certain assets and liabilities, ITS
was allocated a 24% partnership interest which was transferred from NAT's
original interest. Accordingly, at December 31, 1994, the partners' ownership
interests are as follows:
<TABLE>
<S> <C>
Location Technologies, Inc. ("LTI"), a wholly-owned
subsidiary of AirTouch Communications...................... 51%
North American Teletrac ("NAT").............................. 25%
International Teletrac Systems, Inc. ("ITS"), a wholly-owned
subsidiary of NAT.......................................... 24%
</TABLE>
Prior to April 1, 1994, LTI was a wholly-owned subsidiary of PacTel
Corporation, which in turn was 86.1% owned by Pacific Telesis Group. On April 1,
1994, the Wireless Division of Pacific Telesis Group spun off and formed a
separate company operating as AirTouch Communications.
At December 31, 1994, the Partnership operated in six cities. The set up of
the location network is capital intensive, and the Partnership is currently
dependent upon the financial support of its majority partner, LTI and its
parent, AirTouch Communications.
Vehicles are tracked through signals sent by Vehicle Location Units ("VLUs")
placed in the vehicle and received by base stations which have been
strategically installed throughout the coverage area. The signals are processed
by the base stations and sent by telephone to the master station. The system
then determines the location of the vehicle and movement on an electronic map
grid display. The master station can relay the tracking information to the
commercial fleet dispatcher or law enforcement agencies.
2. MANAGEMENT'S PLANS:
The Partnership's financial statements have been prepared on a going-concern
basis which contemplates the realization of assets and a liquidation of
liabilities in the ordinary course of business. The
F-31
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. MANAGEMENT'S PLANS: (CONTINUED)
Partnership has incurred substantial net losses and negative cash flows from
operations. In addition, the Partnership has a working capital deficiency and is
highly leveraged.
To date, substantially all of the cash to fund the operations of the
Partnership had been provided by its affiliate, LTI, in the form of convertible
debt. This financial support may not continue.
There is a pending sale to sell substantially all of the Partnership's
assets to a third party who will also assume certain of the Partnership's
liabilities. See discussion of this pending sale in Note 11.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION:
The Partnership services the commercial market for use in fleet management
and the consumer market for individual vehicle tracking. The commercial systems
include VLUs, computer hardware, and vehicle tracking software. The sales of
commercial systems are recognized upon shipment of the system, and the
commercial service fee revenues are recognized monthly based on the number of
VLUs in the fleet.
The VLUs for the consumer market are manufactured by third parties and are
sold to consumers through unrelated retailers. The Company's service contracts
to individual consumers are initiated by the retailers. Service revenues for the
consumer market are usually paid in advance and are recognized monthly as
earned. Unearned service fees are recorded as deferred revenue and included in
other current liabilities in the accompanying balance sheets.
INVENTORIES:
Inventories consist of VLUs and computer systems for commercial customers
and are stated at the lower of cost or market using the first-in, first-out
method of valuation. The Company has $140,600 of inventory on consignment with
third parties at December 31, 1994.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost, are depreciated using the
straight-line method over their estimated useful lives, which are generally as
follows:
<TABLE>
<S> <C>
Equipment................................................. 3-7 years
Office furniture and equipment............................ 5 years
Vehicles.................................................. 3 years
</TABLE>
Leasehold improvements are amortized using the straight-line method over the
lesser of the estimated useful life of the asset or the remaining terms of the
underlying lease.
Repairs, maintenance, and renewal of minor items are charged to expense as
incurred. Major renewals and improvements are capitalized and depreciated over
the remaining useful lives of the assets.
INTANGIBLE ASSETS:
Intangible assets represent the cost of acquiring FCC licenses as well as
goodwill resulting from the Acquisition. Both FCC licenses and goodwill are
amortized using the straight-line method over twenty
F-32
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
years. The Partnership periodically reviews these intangible assets to determine
if its carrying costs will be recovered from future operations and, accordingly,
a reduction in carrying value should be recorded. No such reductions have
occurred to date.
RESEARCH AND DEVELOPMENT:
Research and development costs are expensed as incurred.
ADVERTISING:
Advertising costs are expensed as incurred.
PARTNERSHIP INCOME:
Subsequent to the Acquisition, Partnership's profits and losses are
allocated based on the partners' percentage ownership interest in the
Partnership.
INCOME TAXES:
No provisions have been made for federal or state income taxes since such
taxes, if any, are the responsibility of the individual partners.
STATEMENT OF CASH FLOWS:
The Company prepares its statement of cash flows using the indirect method
as prescribed by Statement of Financial Accounting Standards No. 95. The Company
considers all investment instruments at date of purchase with maturities of less
than three months to be cash equivalents. The Partnership paid $13,780,500 in
interest in 1994. (See Note 6 for interest paid on convertible debt.) In 1994,
the Partnership did not enter into any capital lease obligations for new
equipment.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1994 consist of the following:
<TABLE>
<S> <C>
Equipment...................................................... $22,958,400
Office furniture and equipment................................. 1,262,400
Vehicles....................................................... 385,100
Leasehold improvements......................................... 175,400
----------
24,781,300
Less, accumulated depreciation and amortization................ 10,763,900
----------
$14,017,400
----------
----------
</TABLE>
F-33
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INTANGIBLE ASSETS:
Intangible assets at December 31, 1994 consist of the following:
<TABLE>
<S> <C>
FCC licenses.................................................... $4,719,300
Goodwill........................................................ 7,517,300
12,236,600
Less, accumulated depreciation and amortization................. 2,282,600
---------
$9,954,000
---------
---------
</TABLE>
FCC licenses represent the cost of acquiring these licenses and are
amortized over a period of 20 years. FCC license term is for a 5-year period
with unlimited options to renew for subsequent 5-year periods.
Goodwill results from the application of the purchase method of accounting
with respect to the Acquisition.
6. RELATED PARTY TRANSACTIONS:
NET INDEBTEDNESS TO ITS:
The net indebtedness at December 31, 1994 represents the following:
<TABLE>
<S> <C>
Preferred capital account...................................... $69,700,000
Note receivable from ITS....................................... (20,200,000)
----------
$49,500,000
----------
----------
</TABLE>
Pursuant to the Acquisition, ITS has a "Preferred Capital Account" on which
the Partnership is required to make quarterly payments to ITS at prime plus 3%.
The Preferred Capital Account has all the debt features associated with the ITS
outstanding debt ($49,500,000--see next paragraph) and a $20,200,000 note
payable to the Partnership. These two debt instruments were not part of the
Acquisition and therefore not assumed by the Partnership. However, the note
receivable from ITS was reclassified and netted against the Preferred Capital
Account to reflect the substance of this transaction. The note receivable bears
interest at prime plus 3% (11.5% at December 31, 1994) and matures May 1998.
Subsequent to year-end, the Partnership intends to assign its preferred capital
account of $49,500,000 and ITS' equity in the Partnership to AirTouch Services,
an affiliate. In addition, the Partnership intends to assign the preferred
capital account of $20,200,000 and the related note receivable to LTI.
The Partnership guarantees the outstanding debt of ITS. The guaranteed debt
outstanding balance at December 31, 1994 was $49,500,000. Of this amount,
$9,500,000 is due no later than December 20, 1995, and the remaining balance is
due no later than January 31, 1996. The outstanding debt of ITS is held by
AirTouch Services, a wholly-owned subsidiary of AirTouch Communications.
CONVERTIBLE DEBT:
The Partnership has convertible debt payable to LTI. The Partnership pays
interest quarterly at prime plus 2% on the outstanding debt balance. Included in
the due to affiliate balance at December 31, 1994 is
F-34
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS: (CONTINUED)
interest payable of $3,879,800. Interest paid to the affiliate for the year
ended December 31, 1994 was $13,862,600. The principal balance is due when the
debt matures as follows:
<TABLE>
<S> <C>
1998.......................................................... $37,500,000
1999.......................................................... 52,600,000
2000.......................................................... 63,595,000
-----------
$153,695,000
-----------
-----------
</TABLE>
The debt is collateralized by the equipment, inventory, accounts receivable,
and all proceeds and products of the Partnership.
The outstanding debt's principal may be converted into shares of AirTouch
Teletrac stock if the Partnership elects to undertake an initial public
offering. After conversion, LTI and its affiliates' aggregate stock ownership
cannot exceed 70% of the total outstanding shares. However, subsequent to
year-end, the intent is that the debt will be held by AirTouch Services due to a
proposed merger of LTI and AirTouch Services, with AirTouch Services as the
surviving entity.
DEPENDENCE ON AFFILIATE:
Substantially all of the cash to fund the operations of the Partnership has
been provided by its affiliate, LTI, in the form of convertible debt.
INSURANCE:
The Partnership is covered under an insurance policy held by an affiliate.
Insurance expense passed through by this affiliate for the year ended December
31, 1994 was $57,600.
7. COMMITMENTS:
SIGNIFICANT SUPPLIER AGREEMENTS:
On July 30, 1991 and July 1, 1993, ITS and AirTouch Teletrac entered into
several purchase agreements with a foreign supplier whereby VLUs would be
supplied at a set price, provided ITS made prepayments to finance the production
of the units. At December 31, 1994, the total open commitments under these
agreements amounted to $3,725,300.
MAINTENANCE AGREEMENT:
Effective January 1, 1991, ITS entered into a 5-year agreement with the
aforementioned supplier whereby the supplier will perform maintenance and repair
on all base stations purchased by ITS from that supplier. At December 31, 1994,
the total remaining commitment on this agreement is approximately $241,000.
ROYALTIES:
ITS entered into an agreement with a software company to develop the mapping
software utilized in all the Partnership's operating locations to track
vehicles.
F-35
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS: (CONTINUED)
The Partnership pays a royalty fee for each copy of mapping software sold to
an end user (corporate customer).
In addition, beginning January 1, 1993, the Partnership has guaranteed to
pay an operational fee of $1,500 per month for each metropolitan area on line
for updates to the mapping software. At December 31, 1994, there were 6 cities
on line and the resulting minimum operational fee commitment amounts to $4,500
for 1995.
For commercial customers using the mapping software (tracking their own
vehicles), the Partnership pays a monthly fee per vehicle.
The above agreement had an original expiration date of January 14, 1995.
This agreement has been amended, which extends the term of the agreement for one
year through January 14, 1996 under the original terms and conditions of the
original agreement except for the payment terms which have been revised to a
flat fee of $325,000 payable in four equal installments during the term of the
agreement.
Total operational fees and royalties for the year ended December 31, 1994
amounted to approximately $256,125.
LEASES:
The Partnership leases various facilities under noncancellable operating
leases expiring through 1997. The Company is responsible for maintenance,
repairs, taxes, and insurance on these operating leases.
Future minimum rental payments required under operating leases that have
initial or remaining noncancellable lease terms in excess of one year are as
follows:
<TABLE>
<S> <C>
1995............................................................ $ 921,200
1996............................................................ 665,700
1997............................................................ 147,200
---------
$1,734,100
---------
---------
</TABLE>
Total rental expense under all operating leases was $2,443,600 for the year
ended December 31, 1994.
8. EMPLOYEE BENEFIT PLAN:
On December 1, 1993, the Partnership revised the profit sharing plan which
qualifies as a cash or deferred arrangement under Section 401(k) of the Internal
Revenue Code. Under this plan, eligible participating employees may elect to
contribute up to 25% of their monthly salaries. The Partnership contributes to
the plan on behalf of the participating employee an amount equal to 25% of
employee contributions to a maximum of $2,000 per employee per calendar year.
Participants are at all times fully vested in their contributions and in the
Partnership's contributions according to the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTED PERCENTAGE
- ---------------------------------------------------------------------------- -----------------
<S> <C>
2........................................................................... 30%
3........................................................................... 50%
4........................................................................... 75%
5........................................................................... 100%
</TABLE>
F-36
<PAGE>
AIRTOUCH TELETRAC GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLAN: (CONTINUED)
The Partnership's contributions to the plan for the year ended December 31,
1994 amounted to approximately $201,400.
9. MAJOR SUPPLIER:
The Partnership purchases substantially all of its equipment from one
supplier.
10. CONTINGENCIES:
The Partnership is a party to various lawsuits arising in the ordinary
course of business. In the opinion of management, based on a review of such
litigation with legal counsel, any losses resulting from these actions are not
expected to materially impact the financial condition of the Partnership.
11. SUBSEQUENT EVENT (UNAUDITED):
Under an Asset Purchase Agreement, drafted in August of 1995, between
AirTouch Services and a third party, there is a pending sale of substantially
all of the Partnership's assets and assumption of certain liabilities. The
purchase price for the above is estimated to be $5,000,000. In addition, if
certain events occur relating to FCC actions prior to Buyer capital or
contractual commitment, it is estimated that an additional sum of $6,800,000
will be paid in two equal installments without interest on the first and second
anniversaries of the closing date or the date on which such FCC action is
issued, whichever is later.
If the sale is consummated under its terms as drafted, the Partnership may
incur significant losses. Such loss, assuming a $5,000,000 purchase price, is
estimated to be approximately $25,000,000.
F-37
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may indemnify such person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation to procure a judgment in its favor
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses (including attorneys' fees) which he actually
and reasonably incurred in connection therewith. The indemnification provided is
not deemed to be exclusive of any other rights to which an officer or director
may be entitled under any corporation's by-law, agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, the Company has adopted a By-Law
which provides that, to the fullest extent permitted by DGCL, the Company shall
indemnify any person made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, other than one by or in the
right of the Company to procure a judgment in its favor, whether civil,
criminal, administrative or investigate, by reasons of the fact that he is or
was 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, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
defense or settlement of any such action or proceeding, or in connection with an
appeal thereon, except in relation to matters as to which such person is
adjudged to have breached his duty to the Company. Under Section 145 of the
DGCL, such indemnification shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any By-Law of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise, including insurance purchased and maintained by the Company, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The Company has purchased and maintains insurance to protect persons
entitled to indemnification pursuant to its By-Laws and the DGCL against
expenses, judgments, fines and amounts paid in settlement, to the fullest extent
permitted by the DGCL.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation, dated September 18, 1995.**
3.2 Certificate of Amendment to Restated Certificate of Incorporation, dated December 4, 1996.**
3.3 By-laws, adopted as of November 14, 1995**
4.1 Indenture between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, dated
August 6, 1997.**
4.2 Registration Rights Agreement, dated August 6, 1997, among the Registrant, Teletrac Holdings, Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and TD Securities (USA) Inc.**
5 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol
10.1 VLU Production Agreement, dated as of September 6, 1996, between Tadiran, Ltd. and the Registrant.*
10.2 Amendment to VLU Production Agreement, dated as of May 28, 1997, between Tadiran, Ltd. and the
Registrant.*
10.3 Mobile Data Terminal Purchase Agreement, dated as of February 8, 1996, between Micronet, Inc. and the
Registrant.*
10.4 Amendment to Mobile Data Terminal Purchase Agreement, dated September 16, 1996, between Micronet,
Inc. and the Registrant.*
10.5 Value Added Reseller License Agreement, dated June 3, 1997, between Etak, Inc. and the Registrant.*
10.6 Pledge Agreement, dated August 6, 1997, between the Registrant and Norwest Bank Minnesota, National
Association, as Collateral Agent.
10.7 Stock Purchase Agreement, dated as of December 6, 1996, by and among Teletrac, Inc. and certain
Investors named therein.
10.8 Stockholder's Agreement, dated as of December 6, 1996, by and among Teletrac, Inc. and certain
Stockholders named therein.
10.9 Amended and Restated Registration Rights Agreement, dated as of December 6, 1996, by and among the
Company and certain Stockholders named therein.
10.10 Exchange Agreement, dated as of July 31, 1997, among Teletrac, Inc., Teletrac Holdings, Inc. and
certain Stockholders named therein.
10.11 Credit Agreement, dated as of September 18, 1997, among Teletrac, Inc., Banque Paribas, as
Administrative Agent, and Fleet National Bank, as Documentation Agent.
10.12 Unlimited Guaranty, dated September 18, 1997, by Teletrac Holdings, Inc. to and with Fleet National
Bank, as Agent.
10.13 Security and Pledge Agreement, dated September 18, 1997, by and between Teletrac, Inc. and Fleet
National Bank, as Agent.
10.14 Securities Pledge Agreement, dated as of September 18, 1997, by and between Teletrac Holdings, Inc.
and Fleet National Bank, as Agent.
10.15 Equity Holder Agreement, dated as of September 18, 1997, among Banque Paribas, Fleet National Bank
and Teletrac, Holdings, Inc.
21.1 Subsidiaries of Registrant**
23.1 Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in their opinion filed
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
as Exhibit 5)
<C> <S>
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Coopers & Lybrand LLP
24.1 Power of Attorney of the Board of Directors (included in the Signature Page)
25 Statement on Form T-1 of Eligibility of Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement between the Registrant and Norwest Bank Minnesota, National
Association, dated as of [ ]
</TABLE>
- ------------------------
* Certain information in this Exhibit is deleted pursuant to a request with
the Securities and Exchange Commission for confidential treatment.
** Previously filed.
<TABLE>
<C> <S>
(ii) Financial Statement Schedules.
[None.]
</TABLE>
ITEM 22. UNDERTAKINGS
(a) 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 provisions described under Item 20 above, 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 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 it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post
effective amendment all information concerning a transaction, and the company
being acquired therein, that was not the subject of and included in the
registration statement when it became effective.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if
II-3
<PAGE>
the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) 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 indemnifications 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 proceedings) 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 it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in New York, New York
on October 16, 1997.
TELETRAC, INC.
/S/ JAMES A. QUEEN
---------------------------------------------
James A. Queen
Chairman of the Board of Directors,
Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman Of The Board,
/s/ JAMES A. QUEEN Chief Executive Officer
- ------------------------------ and Director (Principal October 16, 1997
James A. Queen Executive Officer)
Vice President Of
/s/ ALAN B. HOWE Finance and Corporate
- ------------------------------ Development(Principal October 16, 1997
Alan B. Howe Financial Officer)
/s/ CHARLES SCHEIWE
- ------------------------------ Controller (principal October 16, 1997
Charles Scheiwe Accounting Officer)
- ------------------------------ Director
Sanford Anstey
*
- ------------------------------ Director October 16, 1997
Robert Benbow
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
*
- ------------------------------ Director October 16, 1997
David J. Berkman
*
- ------------------------------ Director October 16, 1997
Michael A. Greeley
*
- ------------------------------ Director October 16, 1997
Michael Markbreiter
*
- ------------------------------ Director October 16, 1997
Marc H. Michel
- ------------------------------ Director October 16, 1997
Brian A. Rich
- ------------------------------ October 16, 1997
* Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation, dated September 18, 1995.**
3.2 Certificate of Amendment to Restated Certificate of Incorporation, dated December 4, 1996.**
3.3 By-laws, adopted as of November 14, 1995**
4.1 Indenture between the Registrant and Norwest Bank Minnesota, National Association, as
Trustee, dated August 6, 1997.**
4.2 Registration Rights Agreement, dated August 6, 1997, among the Registrant, Teletrac
Holdings, Inc., Donaldson, Lufkin & Jenrette Securities Corporation and TD Securities
(USA) Inc.**
5 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol
10.1 VLU Production Agreement, dated as of September 6, 1996, between Tadiran, Ltd. and the
Registrant.*
10.2 Amendment to VLU Production Agreement, dated as of May 28, 1997, between Tadiran, Ltd. and
the Registrant.*
10.3 Mobile Data Terminal Purchase Agreement, dated as of February 8, 1996, between Micronet,
Inc. and the Registrant.*
10.4 Amendment to Mobile Data Terminal Purchase Agreement, dated September 16, 1996, between
Micronet, Inc. and the Registrant.*
10.5 Value Added Reseller License Agreement, dated June 3, 1997, between Etak, Inc. and the
Registrant.*
10.6 Pledge Agreement, dated August 6, 1997, between the Registrant and Norwest Bank Minnesota,
National Association, as Collateral Agent.
10.7 Stock Purchase Agreement, dated as of December 6, 1996, by and among Teletrac, Inc. and
certain Investors named therein.
10.8 Stockholder's Agreement, dated as of December 6, 1996, by and among Teletrac, Inc. and
certain Stockholders named therein.
10.9 Amended and Restated Registration Rights Agreement, dated as of December 6, 1996, by and
among the Company and certain Stockholders named therein.
10.10 Exchange Agreement, dated as of July 31, 1997, among Teletrac, Inc., Teletrac Holdings, Inc.
and certain Stockholders named therein.
10.11 Credit Agreement, dated as of September 18, 1997, among Teletrac, Inc., Banque Paribas, as
Administrative Agent, and Fleet National Bank, as Documentation Agent.
10.12 Unlimited Guaranty, dated September 18, 1997, by Teletrac Holdings, Inc. to and with Fleet
National Bank, as Agent.
10.13 Security and Pledge Agreement, dated September 18, 1997, by and between Teletrac, Inc. and
Fleet National Bank, as Agent.
10.14 Securities Pledge Agreement, dated as of September 18, 1997, by and between Teletrac
Holdings, Inc. and Fleet National Bank, as Agent.
10.15 Equity Holder Agreement, dated as of September 18, 1997, among Banque Paribas, Fleet
National Bank and Teletrac, Holdings, Inc.
21.1 Subsidiaries of Registrant**
23.1 Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in their opinion filed as
Exhibit 5)
23.2 Consent of Arthur Andersen LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------
<C> <S> <C>
23.3 Consent of Coopers & Lybrand LLP
24.1 Power of Attorney of the Board of Directors (included in the Signature Page)
25 Statement on Form T-1 of Eligibility of Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement between the Registrant and Norwest Bank Minnesota, National
Association, dated as of [ ]
</TABLE>
- ------------------------
* Certain information in this Exhibit is deleted pursuant to a request with
the Securities and Exchange Commission for confidential treatment.
** Filed Previously.
<PAGE>
EXHIBIT 5
[Letterhead of Reboul, MacMurray, Hewitt, Maynard & Kristol]
, 1997
Teletrac, Inc.
2323 Grand Street, Suite 1100
Kansas City, Missouri 64108
Teletrac, Inc.
Registration Statement on Form S-4
(Registration No. 333-35021)
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Teletrac, Inc., a Delaware corporation
(the "Company"), in connection with its Registration Statement on Form S-4 (the
"Registration Statement"), filed under the Securities Act of 1933, as amended
(the "Act"), relating to the proposed exchange offer by the Company of up to
$105,000,000 aggregate principal amount of 14% Senior Notes Due 2007 (the "New
Notes") for a like principal amount of its outstanding 14% Senior Notes Due 2007
(the "Old Notes").
In that connection, we have examined originals, or copies certified
or otherwise identified to our satisfaction, of such documents, corporate
records and other instruments as we have deemed necessary or appropriate for
the purposes of this opinion, including the Certificate of Incorporation, as
amended, and By-laws of the Company.
Based upon the foregoing, we are of opinion that:
1. The Company has been duly organized and is validly existing under
the laws of the State of Delaware.
2. The New Notes have been duly and validly authorized by the
Company and, when issued under the Indenture in substantially the form filed as
Exhibit 4.1 to the Registration Statement in exchange for the Old Notes, upon
the terms and subject to the conditions contained in the Prospectus comprising
part of the Registration Statement and in the Letter of Transmit-
<PAGE>
2
tal substantially in the form filed as Exhibit 99.1 to the Registration
Statement, will be valid and binding obligations of the Company.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus comprising a part of the Registration
Statement. By giving the foregoing consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
/s/ Reboul, MacMurray, Hewitt, Maynard & Kristol
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 10.7
TELETRAC, INC.
190,476.19 SHARES OF SERIES A REDEEMABLE
CONVERTIBLE PARTICIPATING PREFERRED STOCK
STOCK PURCHASE AGREEMENT
Dated as of December 6, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Teletrac, Inc.
Stock Purchase Agreement
Dated as of December 6, 1996
INDEX
PAGE
SECTION 1. TERMS OF PURCHASE...............................................1
1.1 Description of Securities.......................................1
1.2 Reserved Shares.................................................1
1.3 Sale and Purchase...............................................1
1.4 Closing.........................................................1
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................2
2.1 Organization and Corporate Power................................2
2.2 Authorization...................................................2
2.3 Non-contravention...............................................3
2.4 Capitalization of the Company...................................3
2.5 Financial Statements; Projections...............................5
2.6 FCC Licenses....................................................5
2.7 Absence of Undisclosed Liabilities..............................7
2.8 Absence of Certain Developments.................................7
2.9 Accounts Receivable.............................................7
2.10 Title to Properties.............................................7
2.11 Tax Matters.....................................................8
2.12 Contracts and Commitments.......................................8
2.13 Proprietary Rights; Employee Restrictions.......................9
2.14 Litigation.....................................................11
2.15 Offerees.......................................................11
2.16 Business; Compliance with Laws.................................11
2.17 Information Supplied to Investors..............................12
2.18 Investment Banking; Brokerage..................................12
2.19 Solvency.......................................................12
2.20 Environmental Matters..........................................12
2.21 Employee Benefit Programs......................................13
2.22 Product and Services Claims....................................16
2.23 Backlog........................................................16
2.24 Employees; Labor Matters.......................................16
2.25 Customers, Distributors and Suppliers..........................16
2.26 Corporate Records; Copies of Documents.........................17
2.27 Affiliate Transactions.........................................17
2.28 Small Business Concern, Etc....................................17
2.29 FIRPTA Withholding.............................................18
2.30 Investments Related to Certain Foreign Countries...............18
SECTION 3. CONDITIONS OF PURCHASE.........................................18
(i)
<PAGE>
PAGE
3.1 Representations................................................18
3.2 Opinions of Counsel............................................18
3.3 Authorization..................................................18
3.4 Effectiveness of Preferred Stock Terms.........................19
3.5 Stockholders' Agreement........................................19
3.6 Convertible Notes..............................................19
3.7 Election of Directors; Indemnification Agreements..............19
3.8 Compensation Committee; Audit Committee........................19
3.9 Option Plan....................................................19
3.10 Registration Rights Agreement..................................20
3.11 Confidentiality Agreements.....................................20
3.12 All Proceedings Satisfactory...................................20
3.13 No Adverse Change..............................................20
3.14 Delivery of Documents..........................................20
3.15 SBIC Deliveries................................................21
SECTION 4. COVENANTS OF THE COMPANY.......................................21
4.1 Financial Statements; Minutes..................................21
4.2 Budget and Operating Forecast..................................22
4.3 Conduct of Business............................................22
4.4 Payment of Taxes, Compliance with Laws, etc....................22
4.5 Insurance......................................................23
4.6 Maintenance of Properties......................................23
4.7 Affiliated Transactions........................................23
4.8 Management Compensation........................................23
4.9 Use of Proceeds................................................23
4.10 Board of Directors Meetings; Meetings with Investors...........24
4.11 Stockholders' Agreement........................................24
4.12 Distributions on, and Redemptions of, Capital Stock............24
4.13 Merger, Consolidation, Sale of Assets and Other Actions........25
4.14 No Amendments to Certificate of Incorporation..................26
4.15 Capital Expenditures...........................................26
4.16 Annual Updates; Number of Stockholders; Use of Proceeds;
Regulatory Violation; Economic Impact Information Amendment....26
4.17 Non-Competition Agreements; Confidentiality and
Proprietary Rights Agreements..................................28
SECTION 5. INVESTOR REPRESENTATIONS.......................................28
SECTION 6. INDEMNIFICATION................................................29
6.1 Indemnification for Vicarious Liability........................29
6.2 Notice; Defense of Claims......................................29
6.3 Satisfaction of Indemnification Obligations....................30
(ii)
<PAGE>
PAGE
SECTION 7. GENERAL........................................................31
7.1 Amendments, Waivers and Consents...............................31
7.2 Survival of Representations, Warranties and Covenants;
Assignability of Rights......................................31
7.3 Governing Law; Jurisdiction....................................32
7.4 Section Headings; Counterparts.................................32
7.5 Notices and Demands............................................32
7.6 Severability...................................................32
7.7 Expenses.......................................................33
7.8 Integration; Waiver of Prior Agreements........................33
7.9 Certain Provisions Applicable to SBIC and Bank Stockholders....33
APPENDIX A - List of Investors
EXHIBITS
Exhibit 3.2(a) - Opinion of Company Counsel
Exhibit 3.2(b) - Opinion of Company FCC Counsel
Exhibit 3.4 - Amended and Restated Certificate of Incorporation
Exhibit 3.5 - Stockholders' Agreement
Exhibit 3.7 - Director Indemnification Agreement
Exhibit 3.9 - Stock Option Plan
Exhibit 3.10 - Registration Rights Agreement
Exhibit 3.11 - Confidentiality and Proprietary Rights Agreement
(iii)
<PAGE>
PAGE
SCHEDULES
Schedule 2.1 - Violations
Schedule 2.4 - Capitalization and Beneficial Ownership; Options;
Rights
Schedule 2.5 _ Projections
Schedule 2.6 _ FCC Licenses
Schedule 2.7 - Undisclosed Liabilities
Schedule 2.8 - Certain Developments
Schedule 2.9 - Accounts Receivable
Schedule 2.10 - Title to Properties
Schedule 2.11 - Tax Matters
Schedule 2.12 - Contracts and Commitments
Schedule 2.13 - Proprietary Rights
Schedule 2.14 - Litigation
Schedule 2.16 - Business
Schedule 2.17 _ Disclosure
Schedule 2.20 - Environmental Matters
Schedule 2.21 - Employee Benefits
Schedule 2.22 - Product and Service Claims
Schedule 2.23 - Backlog
Schedule 2.24 - Employee Matters
Schedule 2.27 - Affiliate Transactions
(iv)
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 6th day of December, 1996 by and among Teletrac,
Inc., a Delaware corporation (the "Company"), and the investors identified on
the signature pages hereto (the "Investors"). As used herein, the term
"Company" shall include any subsidiaries of the Company (except with respect to
Section 2.4 hereof or to the extent the context otherwise requires).
SECTION 1. TERMS OF PURCHASE
1.1 DESCRIPTION OF SECURITIES. The Company has authorized the issuance
and sale to the Investors of 190,476.19 shares (the "Preferred Shares") of its
authorized but unissued Series A Redeemable Convertible Participating Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), for a purchase
price of $173.25 per Preferred Share. The Preferred Stock shall have the
rights, restrictions, privileges and preferences set forth in the Amended and
Restated Certificate of Incorporation attached hereto as EXHIBIT A (the
"Charter"), which has been duly adopted by the Company and filed with the
Secretary of State of the State of Delaware as of this date in connection with
this Agreement.
1.2 RESERVED SHARES. The Company has authorized and has reserved and
covenants to continue to reserve, a sufficient number of shares of its
Redeemable Convertible Participating Preferred Stock, par value $.01 per share
(the "Redeemable Convertible Participating Preferred Stock," and including the
Series A Preferred Stock, the "Preferred Stock"), for issuance upon conversion
of the Preferred Shares to one or more additional series of Preferred Stock in
accordance with the Charter (the "Diluted Preferred Stock"). The Company has
also authorized and has reserved and covenants to continue to reserve a
sufficient number of shares of its Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), to satisfy the rights of conversion of the
holders of the Preferred Stock. Any shares of Common Stock or any successor
class of capital stock of the Company hereafter issued or issuable upon
conversion of the Preferred Shares (other than conversion into Diluted Preferred
Stock in accordance with the Charter) are herein referred to as "Conversion
Shares," and the Preferred Shares, the Conversion Shares and the shares of
Diluted Preferred Stock are herein collectively referred to as the "Securities."
1.3 SALE AND PURCHASE. At the Closing (as hereinafter defined) and
subject to the terms and conditions herein set forth, the Company shall issue
and sell to each of the Investors, and each Investor severally and not jointly
shall purchase from the Company, the number of Preferred Shares set forth
opposite the name of such Investor in Column 1 of APPENDIX A hereto for the
aggregate purchase price set forth opposite the name of such Investor in Column
2 of said APPENDIX A.
1.4 CLOSING. The closing (the "Closing") of the sale and purchase of the
Preferred Shares shall take place at the offices of Goodwin, Procter & Hoar
LLP, located at Exchange Place, Boston, Massachusetts, at 10:00 A.M. on such
date as shall be mutually agreed upon by the Company and the unanimous vote or
written consent of the Investors (the "Closing Date"). At the Closing, the
Company will deliver the Preferred Shares being acquired by each Investor in
<PAGE>
the form of a certificate, issued in such Investor's name or in the name of its
nominee (of which the Investor shall notify the Company not less than two (2)
business days prior to the Closing), against payment of the full purchase price
therefor by or on behalf of each Investor to the Company by check or wire
transfer;
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investors to enter into this Agreement, the Company
hereby represents and warrants to the Investors that as of the date hereof:
2.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business as a foreign corporation and in
good standing in each jurisdiction in which such qualification is required,
except where failure to so qualify would not have a material adverse effect on
the business, assets, operations or condition (financial or otherwise) of the
Company and its subsidiaries taken as a whole ("Material Adverse Effect"). The
Company has all required corporate power and authority to own its property, to
carry on its business as presently conducted or contemplated, to enter into and
perform this Agreement and the agreements contemplated hereby, and generally to
carry out the transactions contemplated hereby and thereby. The copies of the
Charter and By-laws of the Company, each as amended to date, which have been
furnished to counsel for the Investors, are correct and complete at the date
hereof. Except as set forth on SCHEDULE 2.1, the Company is not in violation of
any term of its Charter or By-laws or any agreement, instrument, judgment,
decree, order, statute, rule or government regulation applicable to the Company.
2.2 AUTHORIZATION. This Agreement and all documents and instruments
executed pursuant hereto are valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms. The execution,
delivery and performance of this Agreement and all documents and instruments
contemplated hereby, and the delivery and issuance of the Preferred Shares and,
upon conversion of the Preferred Shares, the Conversion Shares and the shares of
Diluted Preferred Stock, have been duly authorized by all necessary corporate or
other action of the Company. Assuming the accuracy of the Investor
representations set forth in Section 5 hereof, no consent, approval or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required of the Company in connection
with the execution, delivery and performance of this Agreement or the offer,
issuance, sale and delivery by the Company of the Preferred Shares in accordance
with the terms of this Agreement and, upon conversion of the Preferred Shares,
the Conversion Shares and the shares of Diluted Preferred Stock, or the
performance or consummation of any other transaction contemplated hereby, except
for such filings as shall have been made prior to and effective on and as of the
Closing.
2.3 NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and each of the other agreements and instruments to
which it is a party and which are contemplated hereby will not: (a) violate,
conflict with or result in any material default under any contract, instrument,
obligation or commitment of the Company, or violate, conflict with or
2
<PAGE>
result in any default under any charter provision, by-law or corporate
restriction of the Company; (b) result in the creation of any material lien,
charge, restriction or encumbrance of any nature upon any of the properties or
assets of the Company (except as contemplated hereby); or (c) violate any
instrument, agreement, judgment, decree, order, statute, rule, ordinance or
regulation of any federal, state or local government or agency applicable to the
Company or any of its assets or properties or to which the Company is a party,
except where such violations would not singly or in the aggregate have a
Material Adverse Effect.
2.4 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Company consists of: (i) 507,934 shares of Class A Common Stock, of which
249,000 shares will be, as of the Closing, duly and validly issued, outstanding,
fully-paid and non-assessable, 190,476.19 shares will be reserved for issuance
upon conversion of the Preferred Stock, 40,000 shares will be reserved for
issuance upon conversion of the Class B Common Stock (as hereinafter defined)
43,060 shares have been reserved for issuance upon the exercise of outstanding
options under the Company's 1995 Stock Option Plan (the "1995 Option Plan") and
25,397 shares have been reserved for issuance upon the exercise of the Options
(as defined below) under the 1996 Stock Option Plan (as hereinafter defined);
(ii) 70,000 shares of Class B Common Stock, par value $.01 per share (the "Class
B Common Stock," and, collectively with the Class A Common Stock, the "Common
Stock"), none of which 40,000 shares will be outstanding as of the Closing;
(iii) 190,477 shares of Series A Preferred Stock, of which 190,476.19 shares
will be, as of the Closing, duly and validly issued, outstanding, fully-paid,
and non-assessable; and (iv) 190,476.19 shares of one or more series of Diluted
Preferred Stock, all of which shall be reserved for issuance upon automatic
conversion of the Series A Preferred Stock as provided in the Charter. Except
as disclosed in SCHEDULE 2.4 and except for 43,060 shares of Class A Common
Stock reserved for issuance under the 1995 Option Plan and 25,397 shares of
Class A Common Stock reserved for issuance under the 1996 Stock Option Plan, the
Company has not issued any other shares of its capital stock, and there are no
outstanding warrants, options or other rights to purchase or acquire any of such
shares, nor any outstanding securities convertible into such shares or
outstanding warrants, options or other rights to acquire any such convertible
securities. As of the Closing, and assuming the accuracy of the Investor
representations set forth in Section 5 hereof, all of the outstanding shares of
capital stock of the Company will have been offered, issued, sold and delivered
in compliance with applicable federal and state securities laws. The Preferred
Shares have been duly and validly authorized and, when delivered and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. The Preferred Shares are convertible into an aggregate
190,476.19 shares of Class A Common Stock representing 37.5% of the Common Stock
of the Company on a fully-diluted basis after giving effect to the issuance of
43,060 shares reserved for issuance under the 1995 Option Plan and 25,397 shares
of Class A Common Stock reserved for issuance under the 1996 Stock Option Plan
and the exercise, exchange or conversion of any other securities or options
exercisable or exchangeable for or convertible into Common Stock. The relative
rights, preferences, restrictions and other provisions relating to the capital
stock of the Company are as set forth in the Charter. The Company has
authorized and reserved for issuance upon conversion of the Preferred Stock not
less than 190,476.19 shares of its Class A Common Stock and the Conversion
Shares issuable upon such conversion will be, when issued in accordance with the
Charter, duly and validly authorized and issued, fully-paid and nonassessable.
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Except as set forth in the Stockholders' Agreement dated November 14, 1995,
as amended (the "1995 Stockholders' Agreement), with respect to which all
stockholders party thereto have either exercised or waived their preemptive
rights, there are no preemptive rights or rights of first refusal with respect
to the issuance or sale of the Company's capital stock. Except as set forth in
SCHEDULE 2.4, no officer, director or employee of the Company or any other
person or entity has, claims to have or upon the Closing will have any right to
claim to have any interest in the Company's capital stock. There are no
restrictions on the transfer of the Company's capital stock other than those
arising from federal and state securities laws or under this Agreement, the
Stockholders' Agreement or the Registration Rights Agreement (each as
hereinafter defined). Except as set forth in the Stockholders' Agreement and
the Registration Rights Agreement, there are no rights, obligations, or
restrictions on the voting of any of the Company's capital stock or the
registration of such capital stock for offering to the public pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). The outstanding
shares of the capital stock are held of record and beneficially by the persons
identified in SCHEDULE 2.4 in the amounts indicated therein. Upon the Closing,
and after giving effect to the transactions contemplated herein, the
stockholders of the Company will be as indicated on SCHEDULE 2.4.
The Company's subsidiaries and investments in any other corporation or
business organization are listed in SCHEDULE 2.4 (collectively, the
"Subsidiaries" or individually, a "Subsidiary"). Except as set forth in
SCHEDULE 2.4, each Subsidiary of the Company is a duly organized, validly
existing corporation in good standing under the laws of the state of its
incorporation with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. Except as set forth in SCHEDULE 2.4, all of the
outstanding shares of capital stock of each Subsidiary are owned beneficially
and of record by the Company, free of any lien, restriction or encumbrance, and
said shares have been duly and validly issued and are outstanding, fully paid
and non-assessable. The copies of each of the Subsidiaries' charter and
by-laws, as amended to date, which have been furnished to counsel for the
Investors prior to the date hereof, are complete and correct, and no amendments
thereto are pending. None of the Subsidiaries is in violation of any term of
its respective charter or by-laws. Except as set forth in SCHEDULE 2.4,
(i) there are no outstanding warrants, options or other rights to purchase or
acquire any of the shares of capital stock of any Subsidiary, or any outstanding
securities convertible into such shares or outstanding warrants, options or
other rights to acquire any such convertible securities, and (ii) the Company
does not own or have any direct or indirect interest in, a loan or advance to,
or control over any corporation, partnership, joint venture or other entity of
any kind.
2.5 FINANCIAL STATEMENTS; PROJECTIONS. The Company has heretofore
furnished to the Investors the following financial statements: (i) unaudited
balance sheet of the Company as of September 30, 1996 and the related unaudited
statements of income, retained earnings and cash flows of the Company for the
nine-month period ended September 30, 1996 (collectively, the "Financial
Statements"), (ii) pro forma unaudited balance sheets for the Company as of
September 30, 1996, and (iii) audited balance sheet and related statements of
Operations and Cash Flows for fiscal year 1993-95 (the "Predecessor Financial
Statements") of the Company's predecessor, AirTouch Teletrac General Partnership
(the "Predecessor"). All of the financial statements of the Company and, to the
best knowledge of the Company, the Predecessor have
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been prepared in accordance with generally accepted accounting principles
consistently applied, except that interim financial statements and pro forma
statements have been prepared without footnote disclosures and year-end audit
adjustments, which will not, in any event, be material. Except as set forth in
SCHEDULE 2.5, all of such financial statements contain notations for all
significant accruals or contingencies, fairly represent the financial condition
of the Company (and, to the knowledge of the Company, the Predecessor) as of the
date thereof, and are true and correct as of the date thereof in all material
respects. Nothing has come to the attention of the management of the Company
after due inquiry since such dates which would indicate that such financial
statements were not true and correct as of the date thereof or that the
Company's audited financial statements for the year ending December 31, 1996
will require any material year-end audit adjustments not reflected or reserved
for in the Financial Statements. Except as otherwise set forth in SCHEDULE 2.5,
the projections set forth in the PPM represent management's good faith estimates
of the future performance of the Company based upon assumptions which are set
forth therein and which the Company believed were reasonable when made and the
Company believes continue to be reasonable as of the date hereof.
2.6 FCC LICENSES. The Company holds the licenses issued by the FCC and
set forth on Schedule 2.6 hereto (the "FCC Licenses"). The FCC Licenses
authorize the operation of radio stations ("LMS Stations") in the Location and
Monitoring Service ("LMS") from transmitters at the authorized sites and the
authorized spectrum set forth on the FCC Licenses and described in Schedule 2.6
and permit the Company to provide LMS to the metropolitan areas identified on
Schedule 2.6 from such sites. Except as set forth in Schedule 2.6:
(i) no other authorization of the FCC is required for the operation of the
LMS Stations pursuant to the FCC Licenses;
(ii) the FCC Licenses are in full force and effect in accordance with their
terms and the rules and regulations of the FCC;
(iii)none of the FCC Licenses is subject to any condition that the
Company reasonably anticipates could have any material adverse effect upon the
operation of the LMS Stations, considered in the aggregate;
(iv) all conditions to the continuation of the FCC Licenses as
grandfathered LMS licenses under the rules and regulations of the FCC have been
met and no waivers or extensions, other than waivers or extensions previously
granted, are required from the FCC to hold and use the FCC Licenses as
contemplated by the Company; and
(v) no applications for renewal or extension of the FCC Licenses are
pending or due under the rules and regulations of the FCC.
The Company has no reason to believe that the FCC is likely to modify its
rules in a manner that would materially and adversely affect the operation of
the LMS Stations pursuant to the FCC Licenses.
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Except as indicated on SCHEDULE 2.6, and except for actions or proceedings
affecting its industry generally, no petition, action, investigation, notice of
violation or apparent liability, notice of forfeiture, orders to show cause,
complaint or proceeding is pending or, to the best knowledge of the Company,
threatened before the FCC or any other forum or agency with respect to the
Company or any of the currently operating LMS Stations or seeking to revoke,
cancel, suspend or modify any of the FCC Licenses. Except as otherwise
expressly contemplated by this Agreement or as stated in SCHEDULE 2.6 hereto,
(i) there are no applications presently pending before the FCC with respect to
any of the currently operating LMS Stations, (ii) the Company does not know of
any fact that is likely to result in the denial of an application for renewal,
or the revocation, modification, nonrenewal or suspension of any of the FCC
Licenses, or the issuance of a cease-and-desist order, or the imposition of any
administrative or judicial sanction with respect to any of the currently
operating LMS Stations or other operations of the Company, which may have a
materially adverse effect on the currently operating LMS Stations, (iii) the
Company is in compliance in all material respects with the terms of the FCC
Licenses and all applicable filing and operating requirements related thereto
and all other applicable regulations and policies of the FCC and the
Communications Act of 1934, as amended, 47 U.S.C. Section 151, et seq. (the
"Communications Act"), and any other governmental entity and (iv) all equipment
used by the Company and its customers with respect to its LMS business has, to
the extent necessary, been approved by the FCC and the current and contemplated
use of all such equipment complies with all applicable FCC and other regulatory
requirements. No prior FCC consent is required in connection with the
execution, delivery and performance of this Agreement. The Company is the
licensee of the FCC Licenses listed in SCHEDULE 2.6, free and clear of all liens
and encumbrances except those contemplated by this Agreement. SCHEDULE 2.6
correctly sets forth all FCC Licenses required to be issued by the FCC in
connection with the Company's LMS Stations which are held by the Company and
correctly sets forth the termination date of each FCC License. To the best
knowledge of the Company, except as set forth on SCHEDULE 2.6, there have been
no changes in the sites or facilities relating to the LMS Stations which violate
the FCC's 2 kilometer site relocation restrictions (as interpreted by the FCC
staff engineer of the FCC Commercial Wireless Division of the Wireless
Telecommunications Bureau) or otherwise require FCC approval or authorization
except for such confirmation of construction as the FCC may require.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Since the date of the PPM, except
as and to the extent set forth in SCHEDULE 2.7 or incurred in the ordinary
course of business, the Company does not have any material liability or
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown which are or would be required to be
disclosed in accordance with generally accepted accounting principles and, to
the best knowledge of the Company, there exists no set of facts or circumstances
which should be reasonably anticipated to form the basis for any such material
liabilities.
2.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in SCHEDULE 2.8
hereto, since the date of the PPM there has been (i) no adverse change in the
condition, financial or otherwise, of the Company or in the assets, liabilities
or business of the Company, (ii) no declaration, setting aside or payment of any
dividend or other distribution with respect to, or any direct or indirect
redemption, repurchase or acquisition of, any of the capital stock of the
Company, (iii) no waiver of any valuable right of the Company or cancellation of
any debt or claim held by the Company, (iv) no loan by the Company to any
officer, director, employee or
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stockholder of the Company, or affiliates of any of the foregoing or any
agreement or commitment therefor, (v) no material loss, destruction or damage to
any property of the Company, whether or not insured, (vi) no labor trouble
involving the Company and no material change in the personnel of the Company or
the terms and conditions of their employment, and (vii) no acquisition or
disposition of any assets (or any contract or arrangement therefor) nor any
other transaction by the Company otherwise than in the ordinary course of
business consistent with past practices.
2.9 ACCOUNTS RECEIVABLE. Except to the extent reserved against in the
Financial Statements or disclosed elsewhere in this Agreement (including the
Schedules hereto), all of the accounts receivable of the Company represent bona
fide completed sales of services or products made in the ordinary course of
business, are valid and enforceable claims, and, to the knowledge of the
Company, are not subject to asserted rights of set-off or counterclaim and
should be collectible in the ordinary course. Set forth on SCHEDULE 2.9 hereto
is an aging schedule of all accounts receivable of the Company on an aggregate
basis, based on date of invoice, and a list of all such accounts receivable,
identified by customer, which have a balance due in excess of $25,000. Except
as disclosed on SCHEDULE 2.9, the Company has no accounts receivable from any
person, firm or corporation which is affiliated with it or any of its directors,
officers, employees or shareholders or any affiliates of any of the foregoing.
2.10 TITLE TO PROPERTIES. Except as set forth in SCHEDULE 2.10 hereto, the
Company has good and marketable title to all of its material properties and
assets, free and clear of all liens, restrictions or encumbrances, and such
properties and assets constitute all of the assets necessary for the conduct of
the Company's business as presently conducted. All machinery and equipment
included in such properties which is necessary to the business of the Company is
in good condition and repair, ordinary wear and tear excepted, and all leases of
real or personal property to which the Company is a party are in full force and
effect and afford the Company peaceful and undisturbed possession of the subject
matter of the lease. The Company is not in violation of any zoning, building or
safety ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties which individually
or in the aggregate could have a Material Adverse Effect, nor has the Company
received any notice of violation with which it has not complied.
2.11 TAX MATTERS. Except as set forth in SCHEDULE 2.11 hereto:
(a) The Company has paid or caused to be paid all material federal,
state, local, foreign, and other taxes, including without limitation, income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales taxes,
franchise taxes, employment and payroll-related taxes, withholding taxes,
transfer taxes, and all deficiencies, or other additions to tax, interest, fines
and penalties owed by it (collectively, "Taxes"), required to be paid by it
through the date hereof whether disputed or not. All taxes and other
assessments and levies which the Company is required to withhold or collect have
been withheld and collected and have been paid over to the proper governmental
authorities. The Company has, in accordance with applicable law, timely and
properly filed all federal, state, local and foreign tax returns required to be
filed by it through the date hereof, all such returns correctly and accurately
set forth the amount of any Taxes
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relating to the applicable period and any deductions from, or credits against
any Taxes or taxable income relating to such returns are valid and proper items
of deduction or credit.
(b) Neither the Internal Revenue Service (the "IRS") nor any other
governmental authority is now asserting or, to the knowledge of the Company,
threatening to assert against the Company any deficiency or claim for additional
Taxes. No claim has ever been made by an authority in a jurisdiction where the
Company does not file reports and returns that the Company is or may be subject
to taxation by that jurisdiction. There are no security interests on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Taxes. The Company has never entered into a closing
agreement pursuant to Section 7121 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company is not and never has been a "personal holding
company" as defined under Section 541 of the Code. There has not been any audit
of any tax return filed by the Company, no such audit is in progress, and the
Company has not been notified by any tax authority that any such audit is
contemplated or pending. No extension of time with respect to any date on which
a tax return was or is to be filed by the Company is in force, and no waiver or
agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes. The Company is not now and has never been a
member of an affiliated group filing a consolidated federal income tax return.
The Company does not have any liability for the Taxes of any person or entity
other than the Company.
(c) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections.
2.12 CONTRACTS AND COMMITMENTS. Except as set forth in SCHEDULE 2.12
hereto, the Company is not a party to any contract, obligation or commitment
(whether written or oral) which involves a potential commitment in excess of
$100,000 or which is otherwise material and not entered into in the ordinary
course of business, and, except as set forth in SCHEDULE 2.12 hereto or
expressly disclosed or contemplated elsewhere in this Agreement, the Company is
not a party to any: (i) employment contracts; (ii) stock redemption or purchase
agreements; (iii) loan or other financing agreements (including capital lease
obligations in excess of $50,000 individually); (iv) licenses or licensing
agreements (other than license agreements with customers) involving an absolute
or potential commitment or liability in excess of $100,000 per year;
(v) distributor or sales representative agreements involving an absolute
commitment or liability, or which are reasonably likely (based on historical
information) to involve a potential commitment or liability, in excess of
$100,000 per year; (vi) agreements with any officers, directors, employees or
stockholders of the Company or persons or organizations related to or affiliated
with any such persons; (vii) leases involving an absolute or potential liability
in excess of $100,000 per year; (viii) agreements relating to the licensing,
distribution, development or maintenance of software and related hardware other
than such agreements relating to off the shelf "shrink-wrap" software used by
the Company and agreements with its customers; (ix) material agreements with
customers of the Company; (x) powers of attorney; or (xi) pension,
profit-sharing, retirement or stock option plans. The Company does not know of
any basis for the termination, expiration or modification of any such agreements
within one (1) year from the date hereof, which termination, expiration or
modification may have an adverse effect on the assets, liabilities, business or
financial condition of the Company. Except as set forth on SCHEDULE 2.12, the
Company is not in default under any
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material contract, obligation or commitment, and, to the best knowledge of the
Company, there is no state of facts which upon notice or lapse of time or both
would constitute such a default. The Company is not a party to any contract or
arrangement which under circumstances now foreseeable is likely to have a
Material Adverse Effect. The Company does not have any liability for
renegotiation of any government contracts or subcontracts.
2.13 PROPRIETARY RIGHTS; EMPLOYEE RESTRICTIONS. Set forth in SCHEDULE 2.13
hereto is a list and brief description of all patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and copyrights owned by or registered in the name of
the Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. Except as set forth on SCHEDULE 2.13, the Company owns or possesses
exclusive licenses to use, free and clear of claims or rights of any other
person, all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, programming processes and software, algorithms, formulae, trade
secrets and know how (collectively, "Intellectual Property") necessary to the
conduct of its business as presently conducted and as proposed to be conducted.
All Intellectual Property that is used or incorporated into the Company's
products or contemplated products and which is unique or proprietary to the
Company was developed by or for the Company by the employees of the Company or
its predecessors in interests and is owned exclusively by the Company, free and
clear of claims or rights of any other person. The Company is not aware of any
infringement by any other person of any rights of the Company under any
Intellectual Property. Except as set forth on SCHEDULE 2.13, no claim is
pending or, to the Company's best knowledge, threatened against the Company nor
has the Company received any notice from any third parties to the effect that
any Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, or the operation, products or services of the
Company, infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property, and, to the best knowledge of the Company,
there is no basis for any such claim (whether or not pending or threatened). No
claim is pending or threatened against the Company, nor has the Company received
any notice from any third parties, to the effect that any Intellectual Property
owned or licensed by the Company, or which the Company otherwise has the right
to use, is invalid or unenforceable by the Company, as the case may be, and, to
the best knowledge of the Company, there is no basis for any such claim (whether
or not pending or threatened).
All licenses or other agreements under which the Company is granted rights
in Intellectual Property are listed in SCHEDULE 2.13 (other than such agreements
relating to off the shelf "shrink-wrap" software used by the Company in
accordance with the terms of the applicable license). All such licenses or
other agreements are in full force and effect, there is no material default by
any party thereto. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been provided to the Investors and,
to the best knowledge of the Company, the licensors under such licenses and
other agreements have and had all requisite power and authority to grant the
rights purported to be conferred thereby.
All material licenses or other material agreements under which the Company
has granted rights to others in Intellectual Property (including all end user
agreements) are listed in either SCHEDULE 2.12 or SCHEDULE 2.13. All of said
licenses or other agreements are in full force and
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effect and there is no material default by any party thereto. True and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been made available to the Investors.
All technical information developed by or belonging to the Company and
which is material to the business of the Company which has not been patented has
been kept confidential by the Company and its officers, directors, employees and
consultants. The Company is not, to the best knowledge of the Company, making
unlawful use of any Intellectual Property of any other person, including,
without limitation, any former employer of any past or present employees of the
Company. Except as set forth in SCHEDULE 2.13, neither the Company nor any of
its employees, officers or consultants has any agreements or arrangements with
former employers of such employees, officers or consultants relating to any
Intellectual Property of such employers, which interfere or conflict with the
performance of such employee's, officer's or consultant's duties for the Company
or results in any former employers of such employees, officers and consultants
having any rights in, or claims on, the Company's Intellectual Property. The
activities of the Company's employees, officers and consultants, to the best
knowledge of the Company, do not violate any agreements or arrangements which
any such employees have with former employers. The Company has taken all
commercially reasonable steps required to establish and preserve its ownership
of all of the Intellectual Property.
Without limitation of any of the foregoing and except as otherwise
expressly set forth in SCHEDULE 2.13 hereto: (a) the Company has taken
reasonable security measures to guard against unauthorized disclosure or use any
of the Intellectual Property; and (b) the Company has no reason to believe that
any person (including, without limitation, any former employee of the Company)
has unauthorized possession of any of the Intellectual Property, or any part
thereof, or that any person has obtained unauthorized access to any of the
Intellectual Property.
2.14 LITIGATION. Except as set forth in SCHEDULE 2.14 hereto, there is no
litigation or governmental proceeding or investigation pending or, to the
Company's knowledge, threatened against the Company, or any officer or key
employee of the Company, which relates to the Company or its business or affairs
or which may call into question the validity or hinder the enforceability or
performance of this Agreement or the agreements and transactions contemplated
hereby or which could have a Material Adverse Effect; nor, to the best knowledge
of the Company, has there occurred any event nor does there exist any condition
on the basis of which any such litigation, proceeding or investigation might
properly be instituted.
2.15 OFFEREES. Neither the Company nor anyone acting on its behalf has in
the past or will in the future sell, offer for sale or solicit offers to buy any
securities of the Company so as to bring the offer, issuance or sale of the
Preferred Shares, the Conversion Shares or the shares of Diluted Preferred
Stock, as contemplated by this Agreement within the provisions of Section 5 of
the Securities Act, unless such offer, issuance or sale was within the
exemptions of Section 4 thereof. The Company has and will comply with all
applicable state "blue-sky" or other applicable securities laws in connection
with the issuance and sale of its Common Stock, Preferred Shares, and other
securities heretofore issued and to be issued upon the Closing. The Company has
in the past complied with all applicable federal and state securities laws in
connection with the offer, solicitation of offers and sales of its securities.
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2.16 BUSINESS; COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.16
hereto, the Company has all franchises, permits, licenses (other than the FCC
Licenses, which licenses are addressed in Section 2.6 hereof) and other rights
and privileges necessary to permit it to own its property and to conduct its
business as it is presently conducted by the Company or presently contemplated
to be conducted by the Company. The Company is not in violation of any law,
regulation, authorization or order of any public authority which individually or
in the aggregate could have a Material Adverse Effect. Except as set forth in
SCHEDULE 2.16, the Company is in compliance, in all material respects, with all
federal, state and local laws and regulations (including all applicable
environmental laws and regulations) relating to its business as presently
conducted.
2.17 INFORMATION SUPPLIED TO INVESTORS. Except as set forth in SCHEDULE
2.17, this Agreement, the Schedules attached hereto, the documents referenced
herein and the certificates, projections and written statements furnished to the
Investors by or on behalf of the Company (including the June 1996 Private
Placement Memorandum (the "PPM")) taken as a whole do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading. There is no
material fact directly relating to the assets, liabilities, business or
condition (financial or otherwise) of the Company (other than facts which relate
to general economic or industry trends or conditions) presently known to the
Company which has not been disclosed to the Investors and which has a Material
Adverse Effect, or should reasonably be anticipated to have a Material Adverse
Effect in the future.
2.18 INVESTMENT BANKING; BROKERAGE. No broker, finder, agent or similar
intermediary has acted on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby and there are no brokerage
commissions, finders fees or similar fees or commissions payable in connection
therewith, other than those payable to Lehman Brothers and, with respect to the
conversion of the Convertible Notes, Toronto Dominion, which commissions, fees
and expenses shall be borne entirely by the Company, and with respect to which
the Investors shall have no liability therefor. The Company agrees to indemnify
and hold the Investors harmless from any losses, damages, costs or expenses they
may suffer or incur as a result of a breach of this representation (including
any dilution or diminution in value of their investment in the Company).
2.19 SOLVENCY. The Company has not: (a) made a general assignment for the
benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered
the filing of any involuntary petition by its creditors; (c) suffered the
appointment of a receiver to take possession of all, or substantially all, of
its assets; (d) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets; (e) admitted in writing its inability to pay
its debts as they come due; or (f) made an offer of settlement, extension or
composition to its creditors generally. After giving effect to the transactions
provided for or contemplated herein: (i) the Company will be able to pay its
debts as they come due in the usual course of business and will have adequate
capital to conduct its business; and (ii) the Company's total assets will be
greater than its total liabilities (total assets for this purpose being
determined on the basis of the "fair saleable value" thereof).
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2.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.20, the Company has not caused
or allowed, nor has the Company contracted with any party for, the generation,
use, transportation, treatment, storage or disposal of any Hazardous Material in
connection with the operations of its business or otherwise. The Company, the
operations of its business, and any real property that the Company owns, leases,
or otherwise occupies or uses (the "Premises") are in compliance with all
applicable Environmental Laws and orders or directives of any governmental
authorities having jurisdiction under such Environmental Laws including, without
limitation, any Environmental Laws or orders or directives with respect to any
cleanup or remediation of any release or threat of release of Hazardous
Materials. The Company has not received any citation, directive, letter or
other communication, written or oral, or any notice of any proceedings, claims
or lawsuits, from any person, entity or governmental authority arising out of
the ownership or occupation of the Premises, or the conduct of its operations,
nor is it aware of any basis therefor. The Company has obtained and is
maintaining in full force and effect all necessary permits, licenses and
approvals required by any Environmental Laws applicable to the Premises and the
business operations conducted thereon (including operations conducted by tenants
on the Premises) and is in compliance with all such permits, licenses and
approvals. The Company has not caused, or allowed a release, or a threat of
release, of any Hazardous Material unto, at or near the Premises, nor to the
best of the Company's knowledge has the Premises or any property at or near the
Premises ever been subject to a release, or a threat of a release, of any
Hazardous Material.
(b) Except as set forth in SCHEDULE 2.20 hereto, to the best of the
Company's knowledge, no site owned, operated, leased or used by the Company
contains any asbestos or asbestos-containing material, any polychlorinated
biphenyls (PCBs) or equipment containing PCBs, or any urea formaldehyde foam
insulation.
(c) Counsel to the Investors has been provided with copies of all
documents, records and information available concerning any environmental or
health and safety matter relevant to the Company, whether generated in
connection with the Company's business or otherwise, including, without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans and reports, correspondence, permits, licenses, approvals,
consents and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(d) For purposes of this Section 2.20, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Environmental
Law" shall mean any environmental or health and safety-related law, regulation,
rule, ordinance or by-law at the federal, state or local level, whether existing
as of the date hereof or subsequently enacted including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et. seq., the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. Section 11001 et. seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et. seq.; and (iii) "Company" shall include
the Company and any predecessor to the Company.
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2.21 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 2.21 hereto sets forth a list of every Employee Program
(as defined below) that has been maintained (as such term is further defined
below) by the Company at any time prior to the Closing Date.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code has received a favorable determination or approval
letter from the IRS regarding its qualification under such section and, to the
best knowledge of the Company, has, in fact, been continuously qualified under
the applicable section of the Code since the effective date of such Employee
Program. No event or omission has occurred which would cause any such Employee
Program to lose its qualification under the applicable Code section.
(c) Each Employee Program that has ever been maintained by the
Company has been maintained in compliance in all material respects with all
applicable laws. With respect to any Employee Program ever maintained by the
Company, there has occurred no "prohibited transaction," as defined in Section
406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code (for which there exists neither a
statutory nor regulatory exception), or material breach of any duty under ERISA
or other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan or to any person in regard to
such plan), which could result, directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution), in any
taxes, penalties or other liability to the Company or any of its Affiliates. No
officer, director or employee of the Company has committed a material breach of
any duty imposed upon fiduciaries by Title I of ERISA with respect to any
Employee Program maintained by the Company. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
best knowledge of the Company threatened with respect to any such Employee
Program.
(d) Neither the Company nor any Affiliate (as defined below) (i) has
ever maintained any Employee Program which has been subject to Title IV of ERISA
or Section 412 of the Code (including, but not limited to, any Multiemployer
Plan (as defined below)) or (ii) has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of Title I of ERISA) or has ever
promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by or on behalf
of the Company or any Affiliate prior to the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to counsel to the Investors: (i) all documents
embodying or governing such Employee Program, and any funding medium for the
Employee Program (including, without limitation, trust agreements), as they may
have been amended to the date hereof; (ii) the most recent IRS determination or
approval letter with respect to such Employee Program under Code Section 401 or
501(c)(9), and any applications for determination or approval subsequently filed
with the IRS; (iii) all IRS Forms
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5500 filed, with all applicable schedules and accountants' opinions attached
thereto; (iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, all health care continuation requirements).
(f) For purposes of this Section 2.21:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock or cash option plans, restricted
stock plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans and
benefit agreements, and benefit arrangements not described in (A) above.
In the case of an Employee Program funded through an organization described
in Code Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement
or under applicable law) to contribute to or provide benefits under such
Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Company if it
would have ever been considered a single employer with the Company or any
entity under ERISA Section 4001(b) or part of the same "controlled group"
as the Company for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreement.
2.22 PRODUCT AND SERVICES CLAIMS. Except as set forth in SCHEDULE 2.22
hereto, there are no pending or, to the best of the Company's knowledge,
threatened product or service claims involving amounts in excess of $25,000
individually with respect to any products manufactured or services provided by
the Company prior to the Closing date, nor, to the best knowledge of the
Company, are there any facts upon which a claim of such nature could reasonably
be anticipated to be based. No claims have been made against the Company for
renegotiation or price redetermination of any business transaction resulting
from or relating to defective products or
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services, and, to the best of the Company's knowledge, there are no facts upon
which any such claim should reasonably be anticipated to be based.
2.23 BACKLOG. As of October 31, 1996, the Company had outstanding firm
orders for the sale of services and products as set forth in SCHEDULE 2.23
hereto. All such orders represent orders for products with specifications that
can be met in accordance with the terms of such orders and in the ordinary
course of conduct of the Company's business without undue delay or extraordinary
expense.
2.24 EMPLOYEES; LABOR MATTERS. As of the Closing Date, the Company employs
a total of approximately 232 full-time employees and no part-time employees and
generally enjoys good employer-employee relationships. The Company is not
delinquent in payments to any of its employees for any material amount of wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. The Company does not have any policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection with
the termination of employment, except as set forth in SCHEDULE 2.24 hereto. All
of the Company's programs and/or arrangements in connection with the payment of
commissions are described in SCHEDULE 2.24. The Company is in compliance in all
material respects with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work or any other concerted interference with normal
operations which are existing, pending or threatened against or involving the
Company. The Company has not received any information indicating that any of
its employment policies or practices is currently being audited or investigated
by any federal, state or local government agency. The Company is, and at all
times has been, in compliance in all material respects with the requirements of
the Immigration Reform Control Act of 1986. SCHEDULE 2.24 sets forth a complete
list of each major metro manager, officer, employee, salesperson and consultant
who received or is scheduled to receive total remuneration from the Company in
excess of $100,000 for the calendar year ending December 31, 1996.
2.25 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. Except as disclosed in written
materials provided to the Investors, the relationships of the Company with its
customers, vendors and suppliers are good commercial working relationships. No
significant customer accounting for revenues in excess of $100,000 in any twelve
(12) month period or significant vendor has canceled, modified, or otherwise
terminated its relationship with the Company, or has during the last twelve (12)
months decreased its services, supplies or materials to the Company or its usage
or purchase of the services or products of the Company (other than with respect
to such services, supplies, materials or products which are non-recurring by
their nature), nor to the knowledge of Company does any significant customer or
vendor have any plan or intention to do any of the foregoing.
2.26 CORPORATE RECORDS; COPIES OF DOCUMENTS. The corporate record books of
the Company accurately record all corporate action taken by its respective
stockholders and board of directors and committees. The copies of the corporate
records of the Company, as made available
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to the Investors for review prior to the date hereof, are true and complete
copies of the originals of such documents. The Company has made available for
inspection by the Investors and their counsel true and correct copies of all
documents referred to in this Section 2.26 or in the Schedules delivered
pursuant to this Agreement.
2.27 AFFILIATE TRANSACTIONS. Except as set forth in SCHEDULE 2.27 hereto,
neither the Company nor any officer, employee or director of the Company or any
of their respective spouses or family members or any of their affiliates, owns,
directly or indirectly, on an individual or joint basis, any material interest
in, or serves as an officer, director, partner, member or in another similar
capacity of, any competitor or supplier of the Company or any organization which
has a contract or arrangement with the Company.
2.28 SMALL BUSINESS CONCERN, ETC.
(a) The Company, together with its "affiliates" (as that term is
defined in 13 CFR Section 121.103), is a "smaller business" within the meaning
of SBIC Regulations, including 13 CFR Section 107.710. The information
regarding the Company and its affiliates set forth in SBA Form 480, Form 652 and
Section A of Form 1031 delivered prior to the Closing Date is accurate and
complete. Neither the Company nor any Subsidiary presently engages in, or shall
hereafter engage in, any activities, nor shall the Company or any Subsidiary use
the proceeds of the sale of the Securities hereunder directly or indirectly for
any purpose for which an SBIC is prohibited from providing funds by SBIC
Regulations (including 13 CFR Section 107.720).
(b) The proceeds from the purchase of the Preferred Shares will be
used by the Company for purposes of product development, working capital and
capital expenditures.
(c) As of the date hereof, the primary business activity of the
Company is (i) providing vehicle location and fleet management software and
services and related Messaging services and (ii) classified under Standard
Industrial Classification Code number 4812 (Radiotelephone Communications), and
the number of employees of the Company is less than 1,500.
(d) For all purposes of this Agreement, the following terms shall
have the following meanings:
(i) "SBA" means the United States Small Business Administration,
and any successor agency performing the functions thereof;
(ii) "SBIC" means a Small Business Investment Company licensed by
the SBA under the SBIC Act;
(iii)"SBIC Act" means the Small Business Investment Act of
1958, as amended; and
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(iv) "SBIC Regulations" means the SBIC Act and the regulations
issued by the SBA thereunder, codified at Title 13 of the Code of Federal
Regulations ("13 CFR"), Parts 107 and 121.
2.29 FIRPTA WITHHOLDING. The Company is not a "foreign person" within the
meaning of Section 1445 of the Code and Treasury Regulations Sections 1.1445-2.
2.30 INVESTMENTS RELATED TO CERTAIN FOREIGN COUNTRIES. Neither the Company
nor any affiliate of the Company has participated in, or is participating in, an
anti-Israeli boycott within the scope of Chapter 7 of Part 2 of Division 4 of
Title 2 of the California Government Code, as in effect from time to time.
SECTION 3. CONDITIONS OF PURCHASE
The Investors' obligation to purchase and pay for the Preferred Shares
shall be subject to compliance by the Company with its agreements herein
contained and to the fulfillment to all of the Investors' satisfaction or
unanimous waiver by the Investors on or before the Closing Date of the following
conditions:
3.1 REPRESENTATIONS. The representations and warranties of the Company
contained in this Agreement (including but not limited to the representations
and warranties made in Section 2 hereof) shall be true and correct on and as of
the Closing Date.
3.2 OPINIONS OF COUNSEL. The Investors shall have received an opinion of
counsel in substantially the form attached hereto as EXHIBIT 3.2(A) with respect
to the organization and authority of the Company, the enforceability of this
Agreement and any related agreements, the absence of conflicts with
organizational documents and other agreements, the absence of litigation and
such other matters as requested by the Investors. The Investors shall have
received an opinion of FCC counsel in substantially the form attached hereto as
EXHIBIT 3.2(B) with respect to such matters as requested by the Investors.
3.3 AUTHORIZATION. The Board of Directors and the stockholders of the
Company shall have duly adopted resolutions in form reasonably satisfactory to
the Investors authorizing the Company to consummate the transactions
contemplated hereby in accordance with the terms hereof, and the Investors shall
have received a duly executed certificate of the Secretary of the Company
certifying to such resolutions, the Charter and By-laws of the Company, the
incumbency of all officers executing any instruments and agreements therefor,
and such other matters as may be reasonably requested by the Investors.
3.4 EFFECTIVENESS OF PREFERRED STOCK TERMS. The Board of Directors of the
Company shall have adopted a resolution establishing the terms of the Preferred
Stock as set forth in EXHIBIT 3.4 attached hereto, and such action shall have
been made effective by approval thereof by the stockholders of the Company and
the filing of an Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
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3.5 STOCKHOLDERS' AGREEMENT. The Company, the existing stockholders and
the Investors shall have executed and delivered a Stockholders' Agreement in the
form of EXHIBIT 3.5 attached hereto (the "Stockholders' Agreement"), which
Stockholders' Agreement shall supersede the stockholders' agreement previously
entered into among the Company and the existing stockholders.
3.6 CONVERTIBLE NOTES. The convertible notes (the "Convertible Notes") of
the Company in the aggregate amount of $4,899,999 held by some of the existing
stockholders of the Company shall have been converted into 48,999.99 shares of
Class A Common Stock, and certificates evidencing such shares of Common Stock
shall have been delivered to the holders of the Convertible Notes and such
Convertible Notes shall have been canceled.
3.7 ELECTION OF DIRECTORS; INDEMNIFICATION AGREEMENTS. In accordance with
the terms of the Stockholders' Agreement and the By-laws of the Company, the
size of the Company's Board of Directors shall have been initially fixed at
eight (8) members and the composition thereof shall be as provided in the
Stockholders' Agreement. The Company shall have entered into a Director
Indemnification Agreement in the form attached hereto as EXHIBIT 3.7 with each
member of the Board of Directors.
3.8 COMPENSATION COMMITTEE; AUDIT COMMITTEE. The Board of Directors shall
appoint and maintain a Compensation Committee, consisting of no more than three
(3) persons, one of whom shall be designated by the holders of a majority of the
shares of Preferred Stock. The Board of Directors shall appoint and maintain an
Audit Committee consisting of no less than two (2) individuals, all of whom are
not officers or employees of the Company, and one of whom shall be designated by
the holders of a majority of the shares of Preferred Stock.
3.9 OPTION PLAN. The Board of Directors of the Company shall have
adopted, and the stockholders of the Company shall have approved, a stock option
plan in substantially the form attached hereto as EXHIBIT 3.9 (the "1996 Stock
Option Plan"). As of the Closing, the options granted to the employees and
officers of the Company (the "Options") shall be as set forth on SCHEDULE 2.4
hereto.
3.10 REGISTRATION RIGHTS AGREEMENT. The Company, the Investors and the
existing Stockholders shall have entered into a an Amended and Restated
Registration Rights Agreement with respect to the Common Stock, the Preferred
Stock and the Conversion Shares in substantially the form of EXHIBIT 3.10
attached hereto (the "Registration Rights Agreement"), which Registration Rights
Agreement shall supersede the registration rights agreement previously entered
into among the Company and the existing stockholders.
3.11 CONFIDENTIALITY AGREEMENTS. Each of Charles Scheiwe, Alan Howe and
Ken Weisner shall have entered into a Confidentiality and Proprietary Rights
Agreement with the Company in the form attached hereto as EXHIBIT 3.11.
3.12 ALL PROCEEDINGS SATISFACTORY. All corporate and other proceedings
taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement, and all documents and evidences incident
thereto, shall be reasonably satisfactory in form and substance
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to all of the Investors, and the Investors shall have received such copies
thereof and other materials (certified, if requested) as they may reasonably
request in connection therewith. The issuance and sale of the Preferred Shares
to the Investors shall be made in conformity with all applicable state and
federal securities laws.
3.13 NO ADVERSE CHANGE. Since September 30, 1996, there shall have been no
material adverse change in the financial conditions, properties, assets,
liabilities, businesses or operations of the Company, whether or not in the
ordinary course of business.
3.14 DELIVERY OF DOCUMENTS. The Company shall have executed and delivered
to the Investors (or shall have caused to be executed and delivered to the
Investors by the appropriate persons) the following:
(a) Certificates for the Preferred Shares;
(b) Certified copies of resolutions of the Board of Directors (and,
if necessary, the stockholders) of the Company authorizing the execution and
delivery of this Agreement, the Stockholders' Agreement, the Registration Rights
Agreement, the Charter creating the Preferred Shares, the issuance of the
Preferred Shares and, upon conversion of the Preferred Shares, the issuance of
the Conversion Shares and shares of Diluted Preferred Stock, and the adoption of
the Stock Option Plan;
(c) Certified copy of the by-laws of the Company as in effect as of
the Closing;
(d) A copy of the Certificate of Incorporation of the Company, as
amended, certified as of a recent date by the Secretary of State of the State of
Delaware;
(e) A Certificate issued by the Secretary of State of the State of
Delaware, certifying that the Company is in good standing;
(f) A certificate issued by the Secretary of State of each of
California, Florida, Illinois, Kansas, Michigan and Texas, certifying that the
Company is duly qualified as a foreign corporation and in good standing in such
state; and
(g) A waiver from each stockholder of the Company that is not
purchasing Preferred Shares hereunder with respect to such stockholder's
preemptive rights, if any, under the 1995 Stockholders' Agreement;
(h) Such other supporting documents and certificates as the Investors
may reasonably request.
3.15 SBIC DELIVERIES. The Company shall have delivered to Toronto Dominion
Capital (U.S.A.), Inc. ("Toronto Dominion"), EOS Partners SBIC, L.P. ("EOS") and
BancBoston Ventures Inc. ("BancBoston"):
(a) duly completed and executed SBA Forms 480, 652 and Part A of
1031;
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(b) if not delivered prior to the Closing, a business plan showing
the Company's financial projections for a five-year period from the Closing;
(c) a written statement from the Company regarding its intended use
of the proceeds of the Financing; and
(d) a list, after giving effect to such Closing, of (a) the name of
each of the Company's directors, (b) the name and title of each of the Company's
officers, and (c) the name of each of the Company's stockholders setting forth
the number and class of shares held.
SECTION 4. COVENANTS OF THE COMPANY
The Company (which term shall be deemed to include, in addition to any
subsidiaries existing as of the date hereof, for purposes of this Section 4, any
subsidiary or subsidiaries of the Company formed or acquired after the date of
this Agreement) shall comply with the following covenants except as shall
otherwise be expressly agreed pursuant to the affirmative vote of or a written
consent or consents executed by a majority in interest of the holders of the
issued and outstanding shares of Preferred Stock, until such time as all of the
shares of Preferred Stock shall have either been redeemed or converted into
Common Stock in accordance with their terms:
4.1 FINANCIAL STATEMENTS; MINUTES. The Company will maintain a
comparative system of accounts in accordance with generally accepted accounting
principles consistently applied, keep full and complete financial records and,
until such time as the Company has consummated an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offering and sale of Common Stock of the Corporation to the public
(an "IPO"), furnish to the Investors the following reports: (a) within ninety
(90) days after the end of each fiscal year, a copy of the consolidated balance
sheet of the Company as at the end of such year, together with a consolidated
statement of income and retained earnings of the Company for such year, audited
and certified by independent public accountants of recognized national standing
reasonably satisfactory to the Investors, prepared in accordance with generally
accepted accounting principles consistently applied; (b) within thirty (30) days
after the end of each month commencing with the month ending November 30, 1996,
a consolidated unaudited balance sheet of the Company as at the end of such
month and an unaudited statement of income and retained earnings for the Company
for such month and for the year to date, each of the foregoing balance sheets
and statements of income and retained earnings to set forth in comparative form
the corresponding figures for the prior fiscal period and to include a brief
written discussion and analysis by management of such annual financial
statements; and (c) such other financial information as the holders of at least
a majority of the issued and outstanding shares of Preferred Stock may
reasonably request, including without limitation certificates of the principal
financial officer of the Company concerning compliance with the covenants of the
Company under this Section 4.
4.2 BUDGET AND OPERATING FORECAST. Until such time as the Company has
consummated an IPO, the Company will prepare and submit to the Board of
Directors of the Company a budget for the Company for each fiscal year of the
Company at least thirty (30) days
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prior to the beginning of such fiscal year; PROVIDED, HOWEVER that the budget
for fiscal year 1997 shall be prepared and submitted to the Board of Directors
no later than ten (10) days prior to commencement of such fiscal year. The
budget shall be accepted as the budget for such fiscal year when it has been
approved by a majority of the full Board of Directors of the Company and,
thereupon, a copy of such budget promptly shall be sent to the Investors. The
Company shall review the budget periodically and may revise such budget in such
manner as approved by a majority of the full Board of Directors and shall
promptly advise the Investors of all such revisions or other changes therein and
all material deviations therefrom.
4.3 CONDUCT OF BUSINESS. The Company will continue to engage principally
in the business now conducted by the Company or a business or businesses similar
thereto or reasonably compatible therewith. The Company will keep in full force
and effect all FCC Licenses and intellectual property rights useful in its
business (except such rights as the Board of Directors has reasonably determined
are not material to the Company's continuing operations and except to the extent
that the pending litigation regarding the proprietary rights to and use of the
Teletrac name results in a loss of such intellectual property rights and shall
use its best efforts to obtain any approvals, authorizations or waivers from the
FCC which are necessary and appropriate for the full authorization of the sites
set forth on SCHEDULE 2.6).
4.4 PAYMENT OF TAXES, COMPLIANCE WITH LAWS, ETC. The Company will pay and
discharge all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies which,
if not paid when due, might become a lien or charge upon its property or any
part thereof; PROVIDED, HOWEVER, that the Company shall not be required to pay
and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is being contested by the Company in good faith by appropriate
proceedings and an adequate reserve therefor has been established on its books.
The Company will comply with all applicable laws and regulations in the conduct
of its business, including, without limitation, the Communications Act, all
applicable regulations and policies of the FCC, including, without limitation,
compliance with all LMS spectrum band plans implemented by the FCC, and all
applicable federal and state securities laws in connection with the issuance of
any shares of its capital stock. The Company shall file all necessary
applications for renewal of, and preserve in full force and effect, the FCC
Licenses and shall obtain all necessary waivers and permits in connection
therewith.
4.5 INSURANCE. The Company will keep its insurable properties insured,
upon reasonable business terms, by financially sound and reputable insurers
against liability, and the perils of casualty, fire and extended coverage in
amounts of coverage at least equal to those customarily maintained by companies
in the same or similar business as the Company. The Company will also maintain
with such insurers insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies
engaged in the same or similar business.
4.6 MAINTENANCE OF PROPERTIES. The Company will maintain all properties
used or useful in the conduct of its business in good repair, working order and
condition, ordinary wear
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and tear excepted, as necessary to permit such business to be properly and
advantageously conducted.
4.7 AFFILIATED TRANSACTIONS. The Company shall not enter into any
transaction or agreement with (a) any officer, director or shareholder of the
Company or any wholly-or partially-owned subsidiary of the Company, or (b) any
entity that controls, is controlled by or under common control with, the
Company, except for any transaction or agreement on terms no less favorable to
the Company than would be available in a bona fide arm's-length transaction with
a non-affiliated person or entity and which has been approved by the
disinterested members of the Audit Committee of the Board of Directors of the
Company;
4.8 MANAGEMENT COMPENSATION. No compensation or other remuneration having
an aggregate value in excess of $150,000 shall be paid to, nor shall any capital
stock of the Company be issued to, or options to purchase any of its capital
stock granted to, any officer or employee of the Company or any of its
subsidiaries, without the approval of the Compensation Committee of the Board of
Directors (the composition of which Committee shall be as set forth in the
Stockholders' Agreement); PROVIDED, HOWEVER, that the Compensation Committee may
delegate standing authority to the Chief Executive Officer of the Company to
issue stock options and other compensation to consultants to the Company who are
not affiliates of either the Company or any of its stockholders on terms set
forth in such delegation. From and after the Closing Date, any grants of
capital stock or options hereunder shall be conditioned upon the grantee
agreeing to be bound by the terms of the Stockholders' Agreement.
4.9 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Preferred Shares for product development, capital expenditures, general
working capital needs and to fulfill its down payment obligations to Tadiran
Ltd. and/or Tadiran Telematics Ltd. as set forth in Exhibit B to the VLU
Production Agreement dated September 6, 1996, by and between Tadiran Ltd. and/or
Tadiran Telematics Ltd. and the Company.
4.10 BOARD OF DIRECTORS MEETINGS; MEETINGS WITH INVESTORS.
(a) The Company will ensure that meetings of its Board of Directors
are held at least four (4) times each year and at intervals of not more than
three (3) months, and will reimburse Directors for their reasonable and
documented travel and other out-of-pocket expenses (to the extent consistent
with the Company's policies related thereto, which provide for reimbursement of
directors' travel expenses and which have been delivered to the Investors prior
to the date hereof) incurred in connection with attending meetings of the Board
of Directors or performing such other business on behalf of the Company as may
be approved by the Company in advance. The Charter or By-laws of the Company
will at all times during which any nominee of the Investors serves as director
of the Company provide for indemnification of the directors and limitations on
the liability of the directors to the fullest extent permitted under applicable
state law. The Company will use its best efforts to obtain and maintain on
reasonable business terms (including cost) directors and officers' liability
insurance coverage of at least $1,000,000 per occurrence.
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(b) The Investors shall be entitled to consult with and advise the
Board of Directors on significant business issues with respect to the Company,
including management's proposed annual operating plans for the Company, and
management will meet with the Investors regularly during each year at the
Company's facilities at mutually agreeable times and intervals for such
consultation and advice and to review progress in achieving said plans. The
Investors may examine the books and records of the Company and inspect its
facilities and may request information at reasonable times and intervals
concerning the general status of the financial condition and operations of the
Company, provided that access to highly confidential proprietary information and
facilities need not be provided. If an Investor holding in excess of fourteen
percent (14%) of the outstanding Preferred Shares is not represented on the
Board of Directors, the Company shall invite a representative of such Investor
to attend all meetings of its Board of Directors relating to the Company in a
non-voting observer capacity, and in this respect shall give such representative
copies of all notices, minutes, consents, and other material that it provides to
all of its directors and which relate to the Company.
4.11 STOCKHOLDERS' AGREEMENT. The Company will diligently enforce all of
its rights under the Stockholders' Agreement. The Company will not effect any
transfer of any of the outstanding capital stock of the Company on the stock
record books of the Company unless such transfer is made in accordance with the
terms of the Stockholders' Agreement. The Company will not waive or release any
rights under, or consent to the amendment of, the Stockholders' Agreement
without the requisite written approval of the parties thereto.
4.12 DISTRIBUTIONS ON, AND REDEMPTIONS OF, CAPITAL STOCK. Except as
otherwise expressly provided in this Agreement or in the Charter, the Company
will not declare or pay any dividends or make any distributions of cash,
property or securities of the Company with respect to any shares of its Common
Stock or any other class of its capital stock, or directly or indirectly redeem,
purchase, or otherwise acquire for consideration any shares of its Common Stock
or any other class of its capital stock; PROVIDED, HOWEVER, that this
restriction shall not apply to the repurchase of shares of the Common Stock
pursuant to stock repurchase agreements under which the Company has the option
to repurchase such shares upon the occurrence of certain events, including the
termination of employment and involuntary transfers, by operation of law,
provided that the repurchase price paid by the Company does not exceed the
lesser of (i) the purchase price paid to the Company for such shares and (ii)
the fair market value of such shares at the time of such repurchase (as
determined by the Board of Directors in its sole discretion). Any redemption,
repurchase or other acquisition by the Company of any shares of its capital
stock shall be made in compliance with all laws, including, but not limited to,
federal and state securities laws.
4.13 MERGER, CONSOLIDATION, SALE OF ASSETS AND OTHER ACTIONS.
(a) The Company will not without the prior written consent of holders
of a majority of the outstanding shares of Preferred Stock:
(i) Issue any shares of its capital stock which are senior to or
on a parity with the Preferred Shares with respect to dividends,
conversion, liquidation or redemptions or with any special voting rights;
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(ii) Create, incur, assume, become liable for, or permit to exist
any indebtedness for borrowed money, capital leases, or other similar
commitments or obligations, which, for any one such borrowing or series of
related borrowings, is in excess of $250,000 other than (A) the incurrence
of up to $25 million of senior debt on competitive terms approved by the
Board of Directors (no less favorable than the terms provided in the
Toronto Dominion Bank term sheet dated June 11, 1996), and (B) the
incurrence of up to $100 million of high yield debt on competitive market
terms approved by the Board of Directors on or before the first anniversary
of the Closing;
(iii)Grant or permit to exist any material liens, security
interests or encumbrances on any of the Company's assets or properties,
except as permitted by the terms of any senior debt or high yield debt
described in Section 4.13(a)(ii) above;
(iv) Enter into any agreement with any party which by its terms
restricts the payments due the holders of the Preferred Shares as set forth
in the Charter; or
(v) Authorize any merger or consolidation of the Company with or
into any other corporation, partnership or entity (with the result that
less than a majority of the outstanding voting power of the surviving
corporation is held by person's who were stockholders of the Company
immediately prior to such event) or permit the sale of all or any material
portion of the capital stock or assets of the Company (other than sales in
the ordinary course of business and consistent with past practices).
(b) The Company will not, without the vote or affirmative written
consent of holders of sixty-six and two-thirds percent (662/3%) of the
outstanding shares of Preferred Stock, authorize or permit the bankruptcy,
reorganization, liquidation, dissolution or winding up of the Company.
4.14 NO AMENDMENTS TO CERTIFICATE OF INCORPORATION. The Company will not
make any amendment to the Charter or make any amendment to the By-laws (a) so as
to adversely affect the rights of the holders of the Convertible Preferred Stock
with respect to dividends, liquidation preferences or redemption without the
prior written consent of holders of at least eighty percent (80%) of the
outstanding shares of Convertible Preferred Stock, or (b) that adversely affects
any other preferences, powers, rights or privileges of holders of the Preferred
Stock without the prior written consent of holders of at least sixty-six and
two-thirds percent (662/3%) in interest of the Preferred Shares.
4.15 CAPITAL EXPENDITURES. The Company will not, without the prior
approval of the Board of Directors of the Company, make any expenditures for
fixed or capital assets, or any commitments for such expenditures, exceeding an
amount of $1,000,000 for any one such expenditure or series of related
expenditures in any one year.
4.16 ANNUAL UPDATES; NUMBER OF STOCKHOLDERS; USE OF PROCEEDS; REGULATORY
VIOLATION; ECONOMIC IMPACT INFORMATION AMENDMENT.
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(a) As long as an SBIC Investor holds any shares of Preferred Stock,
or Conversion Shares, the Company shall, on an annual basis, provide to such
SBIC Investor the information required under 13 CFR Section 107.620(b) and shall
provide the information and access required by 13 CFR Section 107.620(c).
(b) As long as an SBIC Investor holds any shares of Preferred Stock
or Conversion Shares, the Company shall notify such SBIC Investor:
(i) at least fifteen (15) days prior to taking any action after
which the number of record holders of the Company's voting stock would be
increased from fewer than 50 to 50 or more;
(ii) of any other action or occurrence after which the number of
record holders of the Company's voting stock was increased (or would increase)
from fewer than 50 to 50 or more, as soon as practicable after the Company
becomes aware that such other action or occurrence has occurred or is proposed
to occur. For purposes of this Agreement, an "SBIC Investor" shall mean
(i) Toronto Dominion, provided that Toronto Dominion has been licensed as an
SBIC, or an affiliate of Toronto Dominion that has been licensed as an SBIC and
holds Preferred Stock, Conversion Shares or Common Stock of the Company,
(ii) EOS, or an affiliate of EOS that has been licensed as an SBIC and holds
Preferred Stock, Conversion Shares or Common Stock of the Company and (iii)
BancBoston, or an affiliate of BancBoston that has been licensed as an SBIC and
holds Preferred Stock, Conversion Shares or Common Stock of the Company;
(c) USE OF PROCEEDS. Within seventy-five (75) days after the
Closing, and at the end of each month thereafter until all of the proceeds from
the sale of Preferred Shares hereunder have been used by the Company and its
subsidiaries, the Company shall deliver to all Investors a written statement
certified by the Company's president or chief financial officer describing in
reasonable detail the use of the proceeds of the purchase of Preferred Shares
hereunder by the Company and its subsidiaries. In addition to any other rights
granted hereunder, the Company shall grant all Investors and the SBA access to
the Company's records for the purpose of verifying the use of such proceeds.
(d) REGULATORY VIOLATION. Upon the occurrence of a Regulatory
Violation (as defined below) or in the event that any SBIC Investor determines
in its reasonable good faith judgment that a Regulatory Violation has occurred,
in addition to any other rights and remedies to which it may be entitled
(whether under this Agreement or any other agreement), such SBIC Investor shall
have the right, to the extent required under SBIC Regulations, to demand the
immediate repurchase of all of the outstanding Preferred Stock owned by such
SBIC Investor at a price equal to the purchase price paid for such Preferred
Stock hereunder plus accrued dividends by delivering written notice of such
demand to the Company; PROVIDED, HOWEVER, that, in the event of a Regulatory
Violation, any SBIC Investor shall, prior to demanding the repurchase of all of
the outstanding shares of Preferred Stock owned by such SBIC Investor, use
reasonable efforts to retain its investment in the Preferred Stock, including,
without limitation, petitioning the SBA for its approval with respect to any
unforeseen changes in the principal business activity of the Company. The
Company shall pay the purchase price for such shares of Preferred Stock by a
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cashier's or certified check or by wire transfer of immediately available funds
to such SBIC Investor within thirty (30) days after the Company's receipt of the
demand notice, and, upon such payment, such SBIC Investor shall deliver the
certificates, if any, evidencing the Preferred Stock being repurchased duly
endorsed for transfer or accompanied by duly executed forms of assignment.
For purposes of this Agreement, "REGULATORY VIOLATION" means a change in
the principal business activity of the Company and its subsidiaries to an
ineligible business activity (within the meaning of the SBIC Regulations), if
such change occurs within one (1) year after the date of the initial purchase of
Preferred Shares hereunder.
(e) ECONOMIC IMPACT INFORMATION. Promptly after the end of each
fiscal year (but in any event prior to February 28 of each year), the Company
shall deliver to each Investor a written assessment of the economic impact of
the total investment by all SBIC Investors in the Company, specifying the
full-time equivalent jobs created or retained in connection with the investment,
the impact of the investment on the businesses of the Company in terms of
expanded revenue and taxes, and the other economic benefits resulting from the
investment, including but not limited to, technology development or
commercialization, minority business development, urban or rural business
development and expansion of exports.
(f) AMENDMENT. Notwithstanding anything herein to the contrary, the
provisions of this Section 4.16 shall not be amended without the prior written
consent of holders of a majority of the issued and outstanding Preferred Stock
(or Conversion Shares) of any SBIC Investors (determined on an as converted
basis).
4.17 NON-COMPETITION AGREEMENTS; CONFIDENTIALITY AND PROPRIETARY RIGHTS
AGREEMENTS. The Company shall diligently enforce all of its rights under its
Non-Competition Agreements and its Confidentiality and Proprietary Rights
Agreements. From and after the Closing Date, the Company will enter into a
Confidentiality and Proprietary Rights Agreement (in the form attached hereto as
EXHIBIT 3.11) with each employee of the Company who is exposed to technical and
proprietary information of the Company.
SECTION 5. INVESTOR REPRESENTATIONS
Each Investor hereby severally represents to the Company and each other
Investor with respect to such Investor's purchase of Securities hereunder that:
(a) The Investor is acquiring the Preferred Shares (and the
Conversion Shares issuable upon conversion thereof) for its own account, for
investment, and not with a present view to any "distribution" thereof within the
meaning of the Securities Act. The Investor was not formed or organized for the
purpose of acquiring the Preferred Shares (or the Conversion Shares issuable
upon conversion thereof).
(b) The Investor understands that because the Preferred Shares have
not been registered under the Securities Act, it cannot dispose of any or all of
the Preferred Shares or the Conversion Shares issuable upon conversion thereof
unless such securities are subsequently
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registered under the Securities Act or exemptions from such registration are
available. The Investor understands that each certificate representing the
Preferred Shares and the Conversion Shares will bear the following legend or one
substantially similar thereto:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act").
These securities have been acquired for investment and not
with a view to distribution or resale, and may not be sold,
mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such
securities under the Act or the availability of an exemption
from such registration requirements.
(c) The Investor is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act and is sufficiently knowledgeable and
experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company.
(d) Such Investor has had adequate opportunity to discuss the
business, management, and financial affairs of the Company with the
representatives of the Company.
SECTION 6. INDEMNIFICATION
6.1 INDEMNIFICATION FOR VICARIOUS LIABILITY. The Company shall, to the
full extent permitted by law, and in addition to any such rights which any
Indemnified Party (as defined herein) may have pursuant to statute, the
Company's Charter or By-laws, or otherwise, indemnify and hold harmless each
Investor (including its respective directors, officers, partners, beneficiaries,
stockholders, employees, investment advisors and agents, each an "Indemnified
Investor") and each person (a "Controlling Person" and collectively with
Indemnified Investors, the "Indemnified Parties") who controls any of them
within the meaning of Section 15 of the Securities Act, or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages, expenses and liabilities, joint or
several, including any investigation, legal and other expenses incurred in
connection with the investigation, defense, settlement or appeal of, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted ("Losses" or "Loss"), to which they, or any of them, may become subject
by reason of their status as a securityholder, creditor, director, agent,
representative or controlling person of the Company, (including, without
limitation, any and all Losses under the Securities Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise,
which relates directly or indirectly to the registration, purchase, sale or
ownership of any securities of the Company or to any fiduciary obligation owed
with respect thereto).
6.2 NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an Indemnified
Party of notice of any third party or other claim, liability or expense to which
the indemnification obligations hereunder would apply, including in connection
with any governmental proceeding, the Indemnified Party shall give notice
thereof in writing to the Company, but the omission to so notify the Company
promptly will not relieve the Company from any liability except, and only to
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the extent, that the Company shall have been materially prejudiced as a result
of the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense.
In the case of any third party claim, if within twenty (20) days after
receiving the notice described in the preceding paragraph the Company (i) gives
written notice to the Indemnified Party or Parties stating that it intends to
defend in good faith against such claim, liability or expense at its own cost
and expense and (ii) provides assurance and security reasonably acceptable to
such Indemnified Party or Parties that such indemnification will be paid fully
and promptly if required and such Indemnified Party or Parties will not incur
cost or expense during the proceeding, then counsel for the defense shall be
selected by the Company (subject to the consent of such Indemnified Party or
Parties, which consent shall not be unreasonably withheld) and such Indemnified
Party or Parties shall not be required to make any payment with respect to such
claim, liability or expense as long as the Company is conducting a good faith
and diligent defense at its own expense; provided, however, that the assumption
of defense of any such matters by the Company shall relate solely to the claim,
liability or expense that is subject or potentially subject to indemnification.
If the Company assumes such defense in accordance with the preceding sentence,
it shall have the right, with the consent of such Indemnified Party or Parties,
which consent shall not be unreasonably withheld, to settle all indemnifiable
matters related to claims by third parties which are susceptible to being
settled provided the Company's obligation to indemnify such Indemnified Party or
Parties therefor will be fully satisfied and the settlement includes a complete
release of such Indemnified Party or Parties. The Company shall keep the such
Indemnified Party or Parties apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
such Indemnified Party or Parties with all documents and information that such
Indemnified Party or Parties shall reasonably request and shall consult with
such Indemnified Party or Parties prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, such
Indemnified Party or Parties shall at all times have the right to fully
participate in such defense at its own expense directly or through counsel;
provided, however, if the named parties to the action or proceeding include both
the Company and the Indemnified Party or Parties and representation of both
parties by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of separate counsel for such Indemnified Party
or Parties shall be paid by the Company. The Indemnified Party or Parties shall
make available all information and assistance that the Company may reasonably
request and shall cooperate with the Company in such defense.
If the Company does not give notice of its intent to defend against any
third party or other claim, liability or expense in accordance with the
foregoing paragraph, or if such diligent good faith defense is not being or
ceases to be conducted, the Indemnified Party will have the right to retain its
own counsel in any such action and all fees, disbursements and other charges
incurred in the investigation, defense and/or settlement of such action shall be
advanced and reimbursed by the Company promptly as they are incurred and shall
have the right to compromise or settle, such claim, liability or expense;
PROVIDED, HOWEVER, that the Indemnified Party shall agree to repay any expenses
so advanced hereunder if it is ultimately determined by a court of competent
jurisdiction that the Indemnified Party to whom such expenses are advanced is
not entitled to be indemnified as a matter of law or under the terms of this
Agreement.
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6.3 SATISFACTION OF INDEMNIFICATION OBLIGATIONS. Any indemnity payable
pursuant to this Section 6 shall be paid within the later of (a) ten (10) days
after the Indemnified Party's request therefor or (b) ten (10) days prior to the
date on which the Loss upon which the indemnity is based is required to be
satisfied by the Indemnified Party. The provisions of this Article VI shall
inure to the individual benefit of, and may be specifically enforced by, any
Indemnified Party with or without joinder of any other Indemnified Party.
SECTION 7. GENERAL
7.1 AMENDMENTS, WAIVERS AND CONSENTS. For purposes of this Agreement and
all agreements, documents and instruments executed pursuant hereto, except as
otherwise specifically set forth herein or therein, no course of dealing between
the Company and any Investor and no delay on the part of any party hereto in
exercising any rights hereunder or thereunder shall operate as a waiver of the
rights hereof and thereof. No covenant or other provision hereof or thereof may
be amended or waived otherwise than by a written instrument signed by the party
so amending or waiving such covenant or other provision; PROVIDED, HOWEVER, that
except as otherwise provided herein or therein, changes in or additions to, and
any consents required by, this Agreement may be made, and compliance with any
term, covenant, condition or provision set forth herein may be omitted or waived
(either generally or in a particular instance and either retroactively or
prospectively), by a consent or consents in writing signed by Investors holding
a majority of the outstanding shares of Preferred Stock (including for such
purposes, on a proportional basis, any Conversion Shares into which any of the
Preferred Shares have been converted that have not been sold to the public) and
(in the case of any such change or addition) the Company; PROVIDED, HOWEVER,
that the amendment or waiver of any provision which by its terms or by the terms
of the Charter requires the consent or approval of more than holders of a
majority of the outstanding shares of Preferred Stock shall only be effective if
it is signed by holders of such requisite percentage. All references in this
Agreement to holders of a majority or a specific percentage of the outstanding
shares of Preferred Stock refer to holders of a majority or such specific
percentage of the outstanding shares of Preferred Stock, as the case may be, of
the outstanding Preferred Shares and Conversion Shares on an as converted basis.
Any amendment or waiver effected in accordance with this Section 7.1 shall be
binding upon each holder of Preferred Shares purchased under this Agreement at
the time outstanding (including securities into which such Preferred Shares have
been converted), each future holder of all such securities and the Company.
7.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; ASSIGNABILITY
OF RIGHTS. All covenants, agreements, representations and warranties of the
Company made herein and in the certificates, lists, exhibits, schedules or other
written information delivered or furnished by or on behalf of the Company to any
Investor in connection herewith shall be deemed material and to have been relied
upon by such Investor, and, except as otherwise provided in this Agreement,
shall survive the delivery of the Securities regardless of any instruction and
shall not merge in the performance of any obligation and shall bind the
Company's successors, assigns and heirs, whether so expressed or not, and,
except as otherwise provided in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Investors'
successors and assigns and to transferees of the Securities, whether so
expressed or not; PROVIDED, HOWEVER, that the representations and warranties
made by the Company in Section 2 (other than
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those set forth in Sections 2.1, 2.2 and 2.4, which shall survive indefinitely,
and those set forth in Section 2.11, which shall survive until six (6) months
after the termination of the applicable statute of limitations relating thereto)
shall survive only for a period of twenty-four (24) months after the Closing.
The representations and warranties made by the Investors in Section 5 of this
Agreement shall survive for a period of twenty-four (24) months after the
Closing and shall bind the Investors' successors and assigns and shall inure to
the benefit of the Company's successors and assigns.
7.3 GOVERNING LAW; JURISDICTION. This Agreement shall be deemed to be a
contract made under, and shall be construed in accordance with, the laws of the
Commonwealth of Massachusetts (without giving effect to choice or conflicts of
law principles the effect of which would cause the application of domestic
substantive laws of any other jurisdiction). The Company hereby irrevocably
consents to the non-exclusive personal jurisdiction, service of process and
venue in the federal and state courts of the Commonwealth of Massachusetts for
any claim, suit or proceedings arising under this Agreement or the documents and
agreements executed in connection herewith and in the event any action is
brought against the Company in the Commonwealth of Massachusetts, all of the
Investors hereby agree not to object to such action on the basis of lack of
jurisdiction, improper service of process, forum non conveniens or the like.
7.4 SECTION HEADINGS; COUNTERPARTS. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original
but shall together constitute but one and the same document.
7.5 NOTICES AND DEMANDS. Any notice or demand which, by any provision of
this Agreement or any agreement, document or instrument executed pursuant hereto
or thereto, except as otherwise provided therein, is required or provided to be
given shall be deemed to have been sufficiently given or served and received for
all purposes when delivered or five (5) days after being sent by certified or
registered mail, postage and charges prepaid, return receipt requested, or by
express delivery providing receipt of delivery, to the following addresses: if
to the Company, at its address as shown on the signature page hereof, or at any
other address designated by the Company to each of the Investors in writing; if
to an Investor, at its mailing address as shown on the signature pages hereto,
or at any other address designated by such Investor to the Company and the other
Investors in writing; and if to an assignee of an Investor, at its address as
designated to the Company and the other Investors in writing.
7.6 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
7.7 EXPENSES. The Company shall pay all costs and expenses incurred by
Burr, Egan, Deleage & Co. and its affiliates ("BEDCO") and/or BancBoston in
connection with the negotiation and execution of the Letter of Intent dated
October 18, 1996 by and among the
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Company, BEDCO and BancBoston. The Company shall pay all costs and expenses
that it incurs and all fees and expenses of (i) Goodwin, Procter & Hoar LLP
representing the Investors with respect to the negotiation, execution, delivery
and performance of this Agreement and the agreements, documents and instruments
contemplated hereby or executed pursuant hereto, (ii) Ropes & Gray as special
SBIC counsel to BancBoston and (iii) GCC Investments, Inc. with respect to the
negotiation, execution, delivery and performance of this Agreement.
7.8 INTEGRATION; WAIVER OF PRIOR AGREEMENTS. This Agreement, including
the exhibits, documents and instruments referred to herein, constitutes the
entire agreement, and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof. Each Investor which is also an Institutional Investor (as defined in
the 1995 Stockholders' Agreement) hereby waives any preemptive or other rights
it may have with respect to the issuance of the Preferred Shares and consents to
and acknowledges the conversion of any Convertible Notes held by it into Common
Stock on the terms contemplated by this Agreement.
7.9 CERTAIN PROVISIONS APPLICABLE TO SBIC AND BANK STOCKHOLDERS.
Sections 2.28, 3.15 and 4.16 hereof contain certain provisions that are included
herein solely for the benefit of certain stockholders that are or may become a
small business investment company ("SBIC") subject to the SBA or a bank holding
company or bank holding company subsidiary subject to the Bank Holding Company
Act. A stockholder of the Company may not assert any rights or claims with
respect to such provisions arising at any time after it has ceased to be an SBIC
or a bank holding company or bank holding company subsidiary, as appropriate.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as a sealed instrument as of the day and year first written above.
ADDRESS: COMPANY:
8900 State Line Road TELETRAC, INC., a Delaware corporation
Suite 500
Leawood, KS 66206
Attn: President By:________________________________
Name:
Title:
INVESTORS:
Toronto Dominion Capital TORONTO DOMINION CAPITAL
31 West 52nd Street, 20th Floor (U.S.A.), INC.
New York, NY 10019
Attn: Brian A. Rich By:________________________________
Name:
Title:
Kingdon Capital Management
Corporation KINGDON ASSOCIATES, L.P.
52 West 57th Street
New York, NY 10019 By: Kingdon Capital Management Corp.,
Attn: Michael Markbreiter its general partner
By:________________________________
Name: Mark Kingdon
Title: President
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52 West 57th Street KINGDON PARTNERS, L.P.
New York, NY 10019
Attn: Michael Markbreiter By: Kingdon Capital Management Corp.,
its general partner
By:____________________________
Name: Mark Kingdon
Title: President
52 West 57th Street M. KINGDON OFFSHORE NV
New York, NY 10019
Attn: Michael Markbreiter By: Kingdon Capital Management Corp.,
its investment advisor
By:____________________________
Name: Mark Kingdon
Title: President
Burr, Egan, Deleage & Co. ALTA SUBORDINATED DEBT
One Embarcadero Center PARTNERS III, L.P.
Suite 4050
San Francisco, CA 94111 By: Alta Subordinated Debt Management
Attn: Robert F. Benbow III, L.P.
By:_________________________
General Partner
Burr, Egan, Deleage & Co. ALTA V LIMITED PARTNERSHIP
One Embarcadero Center
Suite 4050 By: Alta V Management Partners, L.P.
San Francisco, CA 94111
Attn: Robert F. Benbow
By:_________________________
General Partner
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<PAGE>
Burr, Egan, Deleage & Co. CUSTOMS HOUSE PARTNERS
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow By:_____________________________
General Partner
Burr, Egan, Deleage & Co. ALTA COMMUNICATIONS VI, L.P.
One Embarcadero Center
Suite 4050 By: Alta Communications VI Management
San Francisco, CA 94111 Partners, L.P.
Attn: Robert F. Benbow
By:_____________________________
General Partner
Burr, Egan, Deleage & Co. ALTA COMM S by S, LLC
One Embarcadero Center
Suite 4050
San Francisco, CA 94111 By:_____________________________
Attn: Robert F. Benbow Member
320 Madison Avenue EOS PARTNERS SBIC, L.P.
22nd Floor
New York, NY 10022 By: EOS SBIC General, L.P.
Attn: Marc H. Michel
By:_________________________
Name: Marc Michel
Title: General Partner
3 Bala Plaza East ASSOCIATED RT, INC.
Suite 502
Bala Cynwyd, PA 19004
Attn: David J. Berkman By:_________________________________
Name: David J. Berkman
Title: Executive Vice President
100 Federal Street BANCBOSTON VENTURES INC.
Boston, MA 02110
Attn: Lars Swanson
By:_____________________________
Name:
Title:
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485 Underhill Boulevard NORTHWOOD VENTURES
Suite 205
Syosset, NY 11791-3419
Attn: Henry T. Wilson
By:______________________________
Name:
Title:
1300 Boylston Street CHESTNUT HILL WIRELESS, INC.
Chestnut Hill, MA 02167
Attn: Michael A. Greeley
By:________________________________
Name:
Title:
400 Post Avenue WESTBURY CAPITAL PARTNERS, L.P.
Westbury, NY 11590
Attn: Jeffrey Freed By: Westbury MGP, L.P., its
general partner
By: J.P. Fogg Co.
By:______________________________
Name:
Title:
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Old City Hall BOSTON CAPITAL VENTURES
Boston, MA 02108-3204
Attn: Suresh Shanmugham
By:_________________________________
Name:
Title:
888 S.W. Fifth Avenue HIGH POINT KELLER LIMITED
Suite 1220 PARTNERSHIP
Portland, Oregon 97204
Attn: Richard B. Keller II By: High Point Management, Inc.,
its general partner
By:______________________________
Name:
Title:
888 S.W. Fifth Avenue
Suite 1220
Portland, Oregon 97204
Attn: R. B. Keller
By:_________________________________
R.B. Keller
888 S.W. Fifth Avenue
Suite 1220
Portland, Oregon 97204
Attn: Richard B. Keller II
By:_________________________________
Richard B. Keller II
36
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APPENDIX A
LIST OF INVESTORS
COLUMN 1 COLUMN 2
NUMBER OF AGGREGATE
PREFERRED PURCHASE PRICE FOR
NAME SHARES PREFERRED SHARES
Alta Subordinated Debt Partners
III, L.P. 8,554.11 $1,482,000.08
Alta V Limited Partnership 14,381.53 2,491,600.95
Customs House Partners 152.38 26,399.84
Alta Communications VI, L.P. 22,574.16 3,910,974.59
Alta Comm S by S, LLC 513.85 89,024.54
Kingdon Associates, L.P. 5,898.99 $1,022,000.00
Kingdon Partners L.P. 935.06 $162,000.00
M. Kingdon Offshore NV 22,025.97 $3,816,000.00
Toronto Dominion & Affiliates 5,772.01 1,000,000.00
Associated RT, Inc. 5,772.01 1,000,000.00
EOS Partners SBIC, L.P. 5,772.01 1,000,000.00
BancBoston Ventures Inc. 34,632.03 6,000,000.00
Northwood Ventures 5,772.01 1,000,000.00
Chestnut Hill Wireless, Inc. 40,404.04 7,000,000.00
Westbury Capital Partners, L.P. 5,772.01 1,000,000.00
Boston Capital Ventures III,
Limited Partnership 5,772.01 1,000,000.00
High Point Keller Limited Partnership 5,194.81 $900,000.00
37
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R.B. Keller 288.60 $50,000.00
Richard B. Keller II 288.60 $50,000.00
---------- --------------
---------- --------------
Total 190,476.19 $33,000,000.00
---------- --------------
---------- --------------
38
<PAGE>
EXHIBIT 10.8
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- --------------------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
By and Among
Teletrac, Inc.
and
The Stockholders
as defined herein and set forth
on the signature pages hereto
Dated as of December 6, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................1
Section 1.1. Construction of Terms...........................................1
Section 1.2. Terms Not Defined...............................................2
Section 1.3. Number of Shares of Stock.......................................2
Section 1.4. Defined Terms...................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES....................................4
Section 2.1. Representations and Warranties of the Stockholders..............4
Section 2.2. Representations and Warranties of the Company...................5
ARTICLE III RESTRICTIONS ON TRANSFER; RIGHT OF LAST REFUSAL; CO-SALE
AND DRAG-ALONG PROVISION..................................................5
Section 3.1. Restrictions on Transfer........................................5
Section 3.2. Right of Last Refusal...........................................7
Section 3.3. Co-Sale Option..................................................9
Section 3.4. Drag-Along Obligations.........................................12
Section 3.5 Contemporaneous Transfers......................................14
Section 3.6. Prohibited Transfers...........................................14
Section 3.7. Exchange of Voting Securities for Non-Voting Securities for
Bank Holding Company Act Purposes..............................14
ARTICLE IV RIGHTS TO PARTICIPATE IN FUTURE ISSUANCES......................15
ARTICLE V ELECTION OF DIRECTORS.............................................16
Section 5.1. Board Composition..............................................16
Section 5.2. Compensation Committee; Audit Committee........................18
Section 5.3. Removal........................................................18
Section 5.4. Vacancies......................................................19
Section 5.5. Increase in Size of Board......................................19
Section 5.6. Assignment.....................................................19
Section 5.7. No Waiver......................................................19
Section 5.8. Board of Directors of Subsidiary...............................19
Section 5.9. Expenses.......................................................19
Section 5.10. Observer Rights................................................20
ARTICLE VI RESTRICTIONS AND LIMITATIONS.....................................20
(i)
<PAGE>
ARTICLE VII MISCELLANEOUS PROVISIONS........................................22
Section 7.1. Survival of Representations and Covenants......................22
Section 7.2. Term...........................................................22
Section 7.3. Legend on Securities...........................................22
Section 7.4. Amendment and Waiver...........................................22
Section 7.5. Notices........................................................23
Section 7.6. Acknowledgment.................................................23
Section 7.7. Headings.......................................................23
Section 7.8. Counterparts...................................................23
Section 7.9. Remedies; Severability.........................................24
Section 7.10. Entire Agreement...............................................24
Section 7.11. Adjustments....................................................24
Section 7.12 Certain Provisions Applicable to SBIC and Bank Stockholders....24
Section 7.13 Participation of Aliens........................................25
Section 7.14. Law Governing..................................................25
Section 7.15. Successors and Assigns.........................................25
Exhibit A - Form of Joinder Agreement
Schedule 1.4 - Amended and Restated Certificate of Incorporation
(ii)
<PAGE>
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement is made as of this 6th day of December, 1996
by and among Teletrac, Inc., a Delaware corporation (the "Company"), the
investors identified on APPENDIX A hereto as the initial management investors
(the "Founding Stockholders"), the investors identified on APPENDIX A hereto
that currently hold Common Stock (the "Common Investors"), the investors
identified on APPENDIX A hereto that are acquiring Preferred Stock in connection
with the execution hereof (the "Preferred Investors," and together with the
Common Investors, the "Investors"), and any other stockholder or optionholder
who from time to time becomes party to this Agreement by execution of a Joinder
Agreement in substantially the form attached hereto as EXHIBIT A (the
"Management Stockholders"). The Founding Stockholders, the Investors and any
Management Stockholders are herein referred to collectively as the
"Stockholders" and individually as a "Stockholder."
W I T N E S S E T H
WHEREAS, reference is made to the Stock Purchase Agreement, dated as of the
date hereof, by and among, INTER ALIA, the Company and the Preferred Investors
(the "Purchase Agreement"), pursuant to which the Preferred Investors have
purchased 190,476.19 shares of Series A Redeemable Convertible Participating
Preferred Stock, par value $.01 per share, of the Company, which is convertible
into 190,476.19 shares of the Company's Common Stock (as defined in Section
1.4);
WHEREAS, the effectiveness of this Agreement is a condition to the
consummation of the Purchase Agreement; and
WHEREAS, the parties hereto desire to agree upon the terms upon which their
investment in the capital stock of the Company will be held, transferred and
voted.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I DEFINITIONS
SECTION 1.1. CONSTRUCTION OF TERMS. As used herein, the masculine,
feminine or neuter gender, and the singular or plural number, shall be deemed to
be or to include the other genders or number, as the case may be, whenever the
context so indicates or requires.
<PAGE>
SECTION 1.2. TERMS NOT DEFINED. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.
SECTION 1.3. NUMBER OF SHARES OF STOCK. Whenever any provision of this
Agreement calls for any calculation based on a number of Shares held by a
Stockholder or Investor, the number of Shares deemed to be held by that
Stockholder or Investor shall be the total number of Shares of Common Stock,
either Class A or Class B, then owned by the Stockholder or Investor, plus the
total number of Shares of Common Stock, either Class A or Class B, issuable upon
conversion of any Preferred Stock or other convertible securities or exercise of
any options, warrants or subscription rights then owned by the Stockholder or
Investor.
SECTION 1.4. DEFINED TERMS. The following capitalized terms, as used in
this Agreement, shall have the meanings set forth below.
"Affiliate" means, with respect to any Person, a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the first mentioned Person. A Person shall be deemed
to control another Person if such first Person possesses directly or indirectly
the power to direct, or cause the direction of, the management and policies of
the second Person, whether through the ownership of voting securities, by
contract or otherwise.
"Charter" has the meaning specified in the definition of Preferred Stock
below.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A or Class B Common Stock, par value $.01
per share, of the Company, and any other shares of stock issued or issuable with
respect thereto (whether by way of a stock dividend or stock split or in
exchange for or upon conversion of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization).
"Conversion Shares" shall mean the shares of Common Stock issued by the
Company upon conversion of the shares of Preferred Stock in accordance with the
Charter.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Offer Notice" has the meaning specified in Section 3.2(a)
"Offeror" has the meaning specified in Section 3.2.
2
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"Permitted Transferee" has the meaning specified in Section 3.1.
"Person" means an individual, a corporation, an association, a partnership,
an estate, a trust, and any other entity or organization, governmental or
otherwise.
"Preferred Stock" means the Series A Redeemable Convertible Participating
Preferred Stock, par value $.01 per share, of the Company, as issued or to be
issued in accordance with the Purchase Agreement and subject to the terms set
forth in the Amended and Restated Certificate of Incorporation of the Company
substantially in the form attached hereto as SCHEDULE 1.4 (the "Charter"),
together with any other shares issued or issuable with respect thereto
including, without limitation, shares of Diluted Preferred Stock (as defined in
the Purchase Agreement) and any Shares of Common Stock (whether by way of a
stock dividend, stock split or in exchange for or in replacement or upon
conversion of such shares or otherwise in connection with a combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization).
"Qualified Public Offering" means the first underwritten public offering
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of Common Stock to the public at an initial public
offering price of not less than $354.38 per share (subject to adjustment for
stock splits, stock dividends, recapitalization and the like) and resulting in
gross proceeds of at least $30 million.
"Registration Rights Agreement" means the Amended and Restated Registration
Rights Agreement, dated the date hereof, by and among, INTER ALIA, the Company
and the Stockholders.
"Right of Last Refusal" has the meaning specified in Section 2.3(b).
"Sale of the Company" means the sale of the Company to a non-Affiliate(s)
of the Company or any of the Stockholders pursuant to which such party or
parties acquire (i) capital stock of the Company possessing the voting power to
elect a majority of the Board of Directors (whether by merger, consolidation or
sale or transfer of the Company's capital stock); or (ii) all or substantially
all of the Company's assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock, Preferred Stock and any other
equity securities now or hereafter issued by the Company, together with any
options thereon and any other shares of stock issued or issuable with respect
thereto (whether by way of a stock dividend, stock split or in exchange for or
upon conversion of such shares or otherwise in connection with a combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization).
3
<PAGE>
"Transaction Offer" has the meaning specified in Section 3.2.
"Transfer" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer, and "Transferee"
means the recipient or intended recipient of a Transfer.
"Transferring Stockholder" has the meaning specified in Section 3.2.
ARTICLE II REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each of
the Stockholders, individually and not jointly, hereby represents, warrants and
covenants to the Company as follows: (a) such Stockholder has full authority
and power and, if an individual, capacity, under its charter, by-laws, governing
partnership agreement or comparable document, as applicable, to enter into this
Agreement; (b) this Agreement constitutes the valid and binding obligation of
such Stockholder; and (c) the execution, delivery and performance by such
Stockholder of this Agreement: (i) does not and will not violate any laws, rules
or regulations of the United States or any state or other jurisdiction
applicable to such Stockholder, or require such Stockholder to obtain any
approval, consent or waiver of, or to make any filing with, any Person that has
not been obtained or made (other than filings or approvals that may have to be
made or obtained in connection with any acquisition or disposition of Shares by
an Investor that is a regulated institutional investor); and (ii) does not and
will not result in a breach of, constitute a default under, accelerate any
obligation under or give rise to a right of termination of any indenture or loan
or credit agreement or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Stockholder is a party or by
which the property of such Stockholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or other
charge or encumbrance on any of the assets or properties of such Stockholder.
SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company,
hereby represents, warrants and covenants to the Stockholders as follows: (a)
the Company has full corporate authority and power to enter into this Agreement;
(b) this Agreement constitutes the valid and binding obligation of the Company
enforceable against it in accordance with its terms; and (c) the execution,
delivery and performance by the Company of this Agreement: (i) does not and will
not violate any laws, rules or regulations of the United States or any state or
other jurisdiction applicable to the Company or any of its subsidiaries, or
require the Company or any of its subsidiaries to obtain any approval, consent
or waiver of, or to make any filing with, any
4
<PAGE>
Person that has not been obtained or made; and (ii) does not and will not result
in a breach of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or credit agreement
or any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which the Company or any of its subsidiaries is a party
or by which the property of the Company or any of its subsidiaries is bound or
affected, or result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets or
properties of the Company or any of its subsidiaries.
ARTICLE III RESTRICTIONS ON TRANSFER; RIGHT OF LAST REFUSAL; CO-SALE
AND DRAG-ALONG PROVISIONS
SECTION 3.1. RESTRICTIONS ON TRANSFER. No Transfers of any Shares shall
be made except in accordance with all applicable provisions of the Securities
Act and any relevant state securities law. In addition, each Stockholder agrees
that he, she or it will not, without the prior written consent of the holders of
both (i) sixty-six and two-thirds percent (662/3%) of the issued and outstanding
shares of Common Stock and (ii) sixty-six and two-thirds percent (662/3%) of the
issued and outstanding shares of Preferred Stock, Transfer all or any portion of
the Shares now owned or hereafter acquired by it or him, except in connection
with, and strictly in compliance with the conditions of, any of the following:
(a) Transfers effected pursuant to Sections 3.2 and 3.3 and 3.4,
in each case made in accordance with the procedures set forth therein;
(b) Any Transfers by a Stockholder to his or her spouse or
children or to a trust of which he is the settlor and a trustee for the
benefit of his or her spouse or children, PROVIDED that any such trust does
not require or permit distribution of such Shares during the term of this
Agreement, and PROVIDED FURTHER that the Transferee shall have executed and
delivered a Joinder Agreement in the form attached hereto as EXHIBIT A;
(c) Transfers upon the death of any Stockholder to his or her
heirs, executors or administrators or to a trust under his or her will or
Transfers between such Stockholder and his or her guardian or conservator,
PROVIDED that the Transferee shall have executed and delivered a Joinder
Agreement in the form attached hereto as EXHIBIT A;
5
<PAGE>
(d) Transfers pursuant to a public offering of the Company's
Common Stock registered under the Securities Act effected in accordance
with the terms of the Registration Rights Agreement;
(e) With respect to any of the Investors, a Transfer to any
other Investor or to a partner or Affiliate of such Investor (other than
the Company) or to any other investment fund or other entity for which such
Investor and/or one or more partners thereof, directly or indirectly
through one or more intermediaries, serve as general partner or manager or
in a like capacity, PROVIDED that the Transferee shall have executed and
delivered a Joinder Agreement in the form attached hereto as EXHIBIT A; and
(f) In the event that Toronto Dominion Capital (U.S.A.), Inc.
("Toronto Dominion"), EOS Partners SBIC, L.P. ("EOS") or BancBoston
Ventures Inc. ("BancBoston") reasonably determines that it has a Regulatory
Problem (as defined below), each of Toronto Dominion, EOS and BancBoston
shall have the right to (i) Transfer its Shares to a non-Affiliate of the
Company and the other Stockholders, PROVIDED that the transferee shall have
executed and delivered a Joinder Agreement in the form attached hereto as
EXHIBIT A, or (ii) exchange their Shares for non-voting securities in the
Company with the same economic rights, and the Company shall take all such
actions as are reasonably requested by Toronto Dominion, EOS and BancBoston
in order to (a) effectuate and facilitate any such Transfer or (b) permit
Toronto Dominion, EOS and/or BancBoston, as the case may be, to exchange
for all or any portion of their Shares on a share-for-share basis for
shares of non-voting securities of the Company, which non-voting securities
shall be identical in all respects to the Shares exchanged for it, except
that such exchanged securities shall be non-voting and shall be convertible
into voting securities on such terms as are reasonably requested by Toronto
Dominion, EOS and/or BancBoston, as the case may be, in light of regulatory
considerations then prevailing and do not alter the economic interests of
the parties hereto. For purposes of this Agreement, a "Regulatory Problem"
means any set of facts or circumstances wherein it has been asserted by any
governmental authority, including by the United States Small Business
Administration (the "SBA"), and any successor agency satisfactory to the
Company performing the functions thereof (or, based on written advice of
counsel satisfactory to the Company, Toronto Dominion, EOS and/or
BancBoston reasonably believes that there is a substantial risk of such
assertion), that, pursuant to the Small Business Act of 1958, as amended,
and the regulations issued by the SBA thereunder, codified at Title 13 of
the Code of Federal Regulations, Parts 107 and 121 (the "SBIC
Regulations"), or pursuant to the Bank Holding Company Act, as amended, and
the regulations issued thereunder, Toronto Dominion, EOS or BancBoston, as
applicable, is not entitled to hold all or a portion of the Preferred Stock
or Common Stock held by it.
6
<PAGE>
Any permitted Transferee described in the preceding clauses (b), (c), (e)
or (f) shall be referred to herein as a "Permitted Transferee." Anything
to the contrary in this Agreement notwithstanding, Permitted Transferees
shall take any Shares so Transferred subject to all provisions of this
Agreement as if such Shares were still held by the Transferring
Stockholder, whether or not they so agree with the Transferring Stockholder
and/or the Company. Without limitation of the foregoing, in connection
with any otherwise permitted transfer of Shares that are restricted shares
subject to any stock restriction or vesting agreement, any Permitted
Transferee of any such Shares shall agree in writing to be bound by the
terms of such stock restriction, vesting or similar agreement, including,
without limitation, any repurchase or similar right contained therein.
SECTION 3.2. RIGHT OF LAST REFUSAL. In the event that any of the
Stockholders, including any of their Permitted Transferees, receives a bona fide
offer to purchase all or any portion of the Shares held by such Stockholder (a
"Transaction Offer") from a non-Affiliate (the "Offeror") in a transaction not
expressly permitted under Section 3.1, such Stockholder (a "Transferring
Stockholder") may, subject to the provisions of Section 3.3 hereof, Transfer
such Shares pursuant to and in accordance with the following provisions of this
Section 3.2:
(a) Such Transferring Stockholder shall cause the Transaction
Offer and all of the terms thereof to be reduced to writing and shall
notify each Preferred Investor of its wish to accept the Transaction Offer
and otherwise comply with the provisions of this Section 3.2 and, if
applicable, Section 3.3 (such notice, the "Offer Notice"). The
Transferring Stockholder's Offer Notice shall constitute an irrevocable
offer to sell such shares to the Preferred Investors on the basis described
below at a purchase price equal to the price contained in, and on the same
terms and conditions of, the Transaction Offer. The notice shall be
accompanied by a true copy of the Transaction Offer (which shall identify
the Offeror and all relevant information in connection therewith).
(b) Each Preferred Investor shall have the right (the "Right of
Last Refusal") to offer to purchase up to that number of Shares covered by
the Transaction Offer as shall be equal to the product obtained by
multiplying (i) the total number of Shares subject to the Transaction Offer
by (ii) a fraction, the numerator of which is the total number of Shares of
Common Stock owned by such Preferred Investor on the date of the Offer
Notice on an as converted basis (including any shares of Common Stock that
may be received upon conversion of the Preferred Stock), and the
denominator of which is the total number of Shares of Common Stock then
held by all Preferred Investors (other than the Transferring Stockholder)
on the date of the Offer Notice on an as converted basis, such that
Preferred Investors shall have the right to accept the Transaction Offer
with respect to all or a portion of the shares covered thereby. (The
number of Shares that
7
<PAGE>
each Preferred Investor is entitled to purchase under this Section 3.2 shall
be referred to as its "Pro Rata Fraction"). In the event that a Preferred
Investor shall elect to purchase all or a part of the Shares covered by the
Transaction Offer (an "Electing Investor"), such Electing Investor shall
individually communicate in writing such election to purchase to the
Transferring Stockholder within thirty (30) days after receipt of the Offer
Notice (which election notice may specify an amount in excess of such
Electing Investor's Pro Rata Fraction in the event that one or more
Preferred Investor(s) desire not to elect to purchase their Pro Rata
Fraction). Such communication shall be delivered by hand or mailed to such
Transferring Stockholder in accordance with Section 6.5 hereof and shall,
when taken in conjunction with the Transaction Offer, be deemed to
constitute a valid, legally binding and enforceable agreement for the sale
and purchase of the Shares covered thereby to the extent of the number of
Shares, if any, allocated to such Electing Investor in accordance with the
following paragraph. In the event that one or more Preferred Investor(s)
do not elect to purchase their full Pro Rata Fraction, then any Preferred
Investors who do so elect shall have an additional five (5) days from the
date the Preferred Investors are notified of the election by any Preferred
Investors not to purchase their Pro Rata Fraction to offer to purchase, on
a pro rata basis with any other Preferred Investors who so elect, any Pro
Rata Fraction not purchased by a Preferred Investor. In the event that the
price set forth in the Offer Notice is stated in consideration other than
cash or cash equivalents, the Board of Directors of the Company may
determine the fair market value of such consideration, reasonably and in
good faith, and the Electing Investors may, at their option, exercise their
Right of Last Refusal by payment of such fair market value in cash or cash
equivalents.
Upon the expiration of thirty (30) days following receipt of the Offer
Notice by all Preferred Investors, the Transferring Stockholder shall
notify all of the Preferred Investors as to how many of the Shares subject
to the Offer Notice have been subscribed for and, after the expiration of
the five (5) day overallotment period thereafter, the number of Shares to
be purchased by each Electing Investor shall be determined as follows: (x)
there shall first be allocated to each Electing Investor a number of Shares
equal to the lesser of (A) the number of Shares as to which such Electing
Investor accepted the Transaction Offer or (B) such Electing Investor's Pro
Rata Fraction, and (y) the balance, if any, not allocated under clause (x)
above, shall be allocated to those Electing Investors who accepted the
Transaction Offer as to a number of Shares which exceeded their respective
Pro Rata Fractions, in each case on a pro rata basis in proportion to the
amount of such excess. The closing for any purchase of Shares to the
Electing Investors hereunder shall take place within thirty (30) days after
the expiration of the first thirty-day period following the Electing
Investors' receipt of the Offer Notice (and, if applicable, the additional
five (5) day overallotment period) at the place and on the date specified
by a majority-in-interest of the Electing Investors.
8
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(c) In the event that the Preferred Investors do not elect to
exercise, in the aggregate, the Right of Last Refusal with respect to all
of the Shares proposed to be sold, the Transferring Stockholder may sell
all such Shares proposed to be sold to the Offeror on the terms and
conditions set forth in the Offer Notice, subject to the restrictions set
forth in the last paragraph of Section 3.1 and the further provisions of
Section 3.3. If the Transferring Stockholder's transfer to an Offeror is
not consummated in accordance with the terms of the Transaction Offer
within the later of (i) ninety (90) days after the expiration of the
periods for exercise by the Preferred Stockholders of the Right of Last
Refusal and the Co-Sale Option set forth in Section 3.3 below, if
applicable, and (ii) the satisfaction of all governmental approval or
filing requirements, the Transaction Offer shall be deemed to lapse, and
any Transfers of Shares pursuant to such Transaction Offer shall be deemed
to be in violation of the provisions of this Agreement unless the Preferred
Investors are once again afforded the Right of Last Refusal provided for
herein with respect to such Transaction Offer.
SECTION 3.3. CO-SALE OPTION. In the event that any Transferring
Stockholder receives a Transaction Offer from an Offeror, and the Right of Last
Refusal is not exercised with respect to all of the Shares proposed to be sold,
such Transferring Stockholder may Transfer such Shares only pursuant to and in
accordance with the following provisions of this Section 3.3:
(a) Each of the Investors and the Founding Stockholders, other
than the Transferring Stockholder if it, he or she is also an Investor or
Founding Stockholder, shall have the right, subject to the provisions of
Section 3.3(f) below, to participate in the Transaction Offer on the terms
and conditions herein stated, which right shall be exercisable upon written
notice to the Transferring Stockholder within the later of (i) thirty (30)
days after delivery to it of the Offer Notice and (ii) ten (10) days after
the Transferring Stockholder notifies the Investors and the Founding
Stockholders in writing that the Preferred Investors have not collectively
elected to exercise the Right of Last Refusal with respect to all of the
Shares proposed to be sold (the "Co-Sale Option").
(b) Each of the Investors and the Founding Stockholders, other
than the Transferring Stockholder if it, he or she is also an Investor or
Founding Stockholder (each such Investor and Founding Stockholder, a
"Selling Investor"), shall have the right, subject to the provisions of
Section 3.3(f) below, to sell a portion of its Shares pursuant to the
Transaction Offer which is equal to or less than the product obtained by
multiplying (i) the total number of Shares subject to the Transaction Offer
by (ii) a fraction, the numerator of which is the total number of Shares of
Common Stock owned by such Selling Investor on the date of the Offer Notice
on an as converted basis (including any Shares of Common Stock that may be
received upon conversion of the Preferred Stock), and the denominator of
which is the total number of Shares of Common Stock then held
9
<PAGE>
by all Investors, Founding Stockholders and the Transferring Stockholder on
the date of the Offer Notice on an as converted basis (including any Shares
of Common Stock that may be received upon conversion of the Preferred
Stock). To the extent one or more Investors and/or Founding Stockholders
elect not to sell, or fail to exercise their right to sell, the full amount
of such Shares which they are entitled to sell pursuant to this Section
3.3, the other Investors' and/or Founding Stockholders' rights to sell
Shares shall be increased proportionately and the other Investors and/or
Founding Stockholders shall have an additional five (5) days from the date
upon which they are notified of such election or failure to exercise in
which to increase the number of Shares to be sold by them hereunder.
(c) Within ten (10) days after the date by which the Investors
and the Founding Stockholders were first required to notify the
Transferring Stockholder of their intent to participate, the Transferring
Stockholder shall notify each Selling Investor of the number of Shares held
by such Selling Investor that will be included in the sale and the date on
which the Transaction Offer will be consummated, which shall be no later
than the later of (i) thirty (30) days after the date by which the Selling
Investors were required to notify the Transferring Stockholder of their
intent to participate and (ii) the satisfaction of any governmental
approval or filing requirements, if any.
(d) Each of the Selling Investors may effect its participation
in any Transaction Offer hereunder by delivery to the Offeror, or to the
Transferring Stockholder for delivery to the Offeror, of one or more
instruments or certificates, properly endorsed for transfer, representing
the Shares it elects to sell therein. At the time of consummation of the
Transaction Offer, the Offeror shall remit directly to each Selling
Investor that portion of the sale proceeds to which each Selling Investor
is entitled by reason of its participation therein (less any adjustments
due to the conversion of any convertible securities or the exercise of any
exercisable securities).
(e) In the event that the Transaction Offer is not consummated
within the period required by subsection (c) hereof or the Offeror fails to
timely remit to each Selling Investor its portion of the sale proceeds, the
Transaction Offer shall be deemed to lapse, and any Transfers of Shares
pursuant to such Transaction Offer shall be deemed to be in violation of
the provisions of this Agreement unless the Transferring Stockholder once
again complies with the provisions of Section 3.2 and this Section 3.3
hereof with respect to such Transaction Offer.
(f) To the extent that any Investor or Founding Stockholder
holds Shares ("Junior Shares") which are junior or inferior in terms of
rights to the Shares subject to purchase under such Transaction Offer
(e.g., the Common Stock is junior to the Preferred
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Stock and the Diluted Convertible Preferred Stock is junior to the
Preferred Stock), the right of such Investor or Founding Stockholder to
participate in a Transaction Offer and to sell a portion of its Shares
pursuant to such Transaction Offer shall be conditioned upon either (i) the
consent of the Offeror to purchase such Junior Shares on the same terms and
conditions (including price) stated in the Transaction Offer or (ii) the
willingness of the Offeror to purchase such Junior Shares on such other
terms and conditions as may be acceptable to such Investor or Founding
Stockholder, as the case may be, provided that in either case such consent
or agreement is obtained within the specified time period set forth in
subsection (c) hereof. Nothing herein shall be construed to impose any
"good faith" or other obligation on the Offeror (or any Transferring
Stockholder or Selling Investor) to grant such consent or negotiate such
agreement.
SECTION 3.4. DRAG-ALONG OBLIGATIONS.
(a) In the event that Investors holding both (i) the applicable
percentage of the issued and outstanding Shares of Common Stock (treating
for such purposes each share of issued and outstanding Preferred Stock as
the number of issued and outstanding Conversion Shares into which such
Preferred Stock may be converted) specified below and (ii) sixty-six and
two-thirds percent (662/3%) of the issued and outstanding Shares of
Preferred Stock determine (A) to sell or otherwise dispose of all or
substantially all of the assets of the Company, or Shares representing a
majority of the Common Stock on a fully-diluted, as converted basis, to any
non-Affiliate(s) of the Company or any of the Investors, or (B) to cause
the Company to merge with or into or consolidate with any non-Affiliate(s)
of the Company or any of the Investors (in each case, the "Buyer") in a
bona fide negotiated transaction (a "Sale"), each of the Stockholders,
including any of their respective Permitted Transferees, shall be obligated
to and shall upon the written request of Investors holding both (x) the
applicable percentage of the issued and outstanding Shares of Common Stock
(treating for such purposes each share of issued and outstanding Preferred
Stock as the number of issued and outstanding Conversion Shares into which
such Preferred Stock may be converted) specified below and (y) sixty-six
and two-thirds percent (662/3%) of the issued and outstanding Shares of
Preferred Stock: (I) sell, transfer and deliver, or cause to be sold,
transferred and delivered, to the Buyer, his, her or its Shares (including
for this purpose all of such Stockholder's Shares that presently or as a
result of any such transaction may be acquired upon the exercise of options
(following the payment of the exercise price therefore)) on substantially
the same terms applicable to the Investors (with appropriate adjustments to
reflect the conversion of convertible securities, the redemption of
redeemable securities and the exercise of exercisable securities as well as
the relative preferences and priorities of the Preferred Stock); and (II)
execute and deliver such instruments of conveyance and transfer and take
such other action, including voting such Shares in favor of any Sale
proposed by the Investors and executing any purchase agreements, merger
agreements,
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indemnity agreements, escrow agreements or related documents, as the
Investors or the Buyer may reasonably require in order to carry out the
terms and provisions of this Section 3.4.
For purposes of this Section 3.4(a), the applicable percentage of the
Shares of the issued and outstanding Common Stock (treating for such
purposes each share of issued and outstanding Preferred Stock as the number
of issued and outstanding Conversion Shares into which such Preferred Stock
may be converted) shall mean the following percent for the following
periods:
PERIOD PERCENT
Closing Date through December 31, 1996 66.0%
January 1, 1997 through March 31, 1997 64.5%
April 1, 1997 through June 30, 1997 63.0%
July 1, 1997 through September 30, 1997 61.5%
October 1, 1997 through December 31, 1997 60.0%
January 1, 1998 through March 31, 1998 58.5%
April 1, 1998 through June 30, 1998 57.0%
July 1, 1998 through September 30, 1998 55.5%
October 1, 1998 through December 31, 1998 54.0%
January 1, 1999 through March 31, 1999 52.5%
April 1, 1999 and thereafter 51.0%
(b) In the event of a Sale to a Buyer as contemplated in Section
3.4(a) above, each of the Founding Stockholders shall, in the event that
the Investors do not exercise their "drag-along" rights in Section 3.4(a)
above, have the right to require the Investors to include such Founding
Stockholder's Shares in the Sale on the same terms and conditions,
including price and type, as the Investors' Shares, which such right shall
be exercisable by the delivery of written notice to the Company and each of
the Investors at least fifteen (15) days prior to the date proposed for the
closing of the Sale.
(c) Not less than thirty (30) days prior to the date proposed
for the closing of any Sale, the Investors shall give written notice to
each Founding Stockholder, setting forth in reasonable detail the name or
names of the Buyer, the terms and conditions of the Sale, including the
purchase price, and the proposed closing date. In furtherance of the
provisions of this Section 3.4, each of the Founding Stockholders hereby
(i) irrevocably appoints BEDCO (as defined below) as its agent and
attorney-in-fact (the "Agent") (which such appointment shall be deemed
coupled with an interest and irrevocable and have full power of
substitution) to execute all agreements, instruments and
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certificates and take all actions necessary or desirable to effectuate any
Sale hereunder, and (ii) grants to the Agent a proxy (which shall be deemed
to be coupled with an interest and irrevocable) to vote the Shares held by
such Stockholder and exercise any consent rights applicable thereto in
favor of any Sale hereunder; PROVIDED, HOWEVER, that the Agent shall not
exercise such powers-of-attorney or proxies with respect to any Stockholder
unless such Stockholders are in breach of their obligations under this
Section 3.4.
(d) Each Stockholder participating in the Sale pursuant to the
"drag-along" rights in Section 3.4(a) shall deliver to the Buyer at a
closing to be held at the offices of the Company (or such other place as
the parties agree), one or more certificates, properly endorsed for
transfer, representing all the Shares (including vested options) owned by
such Stockholder, and each such Stockholder shall make such representations
and warranties, and shall enter into such agreements, as are customary and
reasonable in the context of the Sale, including, without limitation,
representations and warranties (and indemnities with respect thereto) that
the Buyer (or interests therein) is receiving good and marketable title to
such Shares (or interests therein), free and clear of all pledges, security
interests or other liens. In addition, the Stockholders shall reasonably
cooperate and consult with each other in order to effect the Sale described
in this Section 3.4, including the determination of the appropriate scope
of, or limitations or exceptions to, representations and warranties to be
made in connection with such Sale and the preparation of disclosure
schedules with respect thereto.
SECTION 3.5 CONTEMPORANEOUS TRANSFERS. If two or more Stockholders
propose concurrent transfers which are subject to this Article III, then the
relevant provisions of Sections 3.2 and 3.3 shall apply separately to each such
proposed transfer.
SECTION 3.6. PROHIBITED TRANSFERS. If any Transfer is made or attempted
contrary to the provisions of this Agreement, such purported Transfer shall be
void AB INITIO; the Company, the Investors and the other Stockholders shall
have, in addition to any other legal or equitable remedies which they may have,
the right to enforce the provisions of this Agreement by actions for specific
performance (to the extent permitted by law); and the Company shall have the
right to refuse to recognize any Transferee as one of its stockholders for any
purpose. Without limitation of the foregoing, each of the Investors and
Stockholders further agrees that the provisions of Section 7.9 shall apply in
the event of any violation or threatened violation of this Agreement.
SECTION 3.7. EXCHANGE OF VOTING SECURITIES FOR NON-VOTING SECURITIES FOR
BANK HOLDING COMPANY ACT PURPOSES.
(a) As long as any Shares of Class B Common Stock are outstanding,
before the Company redeems, purchases or otherwise acquires, directly or
indirectly, or converts
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or takes any action with respect to the voting rights of, any shares of any
class of its capital stock or any securities convertible into or
exchangeable for any shares of any class of its capital stock (other than
(i) a conversion of Class B Common Stock into Class A Common Stock, (ii) a
conversion of shares of Preferred Stock into shares of Common Stock and
(iii) a conversion of shares of Series A Preferred Stock into shares of
Diluted Convertible Preferred Stock), the Company shall give written notice
of such pending action to each holder of Shares of Class B Common Stock.
Upon the written request of any such holder made within ten (10) days after
its receipt of any such notice, stating that after giving effect to such
action such holder would have a Regulatory Problem, the Company shall defer
taking such action for such period (not to extend beyond thirty (30) days
after such holder's receipt of the Company's original notice) as such
holder reasonably requests to permit it and its Affiliates to reduce the
quantity of the Company's voting securities they own in order to avoid the
Regulatory Problem. For purposes of this Section 3.7 only, a "Regulatory
Problem" (as defined in Section 3.1(f)) shall not include prohibitions
arising under the SBIC Regulations.
(b) At the request of Toronto Dominion or any of its affiliates at
any time (whether in connection with any action by the Company referred to
in subparagraph (a) above or otherwise), the Company shall exchange with
such Investor for such number of shares of Class A Common Stock then held
by such Investor as it designates a like number of Shares of Class B Common
Stock. In the event of any such exchange of Shares of Class B Common Stock
for Shares of Class A Common Stock, the holders of such Shares of Class B
Common Stock shall be entitled to all the rights which such holders had
pursuant to this Agreement, the Stock Purchase Agreement and the
Registration Rights Agreement as holders of Class A Common Stock
(including, without limitation, the right to have such shares treated as
"Class B Common Stock" and as shares that may be converted into
"Registrable Securities," as applicable).
ARTICLE IV RIGHTS TO PARTICIPATE IN FUTURE ISSUANCES
The Company hereby covenants and agrees that it will not sell or issue any
shares of capital stock of the Company, or other securities convertible into or
exchangeable for capital stock of the Company, or options, warrants or rights
carrying any rights to purchase capital stock of the Company (the "Additional
Equity Securities"), other than Excluded Offerings (as defined below), unless
the Company first notifies the Investors of the proposed issuance of Additional
Equity Securities and submits an offer to the Investors identifying the terms of
the proposed sale (including price, number or aggregate principal amount of
securities and all other material terms), and offers to each Investor the
opportunity to purchase its pro rata share of such Additional Equity Securities.
Each Investor's pro rata share of any such Additional Equity Securities shall be
based upon the ratios which the Shares of Common Stock held by such Investor
(determined on
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an as converted basis after giving effect to the conversion of any Preferred
Stock) bears to all of the Shares of the Company determined on a fully-diluted,
as converted basis. For purposes of this Article IV, "Excluded Offerings" shall
consist of (i) issuances made in connection with an acquisition of a
non-Affiliate of the Company (whether by acquisition of assets or capital stock,
merger or consolidation) or a joint venture or strategic alliance with a
non-Affiliate of the Company, (ii) issuances made to officers, directors,
employees, consultants or agents of the Company pursuant to the Company's 1995
Stock Option Plan, the Company's 1996 Stock Option Plan (together, the "Plans")
or other compensation plans which have been adopted and approved by the
Compensation Committee of the Board of Directors, (iii) Conversion Shares issued
upon the conversion of the Preferred Stock, (iv) capital stock issued upon the
exercise, conversion or exchange of Additional Equity Securities that were
previously sold in compliance with the terms of this Article IV, (v) shares
issued in connection with a duly authorized stock split, stock dividend or
recapitalization, (vi) Diluted Convertible Preferred Stock issued in accordance
with the Charter and (vii) warrants issued to any institutional lender in
connection with any debt financing permitted under the Purchase Agreement.
The Company's offer to the Investors shall be irrevocable and remain open
for a period of thirty (30) days. Each Investor electing to purchase any
Additional Equity Securities shall provide a written notice to the Company
within such period indicating the amount it elects to purchase (which notice may
specify an amount in excess of such Investors pro rata share of the Additional
Equity Securities in the event that other Investors do not elect to purchase
their full pro rata share). Any Additional Equity Securities so offered to the
Investors and which are not purchased pursuant to such offer shall be sold to
the Investors which have elected to purchase in excess of their pro rata share
based upon their relative excess purchase indications and, if any Additional
Equity Securities remain unpurchased, may be sold by the Company to any other
Person on terms and conditions, including price, not more favorable to such
Person than those set forth in such offer within ninety (90) days of the date of
such offer. In the event that the Company has not sold the Additional Equity
Securities within such ninety-day period, the Company shall not thereafter issue
or sell such Additional Equity Securities without first complying with the terms
of this Article IV.
ARTICLE V ELECTION OF DIRECTORS
SECTION 5.1. BOARD COMPOSITION. The number of directors of the Company
shall be as set forth in the By-laws of the Company, and the Stockholders agree
to vote all of their respective shares, and to take such other actions as are
necessary, so as to fix the number of directors at no more than eight (8)
directors initially, subject to increase to nine (9) directors as provided
herein. The Stockholders agree to vote their respective shares as follows:
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(a) The Preferred Investors shall vote as a class to elect two
directors as follows:
(i) one (1) individual nominated by BancBoston Ventures
Inc. ("BancBoston"), who shall initially be, and is duly elected
hereby, Sandy Anstey (the "BancBoston Nominee"), and hereafter
such individual as shall be designated by BancBoston; and
(ii) one (1) individual nominated by GCC Investments, Inc.
("GCC"), who shall initially be, and is duly elected hereby,
Michael A. Greeley (the "GCC Nominee"), and hereafter such
individual as shall be designated by GCC.
(b) The Stockholders, including the Preferred Investors, shall vote
together as one class to elect the remaining six (6) of the directors, as
follows:
(i) one (1) individual nominated by the Founding Stockholders,
who shall initially be James A. Queen;
(ii) one (1) individual nominated by Burr, Egan, Deleage & Co.,
and its Affiliates ("BEDCO"), who shall initially be Robert F. Benbow;
(iii)one (1) individual nominated by EOS Partners, L.P.,
SBIC, who shall initially be Marc H. Michel;
(iv) one (1) individual nominated by Kingdon Associates, L.P.,
and its Affiliates, who shall initially be Michael Markbreiter;
(v) one (1) individual nominated by Associated RT, Inc., who
shall initially be David J. Berkman; and
(vi) one (1) individual nominated by the holders of a majority of
the Class A Common Stock issued under the Stock Purchase Agreement
dated November 14, 1995 by and between the Company and the parties
identified therein (the "1995 Stock Purchase Agreement"); provided,
however, that upon receipt by Toronto Dominion or an Affiliate thereof
of its Small Business Investment Company license from the SBA (the
"T-D SBIC"), the holders of a majority of the Shares issued to Toronto
Dominion under the 1995 Stock Purchase Agreement and held by such T-D
SBIC shall have the right to nominate any one individual to
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be a director in lieu of any person previously designated to fill such
remaining directorship. Notwithstanding any provision herein, Toronto
Dominion shall not have the right to transfer to any third party its
right to nominate a Director under this Section 5.1(b) without the
affirmative vote of a majority of the members of the Board of
Directors (other than any directors nominated by, or representing,
Toronto Dominion), if such transfer is made in connection with a
transfer by Toronto Dominion of its Shares under Section 3.1(f)
hereof.
(c) As soon as the Board of Directors, in its sole discretion, has
identified a director candidate who is not an Affiliate of either the Company or
any of the Stockholders and who has operating experience in the Company's
industry (the "Outside Nominee"), but in any event no later than June 30, 1997,
the Stockholders hereby agree that the Board of Directors shall thereupon be
increased to nine (9) and agree to vote their respective Shares for such
additional Director in favor of the Outside Nominee or such successor or
replacement individual as shall be designated from time to time by a majority of
the other Directors designated hereunder.
SECTION 5.2. COMPENSATION COMMITTEE; AUDIT COMMITTEE. The Company and
each of the Stockholders further agrees to cause the Board of Directors to
appoint and maintain a Compensation Committee of the Board of Directors which
shall have exclusive authority over all compensation and employment matters and
the administration of the Plans; PROVIDED, HOWEVER, that the Compensation
Committee may delegate standing authority to the Chief Executive Officer of the
Company to issue stock options and other compensation to consultants who are not
Affiliates of either the Company or any of the Stockholders on terms set forth
in such delegation. The Compensation Committee shall consist of no more than
three (3) persons, one of whom shall be the BancBoston Nominee. The Company and
each of the Stockholders further agrees to cause the Board of Directors to
appoint and maintain an Audit Committee of the Board of Directors which shall be
charged with, among other matters, reviewing the Company's financial statements
and accounting practices and which shall consist of no more than two (2)
persons, one (1) of which shall be the GCC Nominee and each of whom shall be
non-management members of the Board of Directors. Except as expressly set forth
herein, the Company and each of the Stockholders hereby further agrees to cause
the Board of Directors not to create any other committee thereof and not, except
as set forth above, to delegate any other action or authority to any existing
committee thereof.
SECTION 5.3. REMOVAL. Each Stockholder agrees to vote all of its shares
of the Company's capital stock having voting power (and any other shares over
which she or it exercises voting control) for the removal of any director upon
the request of the stockholder or group designating such director and for the
election to the Board of Directors of a substitute designated by such party in
accordance with the provisions of Section 5.1 hereof.
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SECTION 5.4. VACANCIES. Each Stockholder agrees to vote all shares of
the Company's capital stock having voting power (and any other shares over which
she or it exercises voting control) in such manner as shall be necessary or
appropriate to ensure that any vacancy on the Board of Directors of the Company
(occurring for any reason) shall be filled only in accordance with the
provisions of this Article V. In addition, if any Investor which is entitled to
nominate a member of the Board of Directors pursuant to the terms of Section 5.1
fails to do so within ninety (90) days after receipt of written notice from the
Company that such directorship becomes vacant, then the holders of a majority of
the issued and outstanding Common Stock (treating for such purposes each share
of issued and outstanding Preferred Stock as the number of issued and
outstanding Conversion Shares into which such Preferred Stock may be converted)
shall nominate such director (a "Replacement Director") and the Replacement
Director shall serve as a member of the Board of Directors until such Investor
exercises its rights under Section 5.1 to nominate a director, in which event
the Replacement Director shall be removed.
SECTION 5.5. INCREASE IN SIZE OF BOARD. Any increase in the size of the
Board of Directors (other than the increase from eight (8) to nine (9)
contemplated by Section 5.1(c) hereof) shall require an amendment to this
Agreement.
SECTION 5.6. ASSIGNMENT. Each Stockholder agrees, as a condition to any
Transfer of its Shares, to cause the Transferee to agree to the provisions of
this Article V, whereupon such Transferee shall be subject to the provisions
hereof as a Preferred Investor or Stockholder, as applicable, in connection with
its ownership of the Shares Transferred for purposes of this Article V.
SECTION 5.7. NO WAIVER. Any failure by any of the parties hereto to
fully exercise their rights to designate one or more directors under this
Article V at any time shall not be construed to waive or limit their rights to
designate such director(s) hereunder at any time thereafter.
SECTION 5.8. BOARD OF DIRECTORS OF SUBSIDIARY. Each of the Stockholders
agrees, with respect to the composition, election, removal and other
considerations with respect to the Board of Directors of the Company's
subsidiary, Teletrac License, Inc., to cause the Company to vote, and the
Company hereby agrees to vote, its shares of capital stock of such subsidiary in
a manner consistent with and identical to the provisions set forth above in this
Article V.
SECTION 5.9. EXPENSES. The Company hereby agrees to reimburse each
member of the Board of Directors for his or her reasonable and documented travel
and other out-of-pocket expenses (to the extent consistent with the Company's
policies related thereto, which do provide for reimbursement of directors'
travel expenses and which have been delivered to the Investors prior to the date
hereof) incurred in connection with matters relating to such director's
attendance
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at meetings of the Board of Directors or performing such other business on
behalf of the Company.
SECTION 5.10. OBSERVER RIGHTS. For so long as any Investor and its
Affiliates (i) owns at least five percent (5%) of the issued and outstanding
Common Stock of the Company (treating for such purposes each share of issued and
outstanding Preferred Stock as the number of issued and outstanding Conversion
Shares into which such Preferred Stock may be converted) and (ii) does not have
a representative serving on the Board of Directors pursuant to Section 5.1
hereof, such Investor (or an Affiliate thereof) shall be entitled to notice of
and to have one representative (an "Observer") attend, at its own expense,
meetings of the Board of Directors or any of its committees; PROVIDED, HOWEVER,
that any such Observer (a) shall not be entitled to participate in the
discussions, deliberations or voting of the Board of Directors or such
committees and (b) shall be excluded from any meetings or deliberations if the
Board of Directors reasonably determines that the inclusion of such Observer
might compromise or waive the attorney-client privilege for any material matters
discussed therein.
ARTICLE VI RESTRICTIONS AND LIMITATIONS
The Company shall not, without the affirmative vote or written consent of
the holders of a majority of the issued and outstanding shares of Common Stock
and Preferred Stock, voting as a single class on an as converted basis (and, to
the extent expressly provided herein, the affirmative vote or consent of a
greater percentage of holders of Preferred Stock voting separately):
(a) Authorize or issue, or obligate itself to issue, any other equity
security senior to or on a parity with the Preferred Stock as to
liquidation preferences, redemptions or dividend rights or with any special
voting rights (other than with respect to issuances of any Diluted
Convertible Preferred Stock);
(b) Incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any new or additional indebtedness or
liability (except to the extent expressly permitted under the Purchase
Agreement);
(c) Redeem, purchase or otherwise acquire for value (or pay into or
set aside for a sinking fund for such purpose) any shares of Common Stock
or of any other class of capital stock of the Company or any of the
Company's outstanding options, warrants or convertible or exchangeable
securities, except for repurchases of shares of Common Stock at cost by the
Company under employee stock plans and programs approved by the Board of
Directors;
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(d) Enter into any transaction or agreement with: any officer,
director or shareholder of the Company or any wholly- or partially-owned
subsidiary of the Company, or any entity that controls, is controlled by or
under common control with, the Company, except for any transaction or
agreement on terms no less favorable to the Company than would be available
in a bona fide arm's-length transaction with a non-affiliated person or
entity and which has been approved by the Audit Committee of the Board of
Directors of the Company;
(e) Authorize any merger or consolidation of the Company with or into
any other corporation, partnership or entity (with respect to which less
than a majority of the outstanding voting power of such surviving
corporation is held by stockholders of the Company immediately prior to
such event) or permit the sale of all or any material portion of the
capital stock or assets of the Company (other than sales in the ordinary
course of business and consistent with past practices);
(f) Authorize or permit the reorganization, liquidation, dissolution
or winding up of the Company, without the vote or affirmative written
consent of holders of both a majority of the issued and outstanding shares
of Common Stock and sixty-six and two-thirds percent (662/3%) of the
outstanding shares of Preferred Stock;
(g) Without the vote or affirmative written consent of holders of
eighty percent (80%) of the outstanding shares of Preferred Stock, amend
the charter documents of the Company so as to adversely affect the rights
of the holders of Preferred Stock with respect to dividends, liquidation
preferences or redemption, or, without the vote or affirmative written
consent of holders of at least sixty-six and two-thirds percent (662/3%) of
the outstanding shares of Preferred Stock, amend the charter documents or
by-laws of the Company in any manner that adversely affects any other
preferences, powers, rights or privileges of the Preferred Stock; or
(h) Increase or decrease (other than by conversion as permitted
hereby) the total number of authorized shares of Preferred Stock.
ARTICLE VII MISCELLANEOUS PROVISIONS
SECTION 7.1. SURVIVAL OF REPRESENTATIONS AND COVENANTS. Each of the
parties hereto agrees that each representation, warranty, covenant and agreement
made by each of them in this Agreement or in any certificate, instrument or
other document delivered pursuant to this Agreement is material, shall be deemed
to have been relied upon by the other parties and shall remain operative and in
full force and effect after the date hereof regardless of any investigation.
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This Agreement shall not be construed so as to confer any right or benefit upon
any Person other than the parties hereto and their respective successors and
permitted assigns to the extent contemplated herein.
SECTION 7.2. TERM. This Agreement and the provisions herein contained
shall remain in effect until the earlier of: (i) the closing of a Qualified
Public Offering; (ii) the closing of a Public Offering (as defined in Section
4(b) of the terms of the Preferred Stock contained in the Charter); or (iii) a
sale of the Company.
SECTION 7.3. LEGEND ON SECURITIES. The Company, the Preferred Investors
and the Stockholders acknowledge and agree that the following legend shall be
typed on each certificate evidencing any of the securities held at any time by
any of the Stockholders or their Permitted Transferees:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND
MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR
THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. THESE
SECURITIES ARE ALSO SUBJECT TO THE PROVISIONS OF A CERTAIN STOCKHOLDERS'
AGREEMENT, DATED AS OF DECEMBER __, 1996, INCLUDING CERTAIN RESTRICTIONS ON
TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
SECTION 7.4. AMENDMENT AND WAIVER. Any party may waive any provision
hereof intended for its benefit in writing. No failure or delay on the part of
any party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to any party hereto
at law or in equity or otherwise. This Agreement may be amended with the prior
written consent of the Company and the holders of sixty-six and two-thirds
percent (66 2/3%) of each of the Common Stock and the Preferred Stock; PROVIDED,
HOWEVER, that any amendment which directly, materially and adversely affects any
right specifically granted to a particular Investor or Stockholder in a manner
different than the other Investors or Stockholders shall not be effective unless
such Person has consented to that amendment. All actions by the Company
hereunder shall be taken by or upon the direction of a majority of the directors
designated, from time to time, pursuant to Article V hereof.
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SECTION 7.5. NOTICES. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given,
delivered and received (a) if delivered personally or (b) if sent by telex or
facsimile, registered or certified mail (return receipt requested) postage
prepaid, or by courier guaranteeing next day delivery, in each case to the party
to whom it is directed at the address set forth opposite each party's name on
the signature page hereto (or at such other address for any party as shall be
specified by notice given in accordance with the provisions hereof, provided
that notices of a change of address shall be effective only upon receipt
thereof. Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be effective three
days after mailing, notices sent by telex shall be effective when answered back,
notices sent by facsimile shall be effective when receipt is acknowledged, and
notices sent by courier guaranteeing next day delivery shall be effective on the
earlier of the second business day after timely delivery to the courier or the
day of actual delivery by the courier:
SECTION 7.6. ACKNOWLEDGMENT. The Stockholders hereby expressly
acknowledge and consent to the Board of Directors taking any action to sell or
otherwise liquidate the Company in furtherance of its obligations under Section
5(c) of the terms of the Preferred Stock contained in the Charter.
SECTION 7.7. HEADINGS. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
SECTION 7.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
SECTION 7.9. REMEDIES; SEVERABILITY. It is specifically understood and
agreed that any breach of the provisions of this Agreement by any Person subject
hereto will result in irreparable injury to the other parties hereto, that the
remedy at law alone will be an inadequate remedy for such breach, and that, in
addition to any other legal or equitable remedies which they may have, such
other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law) and the Company may refuse to
recognize any unauthorized Transferee as one of its stockholders for any
purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement.
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason,
22
<PAGE>
the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
SECTION 7.10. ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and other agreements specifically contemplated hereby and
thereby, is intended by the parties as a final expression of their agreement and
intended to be complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. This Agreement and the Purchase Agreement and the other
agreements contemplated hereby and thereby (including the exhibits hereto and
thereto) supersede all prior agreements and understandings between the parties
with respect to such subject matter. In furtherance of the foregoing, the
Company and the Stockholders expressly agree that the Stockholders' Agreement
dated as of November 14, 1995 by and among the Company and the parties
identified therein is hereby terminated and of no further force and effect.
SECTION 7.11. ADJUSTMENTS. All references to share prices and amounts
herein shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of the
Company.
SECTION 7.12 CERTAIN PROVISIONS APPLICABLE TO SBIC AND BANK STOCKHOLDERS.
Sections 3.1(f) and 3.7 hereof contain certain provisions that are included
herein solely for the benefit of certain Stockholders that are or may become a
small business investment company ("SBIC") subject to the SBA or a bank holding
company or bank holding company subsidiary subject to the Bank Holding Company
Act. A Stockholder may not assert any rights or claims with respect to such
provisions arising at any time after it has ceased to be a SBIC or bank holding
company or bank holding company subsidiary, as appropriate.
SECTION 7.13 PARTICIPATION OF ALIENS. In the event that the Board of
Directors determines, after consultation with legal counsel, that the Company's
capital stock ownership structure (including, without limitation, the percentage
of the Company's capital stock held by or for the account of any Alien or
Aliens, as determined in accordance with applicable rules and policies of the
Federal Communications Commission) violates or otherwise is not in compliance
with Section 310(b) of the Communications Act of 1934, as amended (the
"Communications Act"), each of the parties hereto hereby agrees to cooperate in
good faith, and to use their commercially reasonable, good faith efforts (which
may include seeking waivers of compliance with applicable provisions of the
Communications Act, the exchange or conversion of shares of capital stock held
by any parties hereto that are attributable to Aliens into other securities or
the disposition of such shares of capital stock on such terms as are
commercially reasonable and as may be mutually agreed to by the parties hereto),
to obtain regulatory waivers if available, to
23
<PAGE>
negotiate and implement such modifications in the ownership and capital
structure of the Company as may be necessary in order to bring such ownership
and capital structure into full compliance with Section 310(b) of the
Communications Act.
SECTION 7.14. LAW GOVERNING. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware
(without giving effect to any choice or conflicts of law principles the effect
of which would cause the application of the domestic substantive laws of any
other jurisdiction). Each party hereby waives trial by jury in any action
relating to this Agreement.
SECTION 7.15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns hereto and shall inure to the benefit of such
successors and assigns permitted hereunder, provided that any transfer or
assignment shall have complied in all respects with the provisions of Article
III hereof and PROVIDED, FURTHER, that each assignee of a Stockholder's shares
shall, as a condition to such consent to assignment, execute a Joinder Agreement
in the form attached hereto as EXHIBIT A.
24
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Stockholders'
Agreement as a sealed instrument as of the day and year first written above.
ADDRESS: COMPANY:
8900 State Line Road TELETRAC, INC., a Delaware corporation
Suite 500
Leawood, KS 66206
Attn: President By:___________________________________
Name:
Title:
INVESTORS:
Toronto Dominion Capital TORONTO DOMINION
31 West 52nd Street, 20th Floor CAPITAL (U.S.A.), INC.
New York, NY 10019
Attn: Brian A. Rich By:___________________________________
Name:
Title:
Kingdon Capital Management
Corporation KINGDON ASSOCIATES, L.P.
52 West 57th Street
New York, NY 10019 By: Kingdon Capital Management Corp.,
Attn: Michael Markbreiter its general partner
By:____________________________
Name: Mark Kingdon
Title: President
25
<PAGE>
52 West 57th Street KINGDON PARTNERS, L.P.
New York, NY 10019
Attn: Michael Markbreiter By: Kingdon Capital Management Corp.,
its general partner
By:____________________________
Name: Mark Kingdon
Title: President
52 West 57th Street M. KINGDON OFFSHORE NV
New York, NY 10019
Attn: Michael Markbreiter By: Kingdon Capital Management Corp.,
its investment advisor
By:____________________________
Name: Mark Kingdon
Title: President
Burr, Egan, Deleage & Co. ALTA SUBORDINATED DEBT
One Embarcadero Center PARTNERS III, L.P.
Suite 4050
San Francisco, CA 94111 By: Alta Subordinated Debt Management
Attn: Robert F. Benbow III, L.P.
By:_________________________
General Partner
Burr, Egan, Deleage & Co. ALTA V LIMITED PARTNERSHIP
One Embarcadero Center
Suite 4050 By: Alta V Management Partners, L.P.
San Francisco, CA 94111
Attn: Robert F. Benbow
By:_________________________
General Partner
26
<PAGE>
Burr, Egan, Deleage & Co. CUSTOMS HOUSE PARTNERS
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow By:_____________________________
General Partner
Burr, Egan, Deleage & Co. ALTA COMMUNICATIONS VI, L.P.
One Embarcadero Center
Suite 4050 By: Alta Communications VI Management
San Francisco, CA 94111 Partners, L.P.
Attn: Robert F. Benbow
By:_____________________________
General Partner
Burr, Egan, Deleage & Co. ALTA COMM S by S, LLC
One Embarcadero Center
Suite 4050
San Francisco, CA 94111 By:_____________________________
Attn: Robert F. Benbow Member
320 Madison Avenue EOS PARTNERS SBIC, L.P.
22nd Floor
New York, NY 10022 By: EOS SBIC General, L.P.
Attn: Marc H. Michel
By:_________________________
Name: Marc Michel
Title: General Partner
3 Bala Plaza East ASSOCIATED RT, INC.
Suite 502
Bala Cynwyd, PA 19004
Attn: David J. Berkman By:_________________________________
Name: David J. Berkman
Title: Executive Vice President
27
<PAGE>
100 Federal Street BANCBOSTON VENTURES INC.
Boston, MA 02110
Attn: Lars Swanson
By:______________________________
Name:
Title:
45 Underhill Boulevard NORTHWOOD VENTURES
Suite 205
Syosset, NY 11791-3419
Attn: Henry T. Wilson
By:______________________________
Name:
Title:
1300 Boylston Street CHESTNUT HILL WIRELESS, INC.
Chestnut Hill, MA 02167
Attn: Michael A. Greeley
By:________________________________
Name:
Title:
400 Post Avenue WESTBURY CAPITAL PARTNERS
Westbury, NY 11590
Attn: Jeffrey Freed By: Westbury MGP, L.P.,
its general partner
By: J.P. Fogg Co.
By:________________________
Name:
Title:
28
<PAGE>
Old City Hall BOSTON CAPITAL VENTURES
Boston, MA 02108-3204
Attn: Suresh Shanmugham
By:_________________________________
Name:
Title:
888 S.W. Fifth Avenue HIGH POINT KELLER
Suite 1220 LIMITED PARTNERSHIP
Portland, Oregon 97204
Attn: Richard B. Keller II By: High Point Management, Inc.,
its general partner
By:_____________________________
Name:
Title:
888 S.W. Fifth Avenue
Suite 1220
Portland, Oregon 97204
Attn: R. B. Keller
_________________________________
R. B. Keller
888 S.W. Fifth Avenue
Suite 1220
Portland, Oregon 97204
Attn: Richard B. Keller II
__________________________________
Richard B. Keller II
FOUNDING STOCKHOLDERS:
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206 ____________________________________
James A. Queen
29
<PAGE>
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
____________________________________
Steven D. Scheiwe
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
____________________________________
Lawrence P. Jennings
16 Marigold Road ____________________________________
Yau Yat Chuen Mrs. T.N. Markbreiter
Kowloon
Hong Kong
95 Kenney Avenue ____________________________________
Rockville Centre, NY 11570 Simon Brenner
c/o Kirkland & Ellis K&E PARTNERS II
200 East Randolph Drive
Chicago, IL 60601
By:_________________________________
Partner
45 Rockefeller Plaza REBOUL, MACMURRAY, HEWITT,
New York, NY 10011 MAYNARD & KRISTOL
Attn: Robert A. Schwed, Esq.
By:_________________________________
Partner
30
<PAGE>
EXHIBIT A
FORM OF JOINDER AGREEMENT
The undersigned hereby agrees, effective as of the date hereof, to become a
party to that certain Stockholders' Agreement (the "Agreement") dated as of
December __, 1996 by and among Teletrac, Inc. (the "Company") and the parties
named therein and for all purposes of the Agreement, the undersigned shall be
included within the term ["Management Stockholder"], ["Common Investor"],
["Preferred Investor"] and "Stockholder" (each as defined in the Agreement). As
of the date hereof the undersigned makes each of the representations and
warranties set forth in Section 2.1 of the Agreement. The address and facsimile
number to which notices may be sent to the undersigned is as follows:
___________________________________________________________________________
Facsimile No.____________________.
______________________________
[NAME OF UNDERSIGNED]
31
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
STOCKHOLDERS/OPTIONHOLDERS
INITIAL MANAGEMENT INVESTORS INVESTORS IN COMMON STOCK INVESTORS IN PREFERRED STOCK ON OR AFTER 12/___/96
("Founding Stockholders") ("Common Investors") ("Preferred Investors") ("Management Stockholders")
NAME NAME NAME NAME
<S> <C> <C> <C>
James A. Queen Toronto Dominion Toronto Dominion
Capital (U.S.A.), Inc. Capital (U.S.A.), Inc.
Steven D. Scheiwe
Kingdon Associates, L.P. Kingdon Associates, L.P.
Lawrence P. Jennings
Kingdon Partners L.P. Kingdon Partners L.P.
T.N. Markbreiter
M. Kingdon Offshore NV M. Kingdon Offshore NV
Simon Brenner
Alta Subordinated Debt Alta Subordinated Debt
K&E Partners II Partners III, L.P. Partners III, L.P.
Reboul, MacMurray, Hewitt, Alta V Limited Partnership Alta V Limited Partnership
Maynard & Kristol
Customs House Partners Customs House Partners
EOS Partners SBIC, L.P. Alta Communications VI, L.P.
Associated RT, Inc. Alta Comm S by S, LLC
EOS Partners SBIC, L.P.
Associated RT, Inc.
BancBoston Ventures Inc.
Northwood Ventures
GCC Investments, Inc.
Boston Capital Ventures
Westbury Capital Partners, L.P.
High Point Keller Limited Partnership
R.B. Keller
Richard B. Keller II
</TABLE>
32
<PAGE>
EXHIBIT 10.9
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is entered into as of December 6, 1996, by and among TELETRAC, INC., a Delaware
corporation (the "Company"), the undersigned holders of the capital stock of the
Company (the "Holders"), and those other persons and entities who have executed
or shall have executed this Agreement and whose names appear on the Schedule of
Registration Rights Holders attached hereto as EXHIBIT A, as such Schedule may
be amended from time to time pursuant to Section 13 hereof. This Agreement
amends and restates in its entirety the Amended Registration Rights Agreement
(as defined below).
WITNESSETH:
WHEREAS, the Company and certain of the Holders entered into the
Registration Rights Agreement dated as of November 14, 1995, as amended by
Amendment No. 1 to Registration Rights Agreement dated March 29, 1996 (the
"Amended Registration Rights Agreement"); and
WHEREAS, the Company and certain Holders contemporaneously herewith are
entering into a Stock Purchase Agreement (the "Convertible Preferred Stock
Purchase Agreement") pursuant to which such Holders shall purchase from the
Company Series A Redeemable Convertible Participating Preferred Stock, par value
$.01 per share (the "Series A Preferred Shares"), which Series A Preferred
Shares shall, upon automatic conversion thereof in accordance with the Charter,
be convertible into one or more series of Redeemable Convertible Participating
Preferred Stock, par value $.01 per share (the "Redeemable Convertible
Participating Preferred Stock," and including the Series A Preferred Stock, the
"Convertible Preferred Stock") of the Company; and
WHEREAS, to induce such Holders to purchase the Series A Preferred Shares,
the Company has agreed to provide the registration rights set forth in this
Agreement and the execution of this Agreement is a condition precedent to the
purchase by the Investors (as defined in the Convertible Preferred Stock
Purchase Agreement) of the Series A Preferred Shares under the Convertible
Preferred Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings:
1.1 "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
<PAGE>
1.2 "HOLDERS" shall mean and include any person or persons who have
executed this Agreement and whose names appear on the Schedule of Registration
Rights Holders or who shall, pursuant to Article 13 hereof, become parties
hereto, and any qualifying transferees under Article 11 hereof who hold
Registrable Securities.
1.3 "INITIATING HOLDERS" shall mean any Holders who in the aggregate own
not less than forty percent (40%) of the Registrable Securities; provided,
however, that after the date on which the Company has closed its Initial Public
Offering, "Initiating Holders" shall mean any Holders who in the aggregate own
not less than ten percent (10%) of the Registrable Securities.
1.4 "INITIAL PUBLIC OFFERING" shall mean the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), covering
the offer and sale of Common Stock to the public at an aggregate offering price
to the public of at least $10,000,000.
1.5 The terms, "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.6 "REGISTRABLE SECURITIES" means any and all shares of Class A Common
Stock (as defined in the Convertible Preferred Stock Purchase Agreement)
(i) issued or issuable upon conversion of the Convertible Preferred Stock,
(ii) issued under the Stock Purchase Agreement dated November 14, 1995 by and
among the Company and certain Holders, (iii) issued under the Subscription
Agreement dated March 29, 1996 by and among the Company and certain Holders,
(iv) issued or issuable upon conversion of the Class B Common Stock (as defined
in the Convertible Preferred Stock Purchase Agreement) (disregarding any
restriction on the conversion of such Class B Common Stock into Class A Common
Stock), (v) issued upon exercise of any options granted by the Company pursuant
to the Company's 1995 Stock Option Plan, the Company's 1996 Stock Option Plan or
any other compensation plans which have been adopted by and approved by the
Compensation Committee of the Board of Directors, and (vi) issued or issuable
with respect to any Securities referred to in classes (i) through (v) above,
upon any stock split, stock dividend, recapitalization or similar event, which
shares have not been sold to the public.
1.7 "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Articles 2 and 3 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of legal counsel for the Company, fees and
disbursements of one legal counsel for the selling stockholders, blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company).
1.8 "S-3 REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Article 4 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of legal counsel for the
2
<PAGE>
Company, fees and disbursements of one legal counsel for the selling
stockholders, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
1.9 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.10 "SELLING EXPENSES" shall mean all underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to the Registrable
Securities registered by the Holders.
ARTICLE 2
REQUESTED REGISTRATION
2.1 REQUEST FOR REGISTRATION. In the event the Company shall receive from
the Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to Registrable Securities
with an anticipated aggregate offering price to the public of at least
$10,000,000, the Company will:
(a) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(b) use its diligent efforts to effect such registration,
qualification or compliance as soon as practicable (including, without
limitation, undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with applicable regulations issued under the Securities
Act, and any other governmental requirements or regulations) 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 received
by the Company within 15 days after the receipt of the written notice from the
Company described in Section 2.1(a);
provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Article 2:
(i) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(ii) Within one hundred and eighty (180) days immediately
following the effective date of any registration statement pertaining to a
firmly underwritten offering of
3
<PAGE>
securities of the Company for its own account (or such lesser period as the
managing underwriters of such offering will allow); or
(iii) After the Company has effected three (3) such requested
registrations pursuant to this Article 2 (not including registrations on Form
S-3 or registrations in which the number of shares of Registrable Securities of
the Holders registered in such offering was reduced by more than fifty percent
(50%) due to underwriters' marketing limitations), each such registration has
been declared or ordered effective, and the securities offered pursuant to each
such registration have been sold, or if the Company has effected any requested
registration (other than a registration for the Company's Initial Public
Offering) pursuant to this Agreement during the previous twelve-month period (or
such shorter period as the managing underwriter of the Company's most recent
public offering will allow).
(iv) If the Company then meets the eligibility requirements
applicable to the use of Form S-3 in connection with such registration and is
able to effect such requested registration pursuant to Article 4 hereof.
(c) Subject to the foregoing clauses (i) through (iv), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
of the Initiating Holders; provided, however, that if the Company shall furnish
to such Holders a certificate signed by the President or other 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, the Company shall
have the right to defer 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 shall not be permitted to exercise such deferral right under this
Section 2.1(c) or Section 4.1(c) hereof more than once in any 360-day period).
2.2 UNDERWRITING.
(a) The distribution of the Registrable Securities covered by the
request of the Initiating Holders shall be effected by means of a firm
commitment underwriting. The right of any Holder to registration pursuant to
this Article 2 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 a majority in interest of the
other Holders and such Initiating Holders) to the extent provided herein.
(b) The Company (together with all Holders proposing to distribute
their securities through such underwriting) shall enter into an underwriting
agreement in customary form with a managing underwriter of nationally recognized
standing selected for such underwriting by a majority in interest of the Holders
of Registrable Securities included in such registration and approved by the
Company, which approval shall not be unreasonably withheld. Notwithstanding any
other provision of this Article 2, if the managing underwriter advises the
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the underwriters may exclude shares requested to
be included in such
4
<PAGE>
registration subject to the provisions of Section 2.3. The number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated amongst Holders who have requested registration of
Registrable Securities in such registration and underwriting in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No
Registrable Securities excluded from the underwriting by reason of the managing
underwriter's marketing limitation shall be included in such registration.
(c) If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such Registrable Securities a greater number of Registrable Securities held by
other Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 2.2(c).
2.3 INCLUSION OF SHARES BY COMPANY. If the managing underwriter has not
limited the number of Registrable Securities to be underwritten, the Company may
include securities for its own account or for the account of others in such
registration if the managing underwriter so agrees and if the number of
Registrable Securities held by Holders which would otherwise have been included
in such registration and underwriting will not thereby be limited. The
inclusion of such shares shall be on the same terms as the registration of
shares held by the Holders. In the event that the underwriters exclude some of
the securities to be registered, the securities to be sold for the account of
the Company and any other holders shall be excluded in their entirety prior to
the exclusion of any Registrable Securities.
ARTICLE 3
COMPANY REGISTRATION
3.1 NOTICE OF REGISTRATION TO HOLDERS. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders (including,
without limitation, under Article IV), other than (i) a registration relating
solely to employee benefit plans on Form S-8 (or any successor form) or (ii) a
registration relating solely to a Commission Rule 145 transaction on Form S-4
(or any successor form), the Company will:
(a) promptly give to each Holder written notice thereof; and
(b) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
within 15 days after receipt of such written notice from the Company described
in Section 3.1(a), by any Holder or Holders.
5
<PAGE>
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). In such event, the right of any Holder to registration pursuant to this
Article 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)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company.
(a) Notwithstanding any other provision of this Article 3, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may exclude some or all
Registrable Securities from such registration and underwriting. The Company
shall so advise all Holders of Registrable Securities, and the number of shares
of Common Stock to be included in such registration shall be allocated as
follows: first, for the account of the Company, all shares of Common Stock
proposed to be sold by the Company; second, for the account of Holders of
Registrable Securities participating in such registration, the number of shares
of Common Stock requested to be included in the registration by such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities that are proposed to be offered and sold by such Holders of
Registrable Securities at the time of filing the registration statement, and
third, for the account of any other stockholders of the Company participating in
such registration, the number of shares of Common Stock requested to be included
in the registration by such other stockholders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities that are
proposed to be offered and sold by such other stockholders of Registrable
Securities at the time of filing the registration statement; PROVIDED, HOWEVER,
that if the offering is not an Initial Public Offering, the number of shares of
Registrable Securities registered in such offering shall not be reduced to less
than forty percent (40%) of the total number of shares of securities registered
in such offering. No Registrable Securities excluded from the underwriting by
reason of the underwriters' marketing limitation shall be included in such
registration.
(b) The Company shall so advise all Holders and the other holders
distributing their securities through such underwriting of any such limitation,
and the number of shares of Registrable Securities held by Holders that may be
included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by all such Holders at the time of filing the
registration statement. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, but the Holder
shall continue to be bound by Article 8 hereof.
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ARTICLE 4
REGISTRATION ON FORM S-3
4.1 REQUEST FOR REGISTRATION.
(a) In addition to the rights set forth in Articles 2 and 3 hereof,
if a Holder or Holders request that the Company file a registration statement on
Form S-3 (or any successor to Form S-3) for a public offering of shares of
Registrable Securities the reasonably anticipated aggregate price to the public
of which would equal at least $2,000,000 and the Company is a registrant
entitled to use Form S-3 (or any successor form to Form S-3) to register such
shares for such an offering, the Company shall use its best efforts to cause
such shares to be registered for the offering as soon as practicable on Form S-3
(or any such successor form to Form S-3).
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Article 4:
(i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(ii) if the Company, within ten (10) days of the receipt of the
request of the Holder or Holders, gives notice of its BONA FIDE intention to
effect the filing of a registration statement with the Commission within
forty-five (45) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction or an offering solely
to employees); and
(iii)during the period starting with the date of filing of,
and ending on a date which is 180 days following the effective date of, a
registration statement described in (ii) above or filed pursuant to this Article
4 or Articles 2 or 3 hereof (or such shorter period as the managing underwriter
of the Company's most recent public offering may agree), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and provided, further, that no other
person or entity could require the Company to file a registration statement in
such period.
(c) Subject to the foregoing clauses (i) through (iii), the Company
shall file a registration statement on Form S-3 covering the Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request of the Holders; provided, however, that if the Company shall furnish
to such Holders 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 on or before the date filing would
be required, and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a reasonable period of not more than ninety (90) days after receipt of the
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request of the Holders (provided, however, that the Company shall not be
permitted to exercise such deferral right under this Section 4.1(c) or Section
2.1(c) hereof more than once in any 360-day period).
4.2 UNDERWRITING.
(a) The distribution of the Registrable Securities covered by the
registration on Form S-3 shall be effected by means of the method of
distribution selected by the Holders holding a majority of the Registrable
Securities covered by such registration. If such distribution is effected by
means of an underwriting, the right of any Holder to registration pursuant to
this Article 4 shall be conditioned upon such Holder's participation in such
underwriting, if any, and the inclusion of such Holder's Registrable Securities
in such underwriting.
(b) If the distribution of the Registrable Securities pursuant to
this Section 4.2 is effected by means of an underwriting, the Company (together
with all Holders proposing to distribute their securities through such
underwriting) shall enter into an underwriting agreement in customary form with
a managing underwriter of nationally recognized standing selected for such
underwriting by a majority in interest of the Holders requesting registration on
Form S-3 and approved by the Company, which approval shall not be unreasonably
withheld. Notwithstanding any other provision of this Article 4, if the
managing underwriter advises the Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
underwriters may exclude some or all of the shares requested to be included in
such registration subject to the provisions of Section 4.3; PROVIDED, HOWEVER,
the number of shares of Registrable Securities registered in such offering shall
not be reduced to less than forty percent (40%) of the total number of shares of
securities registered in such offering. The number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement. No registrable Securities excluded
from the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such registration.
(c) If the distribution of the Registrable Securities pursuant to
this Section 4.2 is effected by means of an underwriting and if any Holder of
Registrable Securities disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Holders. The Registrable Securities and/or other securities
so withdrawn shall also be withdrawn from registration; provided, however, that
if by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the same proportion used in determining the underwriter limitation
in this Section 4.2(c).
4.3 INCLUSION OF SHARES BY COMPANY. If the distribution of the
Registrable Securities pursuant to this Section 4.2 is effected by means of an
underwriting and if the managing underwriter has not limited the number of
Registrable Securities to be underwritten, the Company
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may include securities for its own account or for the account of others in such
registration if the managing underwriter so agrees and if the number of
Registrable Securities held by Holders requesting registration on Form S-3 which
would otherwise have been included in such registration and underwriting will
not thereby be limited. The inclusion of such shares shall be on the same terms
as the registration of shares held by the Holders. In the event that the
underwriters exclude some of the securities to be registered on Form S-3, the
securities to be sold for the account of the Company and any other holders shall
be excluded in their entirety prior to the exclusion of any Registrable
Securities.
ARTICLE 5
EXPENSES OF REGISTRATION
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Articles 2 and 3 hereof and all S-3
Registration Expenses shall be borne by the Company. All Selling Expenses
relating to securities registered by the Holders shall be borne by the holders
of such securities PRO RATA on the basis of the number of shares so registered.
ARTICLE 6
REGISTRATION PROCEDURES
In the case of each registration, qualification or compliance effected by
the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective and
current for a period of one hundred eighty (180) days (or such longer period as
may be necessary to accommodate the filing of amendments or supplements
necessary to comply with the Securities Act) or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) 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 jurisdiction;
(d) 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
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underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement;
(e) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Securities
Act, of the occurrence 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 in the light
of the circumstances then existing;
(f) Cause all such Registrable Securities to be quoted on the market
or listed on each securities exchange, as applicable, on which similar
securities issued by the Company are then quoted or listed;
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than
forty-five (45) days after the close of the period covered thereby (ninety (90)
days in case the period covered corresponds to the fiscal year of the Company),
an earnings statement of the Company which will satisfy the provisions of
Section 11(a) of the Securities Act; and
(h) Use its best efforts to furnish to each Holder and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a
comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Holders of Registrable Securities included in such offering or the managing
underwriter therefor reasonably requests.
ARTICLE 7
INDEMNIFICATION
7.1 The Company will indemnify each Holder, each of its officers,
directors, partners, members, beneficiaries and stockholders and such Holder's
legal counsel, investment advisers, employees, agents and independent
accountants, if any, and each person controlling any such persons within the
meaning of Section 15 of the Securities Act (each, a "Holder Indemnified
Party"), with respect to which registration, qualification or compliance has
been effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act (each, an "Underwriter Indemnified Party"), against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any
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amendment or supplement thereof, incident to any such registration,
qualification or compliance, or based on 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
any rule or regulation promulgated under the Securities Act or any state
securities laws applicable to the Company and relating to action or inaction by
the Company in connection with any such registration, qualification or
compliance, and will reimburse each such Holder Indemnified Party and
Underwriter Indemnified Party for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable to any Holder Indemnified Party or Underwriter Indemnified Party to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by such Holder Indemnified Party or such Underwriter
Indemnified Party, as the case may be, and expressly intended for use in such
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof.
7.2 Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, and each person
controlling any such persons within the meaning of Section 15 of the Securities
Act (each, a "Company Indemnified Party") and each Underwriter Indemnified
Party, if any, and each other Holder Indemnified Party against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on 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 amendment or
supplement thereto, incident to any such registration, qualification or
compliance or based on 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 such Company Indemnified Party,
Underwriter Indemnified Party or Holder Indemnified Party for any legal or any
other expenses reasonably incurred in connection with investigating, preparing
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 such registration
statement, prospectus, offering circular, other document or amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Holder and expressly intended for use in such
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof; provided, however, that the obligations of such
Holders hereunder shall be limited to an amount equal to the proceeds to each
such Holder of Registrable Securities sold as contemplated herein.
7.3 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
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such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of the Indemnified Party if
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest. The failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, unless such failure is prejudicial to the
ability of the Indemnifying Party to defend the action. 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 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 of such claim or litigation.
ARTICLE 8
LOCKUP AGREEMENT
8.1 In consideration for the Company agreeing to its obligations under
this Agreement, each Holder agrees:
(a) In connection with the Company's Initial Public Offering, upon
the request of the underwriters managing the underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of such underwriters for such period of time (not to exceed the period
commencing seven (7) days prior to the effective date of such registration and
ending one hundred and eighty (180) days after such effective date) as the
underwriters may specify; and
(b) In connection with any registration effected pursuant to Articles
2, 3 and 4 hereof, any Holder electing not to participate in, or withdrawing
from, such registration shall, upon the request of the underwriters managing the
offering of the Company's securities, not sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in such registration) without the prior
written consent of such underwriters until such period of time (not to exceed
the period commencing seven (7) days prior to the effective date of such
registration and ending ninety (90) days after such effective date) from the
effective date of such registration or, if earlier, until the distribution of
such securities is completed or the underwriters have sold all securities of the
Company allotted to them pursuant to such registration.
8.2 Notwithstanding Section 8.1 hereof, (i) no Holder shall have any
obligation to enter into the agreement described in Section 8.1 hereof unless
all executive officers and directors of the Company enter into similar
agreements, (ii) nothing herein shall prevent any Holder from making a
distribution of Registrable Securities to its affiliate that is otherwise in
compliance with applicable securities laws or, for any Holder that is a
partnership, from making a distribution of
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Registrable Securities to partners thereof that is otherwise in compliance with
applicable securities laws and (iii) nothing herein shall prevent any Holder
which is an SBIC from making a distribution or transfer of Registrable
Securities pursuant to applicable regulatory requirements under the SBIC Act.
ARTICLE 9
INFORMATION BY HOLDER
The Holder or Holders of Registrable Securities included in any
registration shall furnish in writing to the Company such information regarding
such Holder or Holders and the distribution proposed by such Holder or Holders
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
ARTICLE 10
RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration, after such time as
a public market exists for the Common Stock of the Company, the Company agrees
to:
10.1 Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public; and
10.2 Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (at any time after it has become subject to such reporting
requirements); and
10.3 So long as a Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as a Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Holder to sell any such securities
without registration.
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ARTICLE 11
TRANSFER OF REGISTRATION RIGHTS
The rights to cause the Company to register securities granted to Holders
under Articles 2, 3 and 4 hereof may be assigned in connection with any
permitted transfer or assignment of the Holder's Registrable Securities. All
transferees and assignees of the rights to cause the Company to register
securities granted to Holders under Articles 2, 3 and 4 hereof, as a condition
to the transfer of such rights, shall agree in writing to be bound by the
agreements set forth herein.
ARTICLE 12
TERMINATION OF REGISTRATION RIGHTS
The rights granted and obligations imposed pursuant to this Agreement shall
terminate as to any Holder: (i) at such time, following the Company's
registration of its Common Stock under the Exchange Act, as such Holder holds
Registrable Securities constituting less than one percent (1%) of all
outstanding shares of the Company's Common Stock; (ii) when a registration
statement with respect to the sale of all of such Holder's Registrable
Securities shall have become effective under the Securities Act and such
Registrable Securities shall have been disposed of in accordance therewith;
(iii) at such time as all of such Holder's Registrable Securities may be
distributed pursuant to Rule 144 (or any successor provisions thereto) under the
Securities Act in any three-month period; (iv) when such Holder's Registrable
Securities shall have been otherwise transferred and subsequent disposition of
such Registrable Securities shall not require registration or qualification
under the Securities Act or any similar state law then in force; or (v) on the
fifth (5th) anniversary of the closing of the Company's first firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offering and sale of Common Stock to the
public; PROVIDED, HOWEVER, that the provisions of Article 10 hereof shall
survive for so long as any Holder continues to hold any Registrable Securities.
ARTICLE 13
LIMITATIONS ON REGISTRATION RIGHTS
GRANTED TO OTHER SECURITIES
The parties hereto agree that additional holders may, with the consent of
the Company and the Holders of at least seventy-five percent (75%) of the
Registrable Securities then outstanding, be added as parties to this Agreement
with respect to any or all securities of the Company held by them; provided,
however, that 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
Registrable Securities then outstanding, enter into any agreement with any
holder or prospective holder of any securities of the Company providing for the
grant to such holder of registration rights superior to those granted herein.
Any additional parties shall execute a counterpart of this Agreement, and upon
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execution by such additional parties and by the Company, shall be considered
Holders for purposes of this Agreement, and shall be added to the Schedule of
Registration Rights Holders attached hereto as EXHIBIT A.
ARTICLE 14
MISCELLANEOUS
14.1 WAIVERS AND AMENDMENTS. With the written consent of the Company and
the holders of at least seventy-five percent (75%) of the Registrable Securities
then outstanding, the obligations and rights of the Company and the Holders
under this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a specified
period of time or indefinitely) or amended; provided, however, that no such
waiver or amendment shall reduce the aforesaid number of shares the holders of
which are required to consent to any waiver or amendment, without the consent of
all the Holders . Upon the effectuation of each such waiver or amendment, the
Company shall promptly give written notice thereof to any Holders who have not
previously consented thereto in writing. This Agreement or any provision hereof
may be amended, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the amendment, waiver,
discharge or termination is sought, except to the extent provided in this
Section 14.1.
14.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed entirely within the state without giving effect to any
choice or conflicts of law principles that would cause the application of the
domestic substantive laws of any other jurisdiction.
14.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
14.4 ENTIRE AGREEMENT. This Agreement amends, restates in its entirety and
supersedes the Amended Registration Rights Agreement and constitutes the full
and entire understanding and agreement among the parties hereto with regard to
the subject matter hereof. From and after the date hereof, the Amended
Registration Rights Agreement shall cease to be of force or effect.
14.5 NOTICES. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and received
upon delivery in person, or one business day after delivery by national
overnight courier service or by telecopier transmission with acknowledgment of
transmission receipt, or three (3) business days after deposit via certified or
registered mail, return receipt requested, in each case addressed (i) if to a
Holder, to the address set forth opposite such Holder's name on the signature
pages hereof or to such other address as such Holder shall have furnished to the
Company in writing, or (ii) if to the Company at its address as set forth on the
signature pages hereof or to such other address as the Company shall have
furnished to the Holders in writing, with a copy to the Company's legal counsel,
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Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York,
New York 10111, to the attention of Robert A. Schwed, Esq.
14.6 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
14.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
14.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
ARTICLE 15
AGGREGATION
Shares of capital stock of the Company owned by partnerships and
corporations having substantially common ownership interests or managed by the
same principals and owned by individual investors affiliated with one another
may be aggregated for the purposes of calculating the aggregate percentage of
capital stock of the Company owned by any Holder and any permitted transferee
hereunder.
[END OF TEXT]
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IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated
Registration Rights Agreement as a sealed instrument as of the day and year
first written above.
ADDRESS: COMPANY:
8900 State Line Road TELETRAC, INC., a Delaware corporation
Suite 500
Leawood, KS 66206
Attn: President By:____________________________________
Name:
Title:
HOLDERS:
Toronto Dominion Capital
31 West 52nd Street TORONTO DOMINION CAPITAL
20th Floor (U.S.A.), INC.
New York, NY 10019
Attn: Brian A. Rich
By:______________________________________
Name:
Title:
Kingdon Capital Management
Corporation KINGDON ASSOCIATES, L.P.
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter By: Kingdon Capital Management Corp.,
its general partner
By:____________________________
Name: Mark Kingdon
Title: President
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Kingdon Capital Management
Corporation KINGDON PARTNERS, L.P.
52 West 57th Street
New York, NY 10019 By: Kingdon Capital Management Corp.,
Attn: Michael Markbreiter its general partner
By:____________________________
Name: Mark Kingdon
Title: President
Kingdon Capital Management
Corporation M. KINGDON OFFSHORE NV
52 West 57th Street
New York, NY 10019 By: Kingdon Capital Management Corp.,
Attn: Michael Markbreiter its investment advisor
By:____________________________
Name: Mark Kingdon
Title: President
Burr, Egan, Deleage & Co. ALTA SUBORDINATED DEBT
One Embarcadero Center PARTNERS III, L.P.
Suite 4050
San Francisco, CA 94111 By: Alta Subordinated Debt Management
Attn: Robert F. Benbow III, L.P.
By:_________________________
General Partner
Burr, Egan, Deleage & Co. ALTA V LIMITED PARTNERSHIP
One Embarcadero Center
Suite 4050 By: Alta V Management Partners, L.P.
San Francisco, CA 94111
Attn: Robert F. Benbow
By:_________________________
General Partner
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Burr, Egan, Deleage & Co. CUSTOMS HOUSE PARTNERS
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow By:_____________________________
General Partner
Burr, Egan, Deleage & Co. ALTA COMMUNICATIONS VI, L.P.
One Embarcadero Center
Suite 4050 By: Alta Communications VI Management
San Francisco, CA 94111 Partners, L.P.
Attn: Robert F. Benbow
By:_____________________________
General Partner
Burr, Egan, Deleage & Co. ALTA COMM S by S, LLC
One Embarcadero Center
Suite 4050
San Francisco, CA 94111 By:_____________________________
Attn: Robert F. Benbow Member
EOS Partners SBIC, L.P. EOS PARTNERS SBIC, L.P.
320 Madison Avenue,
22nd Floor
New York, NY 10022 By: EOS SBIC General, L.P.
Attn: Marc H. Michel
By:_________________________
Name: Marc Michel
Title: General Partner
Associated RT, Inc. ASSOCIATED RT, INC.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Attn: David J. Berkman By:_________________________________
Name: David J. Berkman
Title: Executive Vice President
BancBoston Ventures, Inc. BANCBOSTON VENTURES INC.
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<PAGE>
100 Federal Street
Boston, MA 02110
Attn: Lars Swanson
By:_____________________________
Name:
Title:
Northwood Ventures NORTHWOOD VENTURES
485 Underhill Boulevard
Suite 205
Syosset, NY 11791-3419
Attn: Henry T. Wilson By:______________________________
CHESTNUT HILL WIRELESS, INC.
1300 Boylston Street
Chestnut Hill, MA 02167
Attn: Michael A. Greeley
By:________________________________
Name:
Title:
Westbury Capital Partners WESTBURY CAPITAL PARTNERS, L.P.
400 Post Avenue
Westbury, NY 11590 By: Westbury MGP, L.P., its
Attn: Jeffrey Freed general partner
By: J.P. Fogg Co.
By:____________________________
Name:
Title:
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<PAGE>
Boston Capital Ventures BOSTON CAPITAL VENTURES
Old City Hall
Boston, MA 02108-3204
Attn: Suresh Shanmugham
By:_________________________________
Name:
Title:
888 S.W. Fifth Avenue HIGH POINT KELLER LIMITED
Suite 1200 PARNTERSHIP
Portland, Oregon 97204
Attn: Richard B. Keller II By: High Point Management, Inc.,
its general partner
By:____________________________
Name:
Title:
S.W. Fifth Avenue
Suite 1220
Portland, Oregon 97204
Attn: R. B. Keller
By:_________________________________
R.B. Keller
S.W. Fifth Avenue
Suite 1220
Portland, Oregon 97204
Attn: Richard B. Keller II
By:_________________________________
Richard B. Keller II
James A. Queen
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206 ____________________________________
James A. Queen
21
<PAGE>
Steven D. Scheiwe
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206 ____________________________________
Steven D. Scheiwe
Lawrence P. Jennings
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206 ____________________________________
Lawrence P. Jennings
Mrs. T.N. Markbreiter
16 Marigold Road ____________________________________
Yau Yat Chuen Mrs. T.N. Markbreiter
Kowloon
Hong Kong
Simon Brenner
95 Kennedy Avenue ____________________________________
Rockville Centre, NY 11570 Simon Brenner
c/o Kirkland & Ellis K&E PARTNERS II
200 East Randolph Drive
Chicago, IL 60601
By:_________________________________
Partner
45 Rockefeller Plaza REBOUL, MACMURRAY, HEWITT,
New York, NY 10011 MAYNARD & KRISTOL
Attn: Robert A. Schwed, Esq.
By:_________________________________
Partner
22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXCHANGE AGREEMENT
Among
TELETRAC, INC.,
TELETRAC HOLDINGS, INC.
and
THE STOCKHOLDERS NAMED HEREIN
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of July 31, 1997, among TELETRAC,
INC., a Delaware corporation (the "Company"), TELETRAC HOLDINGS, INC., a
Delaware corporation ("Holdings"), and the Stockholders of the Company listed
on Schedule I hereto (the "Stockholders").
WHEREAS, the Company, Holdings and the Stockholders desire to
effect a restructuring of the equity capitalization of the Company, whereby
the Company shall become a wholly owned subsidiary of Holdings and the
Stockholders shall exchange all of their issued and outstanding shares of the
Company's Class A Common Stock, par value $.01 per share ("Company Class A
Common"), and Series A Redeemable Convertible Participating Preferred Stock,
par value $.01 per share ("Company Series A Preferred"), for shares of
Holdings' Class A Common Stock, par value $.01 per share ("Holdings Class A
Common"), and Series A Redeemable Convertible Participating Preferred Stock,
par value $.01 per share ("Holdings Series A Preferred"), respectively; and
WHEREAS, in a single overall plan and transaction, the Stockholders
have agreed, subject to the transactions and conditions described herein, to
assign and transfer to Holdings all of the capital stock of the Company held
by them in exchange for the number of shares of capital stock of Holdings
listed on Schedule II hereto; and
WHEREAS, the Company and the Stockholders have agreed that the
Company shall assign to Holdings, and Holdings shall assume, (i) the Stock
Purchase Agreement, dated November 14, 1995, by and among the Company and
certain of the Stockholders (the "Common Stock Purchase Agreement"), (ii) the
Subscription Agreement, dated March 29, 1996, among the Company and certain
of the Stockholders (the "Common Stock Subscription Agreement"), (iii) the
Stock Purchase Agreement, dated December 6, 1996, among the Company and
certain of the Stockholders (the "Preferred Stock Purchase Agreement"), (iv)
the Stockholders' Agreement, dated as of December 6, 1996, among the Company
and the Stockholders (the "Stockholders' Agreement") and (v) the Amended and
Restated Registration Rights Agreement, dated as of December 6, 1996, among
the Company and the Stockholders (the "Registration Rights Agreement").
WHEREAS, the shares of Company Series A Preferred are redeemable on
December 4, 2001 and the Stockholders have agreed that the Holdings Series A
Preferred shall have a later redemption date as provided for herein and the
terms thereof shall differ from the terms of the Company Series A Preferred
as provided for herein; and
<PAGE>
WHEREAS, the Stockholders, the Company and Holdings have agreed to
make certain amendments to the terms of the Stockholders' Agreement, the
Registration Rights Agreement, the Common Stock Purchase Agreement, the
Common Stock Subscription Agreement and the Preferred Stock Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
SECTION 1. EXCHANGE OF COMPANY CAPITAL STOCK FOR HOLDINGS CAPITAL
STOCK. (a) On and as of the "Effective Date" (as defined below), Holdings
shall (i) issue to each of the Stockholders the number of shares of Holdings
Class A Common set forth opposite the name of such Stockholder in Schedule II
annexed hereto under the column labeled "Holdings Class A Common" and (ii)
issue to each of the Stockholders the number of shares of Holdings Series A
Preferred set forth opposite the name of such Stockholder in Schedule II
annexed hereto under the column labeled "Holdings Series A Preferred".
(b) In exchange for the issuance of the Holdings Class A Common and
Holdings Series A Preferred provided for in paragraph (a) above, and in full
payment therefor as aforesaid, each Stockholder shall, on the Effective Date,
(i) assign, transfer and deliver to Holdings all of such Stockholder's right,
title and interest in and to the capital stock of the Company held by such
Stockholder as specified in said Schedule I and (ii) in that connection,
deliver to Holdings each certificate representing such capital stock,
together with a stock power duly executed in blank.
(c) The "Effective Date" shall be the earlier of (i) the date of
the issuance and sale by Holdings of certain Units consisting of Senior Notes
due 2007 (the "Senior Notes") and Warrants to purchase shares of Holdings
Class A Common, as described in the Preliminary Offering Memorandum of the
Company and Holdings dated July 16, 1997 and (ii) the date of the execution
and delivery by the Company of a definitive credit agreement as contemplated
by the bank financing proposal letter dated July 11, 1997 from Banque Paribas
and Fleet National Bank to the Company (the "Credit Agreement"); PROVIDED,
that on or prior to such date (x) the Certificate of Amendment of the
Certificate of Incorporation of Holdings substantially in the form of Exhibit
A hereto shall have been filed with the Secretary of State of the State of
Delaware, and (y) each of the current Directors of the Company shall have
been appointed to the Board of Directors of Holdings.
SECTION 2. CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF
INCORPORATION OF HOLDINGS; BOARD OF DIRECTORS OF HOLDINGS; CAPITAL STOCK OF
THE COMPANY. (a) Prior to the Effective Date,
2
<PAGE>
Holdings shall file a Certificate of Amendment of the Certificate of
Incorporation substantially in the form of Exhibit A hereto pursuant to
Section 141 of the Delaware General Corporation Law.
(b) Holdings covenants to each Stockholder that, on or prior to
the Effective Date, each of the current Directors of the Company shall be
appointed to the Board of Directors of Holdings. Holdings will enter into
Indemnification Agreements with each of its Directors substantially similar
to the Indemnification Agreements between the Company and each of its
Directors.
(c) Each of the Stockholders hereby waives any default of the
Board of Directors of the Company under paragraph (c) of Section 5.1 of the
Stockholders' Agreement. Said paragraph (c) is hereby amended to replace the
phrase "June 30, 1997" with the phrase "as soon as practicable, but in no
event later than 90 days following completion of the exchange offer for the
notes described in the Preliminary Offering Memorandum dated July 16, 1997 of
the Company".
(d) From and after the Effective Date, and upon consummation of
the transactions contemplated hereunder, Holdings will be the sole
stockholder of the Company and as of the Effective Date (A) no subscription,
warrant, option, convertible security or other right (contingent or other) to
purchase or acquire any shares of any class of capital stock of the Company
is or will be authorized or outstanding, and (B) there will be no commitment
of the Company to issue any shares, warrants, options or other such rights to
any person, other than the commitment of the Company to issue shares of
Common Stock pursuant to the terms of the Teletrac, Inc. Stock Option Plan,
dated November 14, 1995, and the Teletrac, Inc. and its Subsidiaries 1996
Stock Option and Restricted Stock Purchase Plan, and certain option
agreements issued thereunder, which shall be assumed by Holdings on or after
the Effective Date pursuant to the terms thereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF HOLDINGS. Holdings
represents and warrants to each of the Stockholders as follows:
(a) Holdings is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and is duly licensed or qualified to do business
and is in good standing in each other jurisdiction in which
it owns or leases any real property, except where the
failure so to be licensed or qualified would not, in the
aggregate, materially adversely affect it. Holdings has the
corporate power and authority to own and hold its properties
and to carry on its business as currently conducted and to
execute, deliver and perform this Agreement and the
transactions contemplated hereby.
3
<PAGE>
(b) The execution, delivery and performance by
Holdings of this Agreement has been duly authorized by all
requisite corporate action and will not violate any
provision of law, any order of any court or other agency of
government, the Certificate of Incorporation of Holdings or
any provision of any indenture, agreement or other
instrument by which Holdings is bound or affected.
(c) The Holdings Class A Common and Holdings Series A
Preferred to be issued in accordance with the terms hereof
have been duly authorized and, when issued and delivered in
accordance with this Agreement, will be validly issued and
outstanding, fully paid and nonassessable shares of Holdings
Class A Common and Holdings Series A Preferred. The shares
of Holdings Class A Common issuable upon conversion of the
Holdings Series A Preferred, when so issued, will be duly
authorized, validly issued and outstanding, fully paid and
nonassessable shares of Holdings Class A Common. The
issuance, sale and delivery of the Holdings Class A Common
and Holdings Series A Preferred hereunder is not subject to
any preemptive rights of stockholders of Holdings or to any
right of first refusal or other similar right in favor of
any person which has not been waived in its entirety.
(d) As of the date hereof, the authorized capital
stock of Holdings consists of 100 shares of Common Stock of
which no shares have issued. Except as contemplated or
permitted by this Agreement, the Credit Agreement or in
connection with the issuance of the Senior Notes, (A) no
subscription, warrant, option, convertible security or other
right (contingent or other) to purchase or acquire any
shares of any class of capital stock of Holdings is
authorized or outstanding, (B) there is no commitment of
Holdings to issue any shares, warrants, options or other
such rights or to distribute to holders of any class of its
capital stock any evidences of indebtedness or assets and
(C) Holdings has no obligation (contingent or other) to
purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
Each Stockholder represents and warrants to the Company, Holdings and each of
the other Stockholders as follows:
(a) Such Stockholder has the corporate, partnership or individual
(as the case may be) power and authority to enter into and perform this
Agreement; this Agreement has been duly authorized, executed and delivered by
such Stockholder and constitutes the legal, valid, and binding obligation of
such Stockholder, enforceable in accordance with its terms, subject to the
effect
4
<PAGE>
of bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity.
(b) Such Stockholder is the record and beneficial owner of, and
has good and valid title to, the number of shares of Company Class A Common
and Company Series A Preferred listed opposite such Stockholder's name on
Schedule I hereto, free and clear of all liens, charges, encumbrances,
pledges, conditions, restrictions, voting trust arrangements, rights and
claims of every kind (other than such as may have arisen by reason of actions
of the Company and restrictions on transfer under securities laws and the
Stockholders' Agreement) and such shares constitute all of the issued and
outstanding shares of capital stock of the Company owned by such Stockholder.
Such Stockholder has full right, power and authority to sell, exchange,
assign, transfer and convey to the Company such shares. The delivery to the
Company of such shares pursuant to the provisions of this Agreement will
transfer valid title thereto, free and clear of any lien, charge,
encumbrance, pledge, condition, restriction, voting trust arrangement, or
adverse claim or right.
(c) Such Stockholder is acquiring the shares of Holdings Class A
Common and/or Holdings Series A Preferred (and the shares of Holdings Class A
Common or Class B Common Stock, par value $.01 per share, of the Company
issuable upon conversion thereof) for its own account, for investment, and
not with a present view to any "distribution" thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). Such
Stockholder was not formed or organized for the purpose of acquiring the
shares.
(d) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and is sufficiently
knowledgeable and experienced in the making of venture capital investments so
as to be able to evaluate the risks and merits of its investment in Holdings,
and is able to bear the economic risk of loss of its investment in Holdings.
(e) Such Stockholder has had adequate opportunity to discuss the
business, management, and financial affairs of Holdings with the
representatives of Holdings.
(f) Such Stockholder understands that because the Holdings Class A
Common, Holdings Class B Common and Holdings Series A Preferred have not been
registered under the Securities Act, it cannot dispose of any or all of such
shares unless such securities are subsequently registered under the
Securities Act or exemptions from such registration are available. Such
Stockholder understands that each certificate representing such shares
5
<PAGE>
will bear the following legend or one substantially similar thereto:
The securities represented by this
certificate have not been registered under
the Securities Act of 1933 (the "Act").
These securities have been acquired for
investment and not with a view to
distribution or resale, and may not be sold,
mortgaged, pledged, hypothecated or otherwise
transferred without an effective registration
statement for such securities under the Act
or the availability of an exemption from such
registration requirements.
(g) Such Stockholder understands and agrees that the legend set
forth in Section 7.3 of the Stockholders' Agreement shall be typed on each
certificate representing shares of Holdings Class A Common, Holdings Class B
Common or Holdings Series A Preferred held at any time by such Stockholder or
such Stockholder's Permitted Transferees; PROVIDED, that the reference
therein to the Stockholders' Agreement shall be amended to refer to the
Stockholders' Agreement as amended and assigned hereby.
SECTION 5. ASSIGNMENT, ASSUMPTION AND CONSENT. (a) As of the
Effective Date, the Company does hereby transfer, assign and deliver to
Holdings all right, title and interest of the Company in and to the Common
Stock Purchase Agreement, the Common Stock Subscription Agreement, the
Preferred Stock Purchase Agreement, the Stockholders' Agreement, and the
Registration Rights Agreement (collectively, the "Agreements") and Holdings
does hereby assume all of the Company's obligations thereunder. References to
Teletrac, Inc. in each of the Agreements shall be amended to be references to
Teletrac Holdings, Inc., as appropriate, and references to the Company in
each Agreement shall be deemed to be references to Teletrac Holdings, Inc.,
as appropriate, other than references to Teletrac, Inc. or the Company in
Article II of the Preferred Stock Purchase Agreement, the Common Stock
Purchase Agreement and the Common Stock Subscription Agreement.
(b) As of the Effective Date, Holdings hereby assumes and agrees
to pay, perform and discharge when and as due all liabilities and obligations
of the Company arising under the Agreements on and after the Effective Date.
(c) Each of the Stockholders does hereby consent to the assignment
by the Company of all of its right, title and interest in and to the
Agreements, and the delegation of its duties under such Agreements, to
Holdings. Each Stockholder acknowledges and agrees that, notwithstanding
anything in the Agreements to the contrary, the Company shall have no
liability
6
<PAGE>
or obligation whatsoever thereunder with respect to any period from and after
the Effective Date, and that Holdings shall be solely responsible for the
same. Notwithstanding the foregoing, it is understood that the Stockholders
do not waive hereunder any claims they may have against the Company arising
prior to the Effective Date, subject in any event to Section 8 hereof.
SECTION 6. AMENDMENT OF AGREEMENTS. (a) The parties hereto
hereby agree that on the Effective Date the Preferred Stock Purchase
Agreement shall be amended as follows:
(i) Section 4.12 shall be amended and restated in its
entirety as follows:
"4.12 DISTRIBUTIONS ON, AND REDEMPTION OF, CAPITAL
STOCK. Except as otherwise expressly provided in this
Agreement or in the Charter, the Company will not declare or
pay any dividends or make any distributions of cash,
property or securities of the Company with respect to any
shares of its Common Stock or any other class of its capital
stock, or directly or indirectly purchase, redeem, defease,
retire or otherwise acquire or retire for value any shares
of Common Stock or of any other class of capital stock of
the Company or any of the Company's outstanding options,
warrants or convertible or exchangeable securities, except
for repurchases of shares of Common Stock at cost by the
Company under employee stock plans and programs approved by
the Board of Directors; PROVIDED, HOWEVER, that this
restriction shall not apply to the repurchase of shares of
the Common Stock pursuant to stock repurchase agreements
under which the Company has the option to repurchase such
shares upon the occurrence of certain events, including the
termination of employment and involuntary transfers, by
operation of law, provided that the repurchase price paid by
the Company does not exceed the lesser of (i) the purchase
price paid to the Company for such shares and (ii) the fair
market value of such shares at the time of such repurchase
(as determined by the Board of Directors in its sole
discretion). Any redemption repurchase or other acquisition
by the Company of any shares of its capital stock shall be
made in compliance with all laws, including, but not limited
to, federal and state securities laws."
(ii) Section 4.13 (a)(ii) shall be amended and
restated in its entirety as follows:
"(ii) Create, incur, assume, become liable for,
or permit to exist any indebtedness for borrowed money,
capital leases, or other similar commitments or
obligations which, for any one such borrowing or series
of related borrowings, is in excess of $250,000 other
than (A) the incurrence of up to $30 million of senior
debt
7
<PAGE>
under a credit agreement between Teletrac, Inc. and
Banque Paribas and Fleet National Bank, as agents, on
terms substantially similar to those contemplated by
the financing proposal letter dated July 11, 1997 from
Banque Paribas and Fleet National Bank to Teletrac,
Inc. (the "Credit Facility"), (B) the issuance of up to
$115 million principal amount of senior notes under an
indenture on terms substantially similar to those
described in the Preliminary Offering Memorandum of the
Company dated July 16, 1997 (the "Indenture"), (C) the
incurrence of any additional debt expressly permitted
under the terms of the Credit Facility or the Indenture
as in effect on the date of execution and delivery
thereof, and (D) any indebtedness relating to the
refinancing of any indebtedness permitted under clause
(A), (B), or (C), provided that such refinancing
indebtedness (1) shall not have an original principal
amount exceeding the sum of the aggregate principal
amount of indebtedness refinanced thereby, plus accrued
interest and any applicable premiums, penalties, fees
and costs payable in respect of the indebtedness
refinanced thereby, plus out-of-pocket expenses payable
as a result of such refinancing, and (2) having a
maturity later than February 1, 2008 shall not by its
terms expressly restrict payments due to the holders of
the Series A Preferred Stock in connection with
redemption of such shares at the option of such holders
on or after February 1, 2008 (any such refinancing
indebtedness being hereinafter called "Refinancing
Indebtedness");
(iii) Section 4.13 (a)(iii) shall be amended and restated in
its entirety as follows:
"(iii) Grant or permit to exist any material
liens, security interests or encumbrances on any of the
Company's assets or properties, except in connection
with any indebtedness permitted by Section
4.13(a)(ii) above (including, without limitation, under
any Refinancing Indebtedness);"
(iii) Section 4.13 (a)(iv) shall be amended and restated in its
entirety as follows:
"(iv) Enter into any agreement with any party
which by its terms restricts the payments due the
holders of the Preferred Shares as set forth in the
Charter, except pursuant to the terms of any
indebtedness permitted by Section 4.13(a)(ii) above
(including, without limitation, under any Refinancing
Indebtedness); or"
8
<PAGE>
(iv) Section 4.13 (b) shall be amended and restated in
its entirety as follows:
"(b) The Company will not, without the vote or
affirmative written consent of holders of sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares
of Preferred Stock, authorize or permit the voluntary
bankruptcy, reorganization, liquidation or winding up
of the Company."
(b) The parties hereto hereby agree that on the Effective Date the
Stockholders' Agreement shall be amended as follows:
(i) Clause (vii) of the definition of "Excluded
Offerings" in paragraph one of Article IV shall be amended
and restated in its entirety as follows:
"(vii) warrants issued to any institutional lender
or the purchaser of any senior notes in connection
with any debt financing permitted under the
Purchase Agreement."
(ii) Article VI, paragraph (f) shall be amended and
restated in its entirety as follows:
"(f) Authorize or permit the voluntary
reorganization, liquidation or winding up of the
Company, without the vote or affirmative written
consent of both the holders of a majority of the issued
and outstanding shares of Common Stock and the holders
of sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of Preferred Stock;"
(c) Notwithstanding the foregoing, the parties agree that none of
the amendments to the Preferred Stock Purchase Agreement or the Stockholders'
Agreement effected hereby shall be effective after February 1, 2008, and that
after February 1, 2008 each of such agreements shall become effective in the
form in effect immediately prior to the Effective Date; PROVIDED HOWEVER that
all indebtedness permitted hereunder and incurred by Holdings (or any
subsidiary) prior to February 1, 2008, and each other transaction permitted
hereunder and commenced by Holdings (or any subsidiary) prior to February 1,
2008, shall continue to be permitted under each such agreement after February
1, 2008.
SECTION 7. CONSENT AND WAIVER. Each of the Stockholders hereby
consents to the granting of registration rights to the holders of the Senior
Notes with respect to such Senior Notes and to the holders of the associated
Warrants with respect to the Holdings Class A Common issuable upon the
exercise of such Warrants, on terms and conditions approved by the Board of
Directors
9
<PAGE>
of Holdings, and waives the requirements of Article 13 of the Registration
Rights Agreement with respect to registration rights relating to the Senior
Notes and the Warrants described in the Preliminary Offering Memorandum.
SECTION 8. AGREEMENT TO SUBORDINATE. Each of the Stockholders,
the Company and Holdings agree that the payment of any amount due or owing
under this Agreement or the Agreements and any other right or claim (at law
or in equity) of any Stockholder, or any assignee or transferee thereof, in
its capacity as a Stockholder under this Agreement or the Agreements is, and
shall be, fully subordinated to the prior payment in full (in cash) of all
indebtedness of the Company or of Holdings arising out of or relating to the
Senior Notes or the Credit Agreement and all related principal, interest
(including, without limitation, interest accruing after the filing of a
petition initiating any bankruptcy proceeding, whether or not such interest
accrues after the filing of such petition for purposes of federal bankruptcy
laws or is an allowed claim in such proceeding), fees, expenses or other
similar obligations. Upon any payment or distribution of assets or
securities of Holdings or the Company of any kind or character, whether in
cash, property or securities, upon any dissolution or winding-up or
liquidation or reorganization of Holdings or the Company, whether voluntary
or involuntary or in bankruptcy, insolvency or receivership or other
proceedings, the holders of the Senior Notes, or the applicable trustee on
behalf of such holders, and the lenders under the Credit Agreement shall
first be paid in full in cash the amount of principal, interest (including,
without limitation, interest accruing after the filing of a petition
initiating any bankruptcy proceeding, whether or not such interest accrues
after the filing of such petition for purposes of federal bankruptcy laws or
is an allowed claim in such proceeding), fees, expenses or other similar
obligations in respect of such Senior Notes or the Credit Agreement before
any Stockholder shall be entitled to receive any payment by the Company in
its capacity as a Stockholder under this Agreement or the Agreements, and any
amounts received by any Stockholder, or any assignee or transferee thereof,
in its capacity as a Stockholder under this Agreement or the Agreements shall
be held in trust for the benefit of, and paid over to, the holders of the
Senior Notes, or the applicable trustee therefor, and the lenders under the
Credit Agreement.
SECTION 9. INDEMNIFICATION; EXPENSES OF THE STOCKHOLDERS. (a)
Holdings agrees to indemnify and hold harmless each Stockholder, and each of
its respective officers, directors, partners, members, stockholders,
employees and agents, from and against all claims, losses, damages and
liabilities arising out of or resulting from any breach of any
representation, warranty or covenant of Holdings or the Company contained in
this Agreement.
10
<PAGE>
(b) Each Stockholder agrees to indemnify and hold harmless
Holdings, the Company and each other Stockholder, and each of the respective
officers, directors, partners, members, stockholders, employees and agents of
such parties, from and against all claims, losses, damages and liabilities
arising out of or resulting from any breach of any representation, warranty
or covenant of such Stockholder contained in this Agreement.
(c) Promptly following the Effective Date, Holdings shall pay the
reasonable and documented expenses of the Stockholders incurred in connection
with this Agreement.
SECTION 10. MISCELLANEOUS. (a) All covenants, agreements,
representations and warranties made by any party herein shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery
of the shares of capital stock of Holdings pursuant hereto.
(b) All notices which are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and (i) delivered personally, (ii) mailed by
certified or registered mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier or (iv) sent via
facsimile confirmed in writing to the recipient, in the case of each
Stockholder, to the address listed on Schedule I hereto, and in the case of
the Company and Holdings, as follows:
Teletrac, Inc.
2323 Grand Street
Suite 1100
Kansas City, MO
Attention: Steven D. Scheiwe, Esq.
Facsimile: (816) 474-3475
(c) 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.
(d) This Agreement, together with the other agreements referred to
herein, constitutes the entire Agreement of the parties with respect to the
subject matter hereof and may not be modified or amended except in writing by
Holdings and the holders of (i) a majority of the outstanding shares of
Company Class A Common and a majority of the outstanding shares of Company
Series A Preferred, if prior to the Effective Date, and (ii) a majority of
the outstanding shares of Holdings Class A Common and a majority of the
outstanding shares of Holdings Series A Preferred, if on or after the
Effective Date; PROVIDED, HOWEVER, that any such amendment or modification of
any provision of this Agreement that otherwise would adversely affect any
Stockholder's legal rights under this Agreement in a manner that would materi-
11
<PAGE>
ally and disproportionately discriminate against such Stockholder relative to
the other Stockholders shall also require the written approval of such
adversely affected Stockholder.
(E) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
12
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders
have executed this Agreement as of the day and year first above
written.
TELETRAC HOLDINGS, INC.
By__________________________________
Name:
Title:
TELETRAC, INC.
By__________________________________
Name:
Title:
STOCKHOLDERS:
TORONTO DOMINION
CAPITAL (U.S.A.), INC.
By__________________________________
Name:
Title:
KINGDON ASSOCIATES, L.P.
By: Kingdon Capital Management
Corp., its general partner
By:__________________________________
Name:
Title:
13
<PAGE>
KINGDON PARTNERS, L.P.
By: Kingdon Capital Management
Corp., its general partner
By:__________________________________
Name:
Title:
M. KINGDON OFFSHORE NV
By: Kingdon Capital Management
Corp., its investment advisor
By:__________________________________
Name:
Title:
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt
Management III, L.P.
By:__________________________________
General Partner
ALTA V LIMITED PARTNERSHIP
By: Alta V Management Partners,
L.P.
By:__________________________________
General Partner
CUSTOMS HOUSE PARTNERS
By:__________________________________
General Partner
14
<PAGE>
ALTA COMMUNICATIONS VI, L.P.
By: Alta Communications VI, L.P.
By:__________________________________
General Partner
ALTA COMM S by S, LLC
By:__________________________________
Member
EOS PARTNERS SBIC, L.P.
By: EOS SBIC General, L.P.
By:__________________________________
Name:
Title:
ASSOCIATED RT, INC.
By:__________________________________
Name:
Title:
BANCBOSTON VENTURES INC.
By:__________________________________
Name:
Title:
15
<PAGE>
NORTHWOOD VENTURES
By:__________________________________
Name:
Title:
CHESTNUT HILL WIRELESS, INC.
By:__________________________________
Name:
Title:
WESTBURY CAPITAL PARTNERS
By: Westbury MGP, L.P.,
its general partner
By: J.G. Fogg Co.
By:__________________________________
Name:
Title:
BOSTON CAPITAL VENTURES
By:__________________________________
Name:
Title:
HIGH POINT KELLER LIMITED
PARTNERSHIP
By: High Point Management, Inc.,
its general partner
By:__________________________________
Name:
Title:
16
<PAGE>
__________________________________
R. B. Keller
__________________________________
Richard B. Keller II
__________________________________
James A. Queen
__________________________________
Steven D. Scheiwe
__________________________________
Lawrence P. Jennings
__________________________________
Mrs. T.N. Markbreiter
__________________________________
Simon Brenner
K&E PARTNERS II
By:________________________________
Partner
REBOUL, MACMURRAY, HEWITT,
MAYNARD & KRISTOL
By:_________________________________
Partner
17
<PAGE>
SCHEDULE I
Company Company
Stockholder Class A Series A
NAME AND ADDRESS COMMON PREFERRED
Toronto Dominion Capital (U.S.A.), Inc. 50,000 5,772.01
Toronto Dominion Capital
31 West 52nd Street, 20th Floor
New York, NY 10019
Attn: Brian A. Rich
Kingdon Associates, L.P. 7,500 5,898.99
Kingdon Capital Management Corporation
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter
Kingdon Partners, L.P. 12,500 935.06
Kingdon Capital Management Corporation
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter
M. Kingdon Offshore NV 30,000 22,025.97
Kingdon Capital Management Corporation
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter
Alta Subordinated Debt Partners III, L.P. 18,525 8,554.11
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
18
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Alta V. Limited Partnership 31,145 14,381.53
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Customs House Partners 330 152.38
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Alta Communications VI, L.P. 0 22,574.16
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Alta Comm S by S, LLC 0 513.85
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Eos Partners SBIC, L.P. 29,000 5,772.01
320 Park Avenue, 22nd Floor
New York, NY 10022
Attn: Marc Michel
Associated RT, Inc. 50,000 5,772.01
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Attn: David J. Berkman
19
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BancBoston Ventures, Inc. 0 34,632.03
100 Federal Street
Boston, MA 02110
Attn: Lars Swanson
Northwood Ventures 0 5,772.01
45 Underhill Boulevard, Suite 205
Syosset, NY 11791-3419
Attn: Henry T. Wilson
Chestnut Hill Wireless, Inc. 0 40,404.04
1300 Boylston Street
Chestnut Hill, MA 02167
Attn: Michael A. Greeley
Westbury Capital Partners 0 5,772.01
400 Post Avenue
Westbury, NY 11590
Attn: Jeffrey Freed
Boston Capital Ventures 0 5,772.01
Old City Hall
Boston, MA 02108-3204
Attn: Suresh Shanmugham
High Point Keller Limited Partnership 0 5,194.81
888 S.W. Fifth Avenue, Suite 1220
Portland, OR 97204
Attn: Richard B. Keller, Jr.
R.B. Keller 0 288.60
888 S.W. Fifth Avenue, Suite 1220
Portland, OR 97204
Richard B. Keller II 0 288.60
888 S.W. Fifth Avenue, Suite 1220
Portland, OR 97204
20
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James A. Queen 11,500 0.00
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
Steven D. Scheiwe 2,000 0.00
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
Lawrence P. Jennings 1,500 0.00
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
Mrs. T.N. Markbreiter 2,708.34 0.00
16 Marigold Road
Yau Yat Chuen
Kowloon
Hong Kong
Simon Brenner 916.66 0.00
95 Kenney Avenue
Rockville Centre, NY 11570
K&E Partners II 916.66 0.00
c/o Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Reboul, MacMurray, Hewitt, 458.34 0.00
Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attn: Robert A. Schwed, Esq.
21
<PAGE>
SCHEDULE II
Holdings Holdings
Class A Series A
STOCKHOLDER NAME COMMON PREFERRED
Toronto Dominion Capital (U.S.A.), Inc. 50,000 5,772.01
Toronto Dominion Capital
31 West 52nd Street, 20th Floor
New York, NY 10019
Attn: Brian A. Rich
Kingdon Associates, L.P. 7,500 5,898.99
Kingdon Capital Management Corporation
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter
Kingdon Partners, L.P. 12,500 935.06
Kingdon Capital Management Corporation
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter
M. Kingdon Offshore NV 30,000 22,025.97
Kingdon Capital Management Corporation
52 West 57th Street
New York, NY 10019
Attn: Michael Markbreiter
Alta Subordinated Debt Partners III, L.P. 18,525 8,554.11
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
22
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Alta V. Limited Partnership 31,145 14,381.53
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Customs House Partners 330 152.38
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Alta Communications VI, L.P. 0 22,574.16
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Alta Comm S by S, LLC 0 513.85
Burr, Egan, Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attn: Robert F. Benbow
Eos Partners SBIC, L.P. 29,000 5,772.01
320 Park Avenue, 22nd Floor
New York, NY 10022
Attn: Marc Michel
Associated RT, Inc. 50,000 5,772.01
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Attn: David J. Berkman
23
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BancBoston Ventures, Inc. 0 34,632.03
100 Federal Street
Boston, MA 02110
Attn: Lars Swanson
Northwood Ventures 0 5,772.01
45 Underhill Boulevard, Suite 205
Syosset, NY 11791-3419
Attn: Henry T. Wilson
Chestnut Hill Wireless, Inc. 0 40,404.04
1300 Boylston Street
Chestnut Hill, MA 02167
Attn: Michael A. Greeley
Westbury Capital Partners 0 5,772.01
400 Post Avenue
Westbury, NY 11590
Attn: Jeffrey Freed
Boston Capital Ventures 0 5,772.01
Old City Hall
Boston, MA 02108-3204
Attn: Suresh Shanmugham
High Point Keller Limited Partnership 0 5,194.81
888 S.W. Fifth Avenue, Suite 1220
Portland, OR 97204
Attn: Richard B. Keller, Jr.
R.B. Keller 0 288.60
888 S.W. Fifth Avenue, Suite 1220
Portland, OR 97204
Richard B. Keller II 0 288.60
888 S.W. Fifth Avenue, Suite 1220
Portland, OR 97204
23
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James A. Queen 11,500 0.00
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
Steven D. Scheiwe 2,000 0.00
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
Lawrence P. Jennings 1,500 0.00
c/o Teletrac, Inc.
8900 State Line Road, Suite 500
Leawood, KS 66206
Mrs. T.N. Markbreiter 2,708.34 0.00
16 Marigold Road
Yau Yat Chuen
Kowloon
Hong Kong
Simon Brenner 916.66 0.00
95 Kenney Avenue
Rockville Centre, NY 11570
K&E Partners II 916.66 0.00
c/o Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Reboul, MacMurray, Hewitt, 458.34 0.00
Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attn: Robert A. Schwed, Esq.
24
<PAGE>
<PAGE>
EXHIBIT 10.11
CREDIT AGREEMENT
AMONG
TELETRAC, INC.
THE SEVERAL LENDERS FROM
TIME TO TIME PARTIES HERETO
- AND -
BANQUE PARIBAS
AS ADMINISTRATIVE AGENT
AND
FLEET NATIONAL BANK
AS DOCUMENTATION AGENT
DATED AS OF SEPTEMBER 18, 1997
<PAGE>
TABLE OF CONTENTS
SECTION PAGE NO.
RECITALS...............................................
I. GENERAL TERMS..........................................
1.01 Revolver Facilities.............................
1.02 Scheduled Reductions of the Commitments.........
1.03 Interest on the Notes...........................
1.04 Loan Requests; Type of Loan.....................
1.05 Loan Disbursements..............................
1.06 Payments, Prepayments and Termination or Reduction of the
Commitments.....................................
1.07 Fees and Warrants...............................
1.08 Requirements of Law.............................
1.09 Limitations on LIBOR Loans; Illegality..........
1.10 Taxes...........................................
1.11 Indemnification.................................
1.12 Payments Under the Notes........................
1.13 Set-Off, Etc....................................
1.14 Pro Rata Treatment; Sharing.....................
1.15 Non-Receipt of Funds by the Administrative Agent.
1.16 Replacement of Notes............................
1.17 Letters of Credit...............................
II. SECURITY; SUBORDINATION; USE OF PROCEEDS...............
2.01 Security for the Obligations; Subordination; Etc.
2.02 Use of Proceeds.................................
III. CONDITIONS OF MAKING THE LOANS.........................
3.01 Conditions to the First Loans...................
3.02 Acquisition Loans...............................
3.03 All Loans.......................................
<PAGE>
IV. REPRESENTATIONS AND WARRANTIES.........................
4.01 Financial Statements............................
4.02 Organization, Qualification, Etc................
4.03 Authorization; Compliance; Etc..................
4.04 Governmental and Other Consents, Etc............
4.05 Litigation......................................
4.06 Compliance with Laws and Agreements.............
4.07 Licenses, Etc...................................
4.08 Proprietary Rights..............................
4.09 Title to Properties; Condition of Properties....
4.10 Interests in Other Businesses...................
4.11 Solvency........................................
4.12 Full Disclosure.................................
4.13 Margin Stock....................................
4.14 Tax Returns.....................................
4.15 Pension Plans, Etc..............................
4.16 Material Agreements.............................
4.17 Projections.....................................
4.18 Brokers, Etc....................................
4.19 Capitalization..................................
4.20 Environmental Compliance........................
4.21 Investment Company Act..........................
4.22 Labor Matters...................................
V. FINANCIAL COVENANTS....................................
5.01 Minimum VLUs and Messaging Units................
5.04 Maximum Adjusted Total Funded Debt to
Revenue Units...................................
5.03 Minimum Adjusted Total Funded Debt to Annualized
Adjusted Operating Cash Flow....................
5.04 Maximum Net Marketing Expense...................
5.05 Maximum Total Leverage..........................
5.06 Interest Coverage...............................
5.07 Pro Forma Debt Service Coverage.................
5.08 Capital Expenditures............................
5.09 Engineering Expenses and Sustaining Costs.......
5.10 Headquarters Expense............................
5.11 R&D Expense.....................................
5.12 Restricted Payments.............................
<PAGE>
VI. AFFIRMATIVE COVENANTS..................................
6.01 Preservation of Assets; Compliance with Laws, Etc.
6.02 Insurance.......................................
6.03 Taxes, Etc......................................
6.04 Notice of Proceedings, Defaults, Adverse Change, Etc.
6.05 Financial Statements and Reports................
6.06 Inspection......................................
6.07 Accounting System...............................
6.08 Additional Assurances...........................
6.09 Compliance with Environmental Laws..............
6.10 Interest Rate Protection........................
VII. NEGATIVE COVENANTS.....................................
7.01 Indebtedness....................................
7.02 Liens...........................................
7.03 Disposition of Assets; etc......................
7.04 Fundamental Changes; Acquisitions...............
7.05 Management......................................
7.06 Sale and Leaseback..............................
7.07 Investments.....................................
7.08 Change in Business..............................
7.09 Accounts Receivable.............................
7.10 Transactions with Affiliates....................
7.11 Amendment of Certain Agreements, Etc............
7.12 ERISA...........................................
7.13 Margin Stock....................................
7.14 Negative Pledges, etc...........................
VIII. DEFAULTS...............................................
IX. REMEDIES ON DEFAULT, ETC...............................
X. THE AGENTS.............................................
10.01 Appointment, Powers and Immunities..............
10.02 Reliance by Agents..............................
10.03 Events of Default...............................
10.04 Rights as a Lender..............................
10.05 Indemnification.................................
<PAGE>
10.06 Non-Reliance on Agents and other Lenders........
10.07 Failure to Act..................................
10.08 Resignation of Agents...........................
10.09 Cooperation of Lenders..........................
XI. DEFINITIONS............................................
XII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS;
SEPARATE ACTIONS BY THE LENDERS........................
XIII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND
PARTICIPATIONS.........................................
XIV. MISCELLANEOUS..........................................
14.01 Survival........................................
14.02 Fees and Expenses; Indemnity; Etc...............
14.03 Notice..........................................
14.04 Governing Law...................................
14.05 CONSENT TO JURISDICTION, WAIVER OF
JURY TRIAL......................................
14.06 Severability....................................
14.07 Section Headings, Etc...........................
14.08 Several Nature of Lenders' Obligations..........
14.09 Counterparts....................................
14.10 Knowledge and Discovery.........................
14.11 Amendment of Other Agreements...................
14.12 Disclaimer of Reliance..........................
14.13 Environmental Indemnification...................
<PAGE>
INDEX OF SCHEDULES
Schedule 1.01(a) Allocation of Commitments
Schedule 1.01(b) Form of Reducing Revolving Credit Note
Schedule 1.04(a) Loan Request
Schedule 1.04(d) Form of Interest Rate Option Notice
Schedule 1.06 Form of Commitment Reduction Notice
Schedule 2.01 Exceptions to Security
Schedule 2.02 Sources and Uses of Proceeds
Schedule 3.01(a) Form of Omnibus Officer's
and Compliance Certificate
Schedule 3.01(b) Material Adverse Changes
Schedule 4.01 Opening Balance Sheet
Schedule 4.02 Organization, Etc.
Schedule 4.04 Governmental and Other Consents
Schedule 4.05 Litigation
Schedule 4.07 FCC Licenses
Schedule 4.08 Proprietary Rights
Schedule 4.09 Real Properties
Schedule 4.10 Interests in Other Businesses
Schedule 4.15 Pension Plans
Schedule 4.16 Material Agreements
Schedule 4.17 Projections
Schedule 4.19 Capitalization
Schedule 6.05 Compliance Report
Schedule 7.01 Permitted Indebtedness
Schedule 7.02 Permitted Liens
Schedule 13(b)(iii) Form of Assignment and Acceptance
Schedule 13(b)(iv) Form of Notice of Assignment and
Acceptance
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of September 18, 1997, by and among the financial
institutions which are now, or in accordance with ARTICLE XIII hereafter become,
parties hereto (collectively, the "LENDERS" and each individually, a "LENDER");
BANQUE PARIBAS, as administrative agent for the Lenders (in such capacity,
together with its successors and assigns in such capacity, the "ADMINISTRATIVE
AGENT"); FLEET NATIONAL BANK, as documentation agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, the
"DOCUMENTATION AGENT"); and TELETRAC, INC., a Delaware corporation (the
"BORROWER"), the sole subsidiary of Teletrac Holdings, Inc., a Delaware
corporation (the "PARENT"). Certain capitalized terms used herein without
definition are defined in ARTICLE XI of this Agreement.
RECITALS
A. The Borrower was formed for the purpose of engaging in businesses
relating to the design, procurement, installation and operation of location,
fleet management or related two-way messaging systems and businesses and
reasonably related extensions thereof.
B. The Borrower has issued its unsecured Senior 14% Notes due 2007 (the
"SENIOR 14% NOTES") in accordance with the related Offering Memorandum dated
July 31, 1997 (the "OFFERING MEMORANDUM"). In connection with the issuance of
the Senior 14% Notes, the purchasers thereof are receiving warrants for the
purchase of shares of the Class A Common Stock of the Parent. The gross proceeds
from the offering of the Notes and such warrants (the "OFFERING") were
approximately $105,000,000 and will be used by the Borrower to finance the
expansion of its networks and services, to purchase securities to be pledged to
secure certain interest payment obligations under the Senior 14% Notes (the
"INTEREST RESERVE") and for working capital and other general corporate
purposes.
C. The Borrower desires to obtain additional funds for Capital
Expenditures, working capital and general corporate purposes.
D. The Lenders are willing to provide such funds, all subject to the
terms and conditions of this Agreement.
- 1 -
<PAGE>
NOW THEREFORE, the parties hereto, intending to be legally bound, and in
consideration of the foregoing and the mutual covenants contained herein, hereby
agree as follows:
I. GENERAL TERMS
SECTION 1.01. REVOLVER FACILITIES.
(a) On the Closing Date, subject to the terms and conditions contained in
this Agreement, the Lenders agree to establish in favor of the Borrower reducing
revolving credit facilities (the "REVOLVERS") in the aggregate principal amount
of $30,000,000, allocated among the Lenders as set forth in SCHEDULE 1.01(A)
(collectively, in either case, as reduced pursuant to SECTION 1.02 and 1.06, the
"COMMITMENTS" and, with respect to each Lender's allocation of the Revolvers,
its "COMMITMENT"), which shall expire on March 31, 2003 (such date, or such
earlier date as the Commitments shall expire or be terminated thereunder, being
referred to herein as the "EXPIRATION DATE").
(b) The borrowings under this SECTION 1.01 shall be evidenced by the
Borrower's Reducing Revolving Credit Notes, each in the form attached hereto as
SCHEDULE 1.01(B) (together with any additional Reducing Revolving Credit Notes
issued to any assignee(s) of the Commitments under ARTICLE XIII or otherwise
issued in substitution therefor or replacement thereof, the "Notes"). The Notes
are hereby incorporated by reference herein and made a part hereof.
(c) The aggregate principal amount of loans made by the Lenders under the
Commitments (collectively, the "LOANS") as requested in any Loan Request shall
be (i) at least $500,000 and, if more, an integral multiple of $100,000, in the
case of LIBOR Loans, and $100,000, and, if more, an integral multiple thereof,
in the case of Base Rate Loans, or (ii) such lesser amount as equals the then
unadvanced portion of the aggregate Commitments. The Lenders shall have no
obligation to make Loans to the Borrower if, after giving effect thereto, the
outstanding principal balance under the Notes would exceed the aggregate
Available Commitments. From the Closing Date to and including the Expiration
Date and within the limits of the aggregate Available Commitments, the Borrower
may borrow, repay and reborrow under this SECTION 1.01.
SECTION 1.02. SCHEDULED REDUCTIONS OF THE COMMITMENTS. The Commitments (i)
shall be automatically permanently reduced on December 31, 1999 and each
Quarterly Date thereafter, on each of which dates the Borrower shall repay such
amount of the aggregate Notes as shall cause the outstanding principal balance
thereunder to be less than or equal to the Commitments, as so reduced, and (ii)
shall expire on the Expiration Date, when all outstanding principal and accrued
interest on the Notes shall be due and payable in full. Such quarterly
reductions of the Commitments shall be in the amounts set forth below, without
giving effect to any other
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mandatory or optional Commitment reductions and, after giving effect to such
quarterly automatic reductions, the maximum aggregate amount of the Commitments
shall not exceed the levels set forth below:
AGGREGATE AMOUNT OF
QUARTERLY DATE AUTOMATIC PERMANENT REDUCTION MAXIMUM COMMITMENTS
Closing Date $-0- $30,000,000
December 31, 1999 $ 1,500,000 $28,500,000
March 31, 2000 $ 1,500,000 $27,000,000
June 30, 2000 $ 1,500,000 $25,500,000
September 30, 2000 $ 1,500,000 $24,000,000
December 31, 2000 $ 2,250,000 $21,750,000
March 31, 2001 $ 2,250,000 $19,500,000
June 30, 2001 $ 2,250,000 $17,250,000
September 30, 2001 $ 2,250,000 $15,000,000
December 31, 2001 $ 2,250,000 $12,750,000
March 31, 2002 $ 2,250,000 $10,500,000
June 30, 2002 $ 2,250,000 $ 8,250,000
September 30, 2002 $ 2,250,000 $ 6,000,000
December 31, 2002 $ 3,000,000 $ 3,000,000
March 31, 2003 $ 3,000,000 -0-
SECTION 1.03. INTEREST ON THE NOTES.
(A) INTEREST RATE . Subject to the terms and conditions set forth in this
SECTION 1.03, the Borrower may elect an interest rate for the outstanding
principal balances from time to time of the Notes, or any portion thereof, based
on either the Base Rate or the applicable LIBOR Rate and determined as of any
date, as set forth in the Table set forth in paragraph (b) below, as follows:
(i) the rate for any Base Rate Loan shall be the Base Rate plus the
Applicable Margin for Base Rate Loans then in effect; and
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<PAGE>
(ii) the rate for any LIBOR Loan shall be the applicable LIBOR Rate
plus the Applicable Margin for LIBOR Loans in effect on the first day of
the applicable Interest Period.
(B) DETERMINATION OF APPLICABLE MARGIN FOR LOANS.
(i) The Applicable Margin for Loans during the period commencing on
the date hereof and ending on November 14, 1997 shall be 2.50%, with
respect to Base Rate Loans, and 3.50%, with respect to LIBOR Loans.
(ii) Subject to the provisions of SECTION 1.03(B)(III) below, the
Applicable Margin for Loans during the Pricing Period commencing on
November 15, 1997 and ending on February 14, 1998 and during each Pricing
Period thereafter shall be determined based upon the ratio of (A) Total
Funded Debt as of the last day of the fiscal quarter ended immediately
preceding the first day of such Pricing Period to (B) Annualized EBITDA for
such fiscal quarter (the "PRICING RATIO"), as indicated in the following
Table:
- --------------------------------------------------------------------------------
APPLICABLE MARGIN FOR LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRICING RATIO BASE RATE LOANS LIBOR LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Greater than or equal to
3.00:1.00 2.50% 3.50%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less than 3.00:1.00 but
greater than or equal to 2.00% 3.00%
2.50:1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less than 2.50:1.00 but
greater than or equal to 1.50% 2.50%
2.00:1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less than 2.00:1.00 1.00% 2.00%
- --------------------------------------------------------------------------------
(iii) Notwithstanding the foregoing, so long as Annualized EBITDA for
any fiscal quarter shall be negative, the Applicable Margin for Loans
during the Pricing Period commencing on the day after the last day of such
fiscal quarter shall be 2.50%, with respect to Base Rate Loans, and 3.50%,
with respect to LIBOR Loans.
(C) COMPUTATIONS, PRICING PERIOD, ETC.
(i) Nothing in SECTION 1.03(B) shall be deemed to constitute a waiver
of the requirements of SECTION 5.01, default under which will result in an
Event of Default and the application of the default rate of interest
specified in SECTION 1.03(E).
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<PAGE>
(ii) As used in SECTION 1.03, the first "PRICING PERIOD" shall
commence on November 15, 1997 and end on February 14, 1998 and, thereafter, the
term "Pricing Period" shall mean each period commencing on (A) the date as of
which the Borrower is required, under SECTION 6.05(A) or (B) and SECTION
6.05(D), to deliver financial statements and a Compliance Report indicating the
applicable Pricing Ratio (in each case, a "COMPLIANCE REPORT DELIVERY DATE") and
ending on (B) the next following Compliance Report Delivery Date.
(iii) Notwithstanding the foregoing, no downward adjustment of the
Applicable Margin hereunder shall be permitted (A) unless the Compliance Report
for the relevant fiscal period delivered to the Administrative Agent includes a
request by the Borrower for such adjustment or (B) during the existence of any
Default.
(iv) Interest on the Loans shall be computed on the basis of the
actual number of days elapsed over a 360-day year.
(D) INTEREST PAYMENT DATES. Interest on the Loans shall be payable in
arrears, without setoff, deduction or counterclaim, as follows:
(i) Interest on each Base Rate Loan shall be due and payable on
the Quarterly Dates, commencing September 30, 1997, and at maturity, whether by
reason of acceleration, prepayment, payment or otherwise, provided that interest
accrued on any Base Rate Loan which is converted to a LIBOR Loan shall be paid
on the Quarterly Date following the date of such conversion (or, if accrued on a
Base Rate Loan which is so converted on a Quarterly Date, on such Quarterly
Date). The interest rate on Base Rate Loans shall change on the date of any
change in the applicable Base Rate.
(ii) Interest on each LIBOR Loan shall be due and payable on the
last day of the Interest Period applicable to such Loan and, if such Interest
Period exceeds three (3) months, every three (3) months after the beginning
thereof, until and at maturity, whether by reason of acceleration, prepayment,
payment or otherwise.
(E) EFFECT OF DEFAULTS, ETC.
(i) During the existence of any Event of Default, the outstanding
principal under the Notes and, to the extent permitted by applicable law,
overdue interest, fees or
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<PAGE>
other amounts payable hereunder or under the other Loan Documents shall
bear interest, from and including the date such event of Default occurred
until such Event of Default is waived in writing as provided herein, at a
rate per annum (computed on the basis of the actual number of days elapsed
over a 360-day year) equal to two percent (2.00%) above (a) the highest
interest rate or rates then applicable to Base Rate Loans and overdue
interest, fees and other expenses, or (b) with respect to any LIBOR Loans
then in effect (and only until the end of the Interest Period applicable to
such LIBOR Loans) the highest interest rate or rates then applicable to
such LIBOR Loans, as provided in the Table set forth in SECTION
1.03(B)(II).
(ii) Nothing in this SECTION 1.03(E) shall affect the rights of the
Agents or the Lenders to exercise any rights or remedies under the Loan
Documents or applicable law arising upon the occurrence of an Event of
Default.
SECTION 1.04. LOAN REQUESTS; TYPE OF LOAN.
(A) LOAN REQUEST. Each request by the Borrower for Loans under the
Revolvers (other than the initial Loans, if made concurrently herewith) shall be
made not later than (i) 11:00 A.M. (New York City time) on the Business Day
prior to the proposed Borrowing Date, if such Loans are Base Rate Loans, or (ii)
11:00 A.M. (New York City time) on the third Business Day prior to the proposed
Borrowing Date, if any such Loans are LIBOR Loans, by a written Loan Request, in
the form of SCHEDULE 1.04(A) (each, a "LOAN REQUEST"), signed by a duly
authorized representative of the Borrower and indicating (i) the date of such
Loans and (ii) whether such Loans shall be Base Rate Loans or LIBOR Loans or a
combination of the two types of Loans and, if so, the Interest Period for such
LIBOR Loans. The Administrative Agent shall promptly notify the Lenders of such
Loan Request and the information contained therein. Such Loan Request shall be
irrevocable and binding on the Borrower.
(B) CONVERSION TO A DIFFERENT TYPE OF LOAN. The Borrower may elect from
time to time to convert any outstanding Loans to Base Rate Loans or LIBOR Loans,
as the case may be, PROVIDED that (i) with respect to any such conversion of
LIBOR Loans to Base Rate Loans, the Borrower shall provide the appropriate
Interest Rate Option Notice by 11:00 A.M. (New York City time) on the date of
such proposed conversion; (ii) with respect to any such conversion of Base Rate
Loans to LIBOR Loans, the Borrower shall provide the appropriate Interest Rate
Option Notice by 11:00 A.M. (New York City time) at least three Business Days'
prior to the date of such proposed conversion; (iii) with respect to any such
conversion of LIBOR Loans into Base Rate Loans, such conversion shall only be
made on the last day of the related Interest Period; (iv) no Loans may be
converted into LIBOR Loans when any Default has occurred and is continuing; (v)
the Borrower may have no more than five (5) LIBOR Loans outstanding at any time;
(vi) any conversion of less than all of the outstanding Base Rate Loans into
LIBOR Loans shall be in a minimum aggregate principal amount of $500,000 and, if
greater, an integral multiple of $100,000; and (vii) any conversion of less than
all of the outstanding LIBOR Loans into Base
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Rate Loans shall be in a minimum aggregate principal amount of $1,000,000 and,
if greater, an integral multiple of $100,000. The Administrative Agent shall
promptly notify the Lenders of such Interest Rate Option Notice and the
information contained therein.
(C) CONTINUANCE OF AN INTEREST RATE OPTION. The Borrower may continue any
LIBOR Loans as such upon the expiration of the related Interest Period by
providing to the Administrative Agent (i) an Interest Rate Option Notice in
compliance with the notice provisions set forth in SECTION 1.04(B) or (ii)
standing written instructions authorizing the automatic continuation of such
Loans, which instructions shall be effective until notice to the Administrative
Agent by the Borrower revoking the same (such notice to take effect no sooner
than three Business Days after receipt by the Administrative Agent); PROVIDED
that no LIBOR Loans may be continued when any Default has occurred and is
continuing, but shall be automatically converted to Base Rate Loans on the last
day of the first applicable Interest Period which ends during the continuance of
such Default. Base Rate Loans shall be deemed to continue as such until receipt
of an Interest Rate Option Notice requesting conversion thereof to LIBOR Loans.
(D) FORM OF NOTICE. Each Interest Rate Option Notice shall be
substantially in the form of SCHEDULE 1.04(D) and shall Specify: (i) the
aggregate principal amount of Loans to be continued or converted; (ii) the
proposed date thereof; (iii) the Interest Period for such LIBOR Loans; and (iv)
whether such Loans shall be LIBOR Loans or Base Rate Loans.
SECTION 1.05. LOAN DISBURSEMENTS. The Loans shall be made by the
applicable Lenders PRO RATA as provided in SECTION 1.14. Not later than 12:00
Noon (New York City time), in the case of LIBOR Loans, or 2:00 P.M. (New York
City time), in the case of Base Rate Loans, on the date specified for any Loans,
each applicable Lender shall make available to the Administrative Agent the
portion of the Loans to be made by it on such date, in immediately available
funds, for the account of the Borrower. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of the
Agreement, be made available to the Borrower by depositing the same in
immediately available fund in the appropriate account or accounts of the
Borrower and by disbursing such funds as indicated in writing in the related
Loan Request prior to the date such Loans are proposed to be made.
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SECTION 1.06. PAYMENTS, PREPAYMENTS AND TERMINATION OR REDUCTION OF THE
COMMITMENTS.
(A) VOLUNTARY REDUCTIONS OF COMMITMENTS AND RELATED PREPAYMENTS. At any
time prior to the Expiration Date, upon at least three (3) business Days'
written notice to the Administrative Agent in the form of SCHEDULE 1.06 (each, a
"COMMITMENT REDUCTION NOTICE") signed by a duly authorized representative of the
Borrower, the Borrower may permanently terminate or permanently reduce any of
the Commitments, PROVIDED as follows:
(i) The amount of not less than $100,000 or, if greater, an
integral multiple of $50,000;
(ii) Each Lender's Commitment PRO RATA as provided in SECTION 1.14;
and
(iii) simultaneously with each such reduction, the Borrower (A)
shall pay to the Administrative Agent, for the ratable account of each
Lender, any then accrued unpaid Commitment Fee on the terminated or reduced
portion of the respective Commitments, (B) shall pay any indemnification
payments due in accordance with SECTION 1.11 in respect of LIBOR Loans so
prepaid and (C) shall repay such amount of the aggregate principal amount
of the Notes as shall cause the outstanding principal balance thereunder to
be less than or equal to the aggregate Available Commitments, after giving
effect to such reduction, PROVIDED that any such prepayment shall be an
aggregate amount of not less than $100,000 or, if greater, an integral
multiple of $50,000.
Each Commitment Reduction Notice shall specify the date fixed for such
termination or reduction, the aggregate principal amount thereof and the
aggregate principal amount of the Notes required to be repaid hereunder on
such date.
(B) CASUALTY EVENTS. Within two hundred seventy (270) days following the
receipt by the Borrower or any of the Subsidiaries of the proceeds of any
insurance, condemnation award or other compensation in respect of any Casualty
Event (or upon such earlier date as the Borrower or any Subsidiary shall have
determined not to repair or replace the asset or property affected by such
Casualty Event), which proceeds, together with all other such proceeds
theretofore received in respect of Casualty Events, exceed $500,000 in the
aggregate, (i) the Commitments shall be automatically reduced in an aggregate
amount, if any, equal to the aggregate amount of such proceeds not theretofore
applied to the repair or replacement of such asset or property under SECTION
6.02(B) and (ii) the Borrower shall prepay the Notes accordingly, all as
provided in SECTIONS 1.06(H) and (I). Nothing in this SECTION 1.06(B) shall be
deemed (i) to limit any obligation of the Companies pursuant to the Security
Agreements to remit to the Collateral Account the proceeds of insurance,
condemnation award or other compensation received in respect of any Casualty
Event, (ii) to obligate the Agent to release any of such proceeds from the
Collateral Account to the Borrower or any Subsidiary during the existence of any
Default or (iii)
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to apply to temporary prepayments of the Notes from insurance proceeds pending
completion of repairs and restoration within the two hundred seventy (270) day
period referred to above.
(C) EXCESS CASH FLOW. On or before May 31 of each year, commencing May
31, 2001, (i) the Commitments shall be automatically reduced by an amount equal
to the portion of such prepayments applied to the Notes, in an aggregate amount
equal to seventy-five percent (75% ) of Excess Cash Flow for the immediately
preceding fiscal year, and (ii) the Borrower shall prepay the Notes accordingly,
all as provided in SECTIONS 1.06(H) and (I).
(D) DISPOSITIONS OF ASSETS. Without limiting the obligation of the
Borrower under SECTION 7.03 to obtain the consent of the Required Lenders to any
Disposition not otherwise permitted hereunder, the Borrower agrees (i) two (2)
Business Days prior to the occurrence of any disposition of assets or properties
other than pursuant to SECTION 7.03(A), to deliver to the Administrative Agent
(in sufficient copies for each Lender) a statement, certified by the chief
executive officer or chief financial officer of the Borrower and in reasonable
detail, of the estimated amount of the Net Cash Proceeds of such Disposition and
(ii) that in the event such Disposition is completed, the Commitments shall be
automatically reduced as follows:
(A) on the date of such Disposition, in an aggregate amount
equal to 100% of the Net Cash Proceeds of such Disposition received by the
Borrower or any of the Subsidiaries on the date of such Disposition; and
(B) thereafter, quarterly, on the date of the delivery to the
administrative Agent pursuant to SECTION 6.05 hereof of the financial
statements for each fiscal quarter or (if earlier) the date which is forty-
five (45) days after the end of such fiscal quarter, to the extent the Borrower
or any Subsidiary shall receive Net Cash Proceeds during such fiscal quarter
under deferred payment arrangements or investments entered into or received in
connection with any Disposition, an amount equal to 100% of the aggregate amount
of such Net Cash Proceeds, PROVIDED that if, prior to the date upon which the
Borrower would otherwise be required to make a prepayment under this paragraph
(B) with respect to any fiscal quarter, all such Net Cash Proceeds received in
cash shall aggregate an amount that will require a prepayment of $50,000 or more
under this paragraph (B) with respect to such fiscal quarter, then the Borrower
shall immediately make a prepayment under this paragraph (B) in an amount equal
to such required prepayment.
In connection with each such reduction of the Commitments the borrower shall
prepay the Notes accordingly, as provided in SECTION 1.06(I).
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(E) DEBT ISSUANCES. Without limiting the obligation of the Borrower to
obtain the consent thereto of the Required Lenders under SECTION 7.01, upon any
issuance of additional debt securities of the Borrower or the Parent, other than
the Senior 14% Notes, (i) the Commitments shall be automatically reduced in an
aggregate amount equal to the net proceeds thereof and (ii) the Borrower shall
prepay the Notes accordingly, as provided in SECTIONS 1.06(H) and (I).
(F) EQUITY ISSUANCES. Upon any issuance of additional shares of the
capital stock of the Borrower or the Parent for cash consideration, other than
the New Equity and Employee Shares, (i) the Commitments shall be automatically
reduced in an aggregate amount equal to fifty percent (50%) of the net cash
proceed thereof and (ii) the Borrower shall prepay the Notes accordingly, as
provided in SECTIONS 1.06(H) and (I).
(G) FCC LICENSE ACQUISITIONS. the Borrower shall furnish the
Documentation Agent with written notice (the "FCC LICENSE ACQUISITION PAYMENTS
NOTICE") if, prior to September 18, 1998, FCC License Acquisition Payments
exceed $6,000,000. If, prior to September 18, 1998, FCC License Acquisition
Payments exceed the greater of $6,000,000 or such higher amount as may have been
approved prior to such date by the Lenders, in their sole and absolute
discretion, upon request under SECTION 7.03(C)(III), then, at the election of
the Required Lenders exercised by written notice provided within ten (10)
Business Days after receipt of any FCC License Acquisition Payments Notice, the
Commitments shall automatically terminate and the Borrower shall repay the Notes
in full.
(H) APPLICATION OF REDUCTIONS OF THE COMMITMENTS. Upon the occurrence of
any of the events described in the above paragraphs of this SECTION 1.06, the
amount of the proposed or required reduction of the Commitments, if any, shall
be applied to the reduction of the Lenders' respective Commitments on a PRO RATA
basis, as provided in SECTION 1.14. Each such reduction of the aggregate
Commitments shall be applied as follows:
(i) in the case of voluntary reductions under SECTION 1.06(A), to
subsequent scheduled automatic reductions of the Commitments under SECTION
1.02 in the inverse order in which they appear; and
(ii) in the case of all other reductions, to reduce the dollar levels
of each of the Commitments shown in the Table of scheduled automatic
reductions under SECTION 1.02 accordance with the dollar levels shown in
such Table.
(I) MANDATORY PREPAYMENTS; APPLICATIONS OF PREPAYMENTS.
(i) Simultaneously with any mandatory automatic reduction of the
Commitments under SECTION 1.02 or SECTION 1.06(B), (C), (D), (E), (F) or
(G), the Borrower (A) shall pay
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to the Administrative Agent, for the ratable account of each Lender, any
then accrued unpaid Commitment Fee on the reduced portion of the
respective Commitments, (B) shall pay any indemnification payments due in
accordance with SECTION 1.11 in respect of LIBOR Loans so prepaid and (C)
shall repay such amount of the aggregate principal amount of the Notes as
shall cause the outstanding principal balance thereunder to be less than
or equal to the aggregate Available Commitments, after giving effect to
such reduction.
(ii) All voluntary and mandatory prepayments of the Notes under this
SECTION 1.06 (A) shall be made without set-off (other than for final
judgments for the payment of money against either Agent or any Lender),
deduction or counterclaim, and (B) unless otherwise specified in this
SECTION 1.06, shall be applied FIRST, to overdue interest, fees,
indemnification payments and expenses hereunder and SECOND, to pay
principal of the Notes, PROVIDED, in each case, that (A) payments of
principal of the Notes shall be applied to the Lenders' respective Notes
PRO RATA as provided in SECTION 1.14, unless otherwise agreed to by the
Lenders, and (B) applications of prepayments to principal shall be made
first to Base Rate Loans and then to LIBOR Loans.
SECTION 1.07. FEES AND WARRANTS.
(a) The Borrower shall pay to the Administrative Agent, for the ratable
account of each Lender, a non-refundable fee (the "COMMITMENT FEE") on the
aggregate daily unutilized portion of the Commitments from the Closing Date to
and including the earlier of the termination of the Commitments or the
Expiration Date, at the Commitment Fee Rate (computed on the basis of the actual
number of days elapsed over a 360-day year), payable quarterly in arrears on
each Quarterly Date, without setoff, deduction or counterclaim, with a final
payment at the maturity of the Notes, whether by payment, prepayment,
acceleration or otherwise.
(b) The Commitment Fee Rate during the period commencing on the date hereof
and ending on November 14, 1997 shall be .50%. The Commitment Fee Rate during
the Pricing Period commencing on November 15, 1997 and ending on February 14,
1998 and during each Pricing Period thereafter shall be determined based upon
the Pricing Ratio, as indicated in the following Table:
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------------------------------------------------------
PRICING RATIO COMMITMENT FEE RATE
------------------------------------------------------
------------------------------------------------------
Greater than or equal to
2.50:1.00 .500%
------------------------------------------------------
------------------------------------------------------
Less than 2.50:1.00 .375%
------------------------------------------------------
Notwithstanding the foregoing, as long as Annualized EBITDA for any fiscal
quarter shall be negative, the Commitment Fee Rate for the Pricing Period
commencing on the day after the last day of such fiscal quarter shall be .50%.
(c) The Borrower shall also pay certain additional fees, and the Parent
shall issue the Warrants, to the Lenders and the Agents, as provided in the Fee
and Warrant Letters. In conjunction with the issuance of the Warrants, the
Borrower and the Parent shall enter into the Equity Holder Agreement.
SECTION L.08. REQUIREMENTS OF LAW.
(a) In the event that any Regulatory Change shall:
(i) change the basis of taxation of any amounts payable to any
Lender under this Agreement or any Notes in respect of any Loans,
including without limitation LIBOR Loans (other than taxes imposed on the
overall net income of such Lender in its jurisdiction of organization or
in the jurisdiction where its lending office is located);
(ii) impose or modify any reserve, compulsory loan assessment,
special deposit or similar requirement relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of,
any office of such Lender (including any of such Loans or any deposits
referred to in the definition of "LIBOR BASE RATE" in ARTICLE XI); or
(iii) impose any other conditions affecting this Agreement in
respect of Loans, including without limitation LIBOR Loans (or any of such
extensions of credit, assets, deposits or liabilities);
and the result of any of the foregoing shall be to increase such Lender's costs
of making or maintaining any Loans, including without limitation LIBOR Loans or
any Commitment, or to reduce any amount receivable by such Lender hereunder in
respect of any of its LIBOR Loans or any Commitment, in each case only to the
extent that such additional amounts are not included in the LIBOR Base Rate or
Base Rate applicable to such Loans, then the Borrower shall pay on demand to
such Lender, through the Administrative Agent, and from time to time as
specified by such Lender, such additional amounts as such Lender shall
reasonably determine are sufficient to compensate such Lender for such increased
cost or reduced amount receivable.
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(b) If at any time after the date of this Agreement any Lender shall have
determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Lending Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption or implementation of any Regulatory Change regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof (whether or not having the
force of law), has or will have the effect of reducing the rate of return on
such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of the existence of its obligations hereunder to a level
below that which such Lender or its holding company could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount reasonably deemed by
such Lender to be material, then from time to time following written notice by
such Lender to the Borrower as provided in paragraph (c) of this Section, within
fifteen (15) days after demand by such Lender, the Borrower shall pay to such
Lender, through the Administrative Agent, such additional amount or amounts as
such Lender shall reasonably determine will compensate such Lender or such
corporation, as the case may be, for such reduction, provided that to the extent
that any or all of the Borrower's liability under this Section arises following
the date of the adoption of any such Regulatory Change (the "EFFECTIVE DATE"),
such compensation shall be payable only with respect to that portion of such
liability arising after notice of such Regulatory Change is given by such Lender
to the Borrower (unless such notice is given within sixty (60) days after the
Effective Date, in which case such compensation shall be payable in respect of
all periods before and after the Effective Date).
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrower of the event by
reason of which it has become so entitled. A certificate setting forth in
reasonable detail the computation of any additional amounts payable pursuant to
this Section submitted by such Lender to the Borrower shall be delivered to the
Borrower and the other Lenders promptly after the initial incurrence of such
additional amounts and shall be conclusive in the absence of manifest error. The
covenants contained in this Section shall survive for six months following the
termination of this Agreement and the payment of the outstanding Notes. No
failure on the part of any Lender to demand compensation under paragraph (a) or
(b) above on any one occasion shall constitute a waiver of its rights to demand
compensation on any other occasion. The protection of this Section shall be
available to each Lender regardless of any possible contention of the invalidity
or inapplicability of any law, regulation or other condition which shall give
rise to any demand by such Lender for compensation thereunder.
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SECTION 1.09. LIMITATIONS ON LIBOR LOANS; ILLEGALITY.
(a) Anything herein to the contrary notwithstanding, if, on or prior to
the determination of an interest rate for any LIBOR Loans for any applicable
Interest Period, the Administrative Agent shall determine (which determination
shall be conclusive absent manifest error) that:
(i) by reason of any event affecting United States money markets or
the London interbank market, quotations of interest rates for the relevant
deposits are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such Loans
under this Agreement; or
(ii) the rates of interest referred to in the definition of "LIBOR
BASE RATE" in ARTICLE XI, on the basis of which the rate of interest on any
LIBOR Loans for such period is determined, do not accurately reflect the
cost to the Lenders of making or maintaining such LIBOR Loans for such
period; then the Administrative Agent shall give the Borrower prompt notice
thereof (and shall thereafter give the Borrower prompt notice of the
cessation, if any, of such condition), and so long as such condition
remains in effect, the Lenders shall be under no obligation to make LIBOR
Loans or to convert Base Rate Loans into LIBOR Loans and the Borrower
shall, on the last day(s) of the then current Interest Period(s) for any
outstanding LIBOR Loans, either prepay such LIBOR Loans in accordance with
SECTIONS 1.01 and 1.06 or convert such Loans into Base Rate Loans in
accordance with SECTION 1.04.
(b) Notwithstanding any other provision herein, if for any reason a Lender
shall be unable to make or maintain LIBOR Loans as contemplated by this
Agreement, such Lender shall provide prompt written notice to the Borrower and
(i) such Lender's commitment hereunder to make LIBOR Loans, continue LIBOR Loans
as such and convert Base Rate Loans to LIBOR Loans shall thereupon terminate and
(ii) such Lender's Loans then outstanding as LIBOR Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a LIBOR Loan occurs on a
day which is not the last day of the then current Interest Period with respect
thereto, and if the reason for such Lender's inability to make or maintain LIBOR
Loans as contemplated by this Agreement is a Regulatory Change, then the
Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to SECTION 1.11.
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SECTION 1.10. TAXES.
(a) All payments made by the Borrower under this Agreement and the Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority (all such
taxes, levies, imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "TAXES"); PROVIDED, HOWEVER, that the term "Taxes" shall not
include net income taxes, franchise taxes (imposed in lieu of net income taxes)
and general intangibles taxes (such as those imposed by the State of Florida)
imposed on either Agent or any Lender, as the case may be, as a result of a
present or former connection or nexus between the jurisdiction of the government
or taxing authority imposing such tax (or any political subdivision or taxing
authority thereof or therein) and such Agent or such Lender other than that
arising solely from such Agent or such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement, the Notes or any of the Security Documents. If any Taxes are required
to be withheld from any amounts payable to either Agent or any Lender hereunder
or under the Notes, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the Notes. Whenever
any Taxes are payable by the Borrower in respect of this Agreement or the Notes,
as promptly as possible thereafter the Borrower shall send to such Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agents and the Lenders for any incremental taxes, interest or penalties that
may become payable by either Agent or any Lender as a result of any such
failure. If, after any payment of Taxes by the Borrower under this Section, any
part of any Tax paid by either Agent or any Lender is subsequently recovered by
such Agent or such Lender, such Agent or such Lender shall reimburse the
Borrower to the extent of the amount so recovered. A certificate of an officer
of the Administrative Agent or such Lender setting forth the amount of such
recovery and the basis therefor shall, in the absence of manifest error, be
conclusive. The Agents and the Lenders shall use reasonable efforts to notify
the Borrower of their attempts, if any, to obtain abatements of any such Taxes
and the receipt by the Agents or the Lenders of any funds in connection
therewith. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
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(b) Each Lender, if any, that is not incorporated under the laws of the
United States or a state thereof agrees that prior to the date any payment is
required to be made to it hereunder it will deliver to the Borrower and the
Administrative Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form. Each such Lender also agrees to deliver to the Borrower and the
Administrative Agent two further copies of the said Form 1001 or 4224 and Form
W-8 or W-9, or successor applicable forms or other manner of certification, as
the case may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower, and such extensions or
renewals thereof as may reasonably be requested by the Borrower or the
Administrative Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Such Lender shall certify (x) in the case
of a Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes and (y) in the case of a Form W-8 or W-9, that it is entitled to an
exemption from United States backup withholding tax.
SECTION 1.11. INDEMNIFICATION. The Borrower shall pay to the
Administrative Agent, for the account of each Lender, upon the request of such
Lender delivered to the Administrative Agent and thereafter delivered by the
Administrative Agent to the Borrower, such amount or amounts as shall compensate
such Lender for any loss, cost or expense incurred by such Lender (as reasonably
determined by such Lender) as a result of:
(a) any payment or prepayment or conversion of any LIBOR Loan held by such
Lender on a date other than the last day of the Interest Period for such LIBOR
Loan (including without limitation any such payment, prepayment or conversion
required under SECTION 1.04 or 1.06); or
(b) any failure by the Borrower to borrow, convert into or continue a
LIBOR Loan on the date for such borrowing specified in the relevant Loan Request
or Interest Rate Option Notice under SECTION 1.04 or otherwise.
Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably
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determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder. The determination by each such Lender of the amount of any
such loss or expense, when set forth in a written notice delivered to the
Administrative Agent (and thereafter delivered by the Administrative Agent to
the Borrower), containing such Lender's calculation thereof in reasonable
detail, shall be conclusive in the absence of manifest error.
SECTION 1.12. PAYMENTS UNDER THE NOTES. All payments and prepayments made
by the Borrower of principal of, and interest on, the Notes and other sums and
charges payable under this Agreement, including without limitation the
Commitment Fee and any payments under SECTIONS 1.08, 1.10 and 1.11, shall be
made in immediately available funds to the Administrative Agent (as specified in
SECTION 14.03) for the accounts of the Lenders as provided in SECTION 1.14 and
otherwise herein and, with respect to fees payable to the Agents and their
affiliates, the Fee and Warrant Letters, not later than 2:00 P.M. (New York City
time), on the date on which such payment shall become due. The failure by the
Borrower to make any such payment by such hour shall not constitute a Default
hereunder so long as payment is received later that day, provided that any such
payment made after 2:00 P.M. (New York City time), on such due date shall be
deemed to have been made on the next Business Day for the purpose of calculating
interest on amounts outstanding on the Notes. The Borrower shall, at the time of
making each payment under this Agreement or the Notes, specify to the
Administrative Agent the Notes or amounts payable by the Borrower hereunder to
which such payment is to be applied (and in the event that it fails to so
specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payments in such manner as the Required
Lenders may direct or, absent such direction, as it determines to be
appropriate, subject to the provisions of SECTION 1.14). Except as otherwise
provided in the definition of "Interest Period" with respect to LIBOR Loans, if
any payment hereunder or under the Notes shall be due and payable on a day which
is not a Business Day, such payment shall be deemed due on the next following
Business Day and interest shall be payable at the applicable rate specified
herein through such extension period. The Administrative Agent, or any Lender
for whose account any such payment is to be made, may (but shall not be
obligated to) debit the amount of any such payment which is not made by such
time to any deposit account of the Borrower with the Administrative Agent or
such Lender, as the case may be. Each payment received by the Administrative
Agent under this Agreement or any Note for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds, for the account of such
Lender for the Note in respect to which such payment is made.
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SECTION 1.13. SET-OFF, ETC. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have and in addition to the debit right afforded in SECTION
1.12, each Lender (and each subsequent holder of any Note) shall be entitled, at
its option, to offset balances held by it, or by any of its respective branches
or agencies, for the account of the Borrower at any of its or their offices, in
Dollars or in any other currency, against any principal of or interest on the
Notes held by such Lender (or subsequent noteholder) or other fees or charges
owed to such Lender (or subsequent noteholder) hereunder which are not paid when
due (regardless of whether such balances are then due to the Borrower and
regardless of whether the Lenders are otherwise fully secured), in which case it
shall promptly notify the Borrower and the Administrative Agent thereof,
provided that such Lender's (or subsequent noteholder's) failure to give such
notice shall not affect the validity thereof and (as security for any
Indebtedness hereunder) the Borrower hereby grants to the Documentation Agent
and the Lenders a continuing security interest in any and all balances, credit,
deposits, accounts or moneys of the Borrower maintained with either Agent and
any Lender now or hereafter. If a Lender (or subsequent noteholder) shall obtain
payment of any principal, interest or other amounts payable under this Agreement
through the exercise of any right of set-off, banker's lien or counterclaim or
otherwise or pursuant to the debit right provided in SECTION 1.12, it shall
promptly purchase from the other Lenders participations in (or, if and to the
extent specified by such Lender, direct interests in) the Note(s) held by the
other Lenders in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders shall share the benefit
of such payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) PRO RATA in accordance with the unpaid
principal amounts of and interest on the Note(s) held by each of them. To such
end, the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. The Borrower agrees that any Lender or any other Person
which purchases a participation (or direct interest) in the Note(s) held by any
or all of the Lenders (each being hereinafter referred to as a "PARTICIPANT")
may exercise all rights of set-off, bankers' lien, counterclaim or similar
rights with respect to such participation as fully as if such Participant were a
direct holder of Notes in the amount of such participation, provided that the
Borrower was notified of such purchase. Nothing contained herein shall be deemed
to require any Participant to exercise any such right or shall affect the right
of any Participant to exercise, and retain the benefits of exercising, any such
right with respect to any indebtedness or obligation of the Borrower, other than
the Borrower's indebtedness and obligations under this Agreement.
SECTION 1.14. PRO RATA TREATMENT; SHARING.
(a) Except to the extent otherwise provided herein and, with respect to
fees payable to the Agents and their affiliates, the Fee and Warrant Letters,
and except as otherwise agreed by the Lenders: (i) each borrowing from the
Lenders under the Commitments shall be made from the Lenders, each Lender's
share of each Letter of Credit under SECTION 1.17 and each payment of the
Commitment Fee under SECTION 1.07 and the Letter of Credit Fee under SECTION
1.17 shall be
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allocated to the Lenders PRO RATA according to the amounts of their respective
unutilized Commitments; (ii) the principal amount of LIBOR Loans made by each
Lender shall be determined on a PRO RATA basis in accordance with its respective
Commitment (when making Loans) or the outstanding principal amount of the Loans
owed to such Lender (in the case of conversions to or continuations of Loans as
LIBOR Loans); (iii) each payment and prepayment of principal of the Notes and
each repayment of Letter of Credit Disbursements shall be allocated to the
Lenders PRO RATA in accordance with the unpaid principal amounts of the
respective Notes held by the Lenders; (iv) each payment of interest on the Notes
shall be allocated to the Lenders PRO RATA in accordance with the unpaid
principal amounts of their respective Revolver Loans; (v) each payment of any
other sums and charges payable for the Lenders' account under this Agreement
(except the fees payable under the Fee and Warrant Letters, which are payable
solely in accordance therewith) shall be allocated to the Lenders PRO RATA in
accordance with the respective unpaid principal amounts of the aggregate Loans
made by each of them; (vi) each payment under SECTION 1.08, 1.10 or 1.11 shall
be made to each Lender in the amount required to be paid to such Lender to
adequately indemnify or compensate such Lender for losses suffered or costs
incurred by such Lender as provided in such Section; and (vii) notwithstanding
the foregoing, after and during the continuance of a Default, each distribution
of cash, property, securities or other value received by any Lender, directly or
indirectly, in respect of the Borrower's Indebtedness hereunder, whether
pursuant to any attachment, garnishment, execution or other proceedings for the
collection thereof or pursuant to any bankruptcy, reorganization, liquidation or
other similar proceeding or otherwise, after payment of collection and other
expenses as provided herein and in the Security Documents, shall be apportioned
among the Lenders PRO RATA based upon the respective aggregate unpaid principal
amounts of and interest on the Notes held by each of them and their respective
shares of the aggregate Letter of Credit Exposure.
(b) Notwithstanding the foregoing, if any Lender (a "Recovering Party")
shall receive any such distribution referred to in SECTION 1.14 (A)(VI) above (a
"RECOVERY") in respect thereof, such Recovering Party shall pay to the
Administrative Agent for distribution to the Lenders as set forth herein their
respective PRO RATA shares of such Recovery, based on the Lenders' PRO RATA
shares of all Loans outstanding at such time, unless the Recovering Party is
legally required to return any Recovery, in which case each party receiving a
portion of such Recovery shall return to the Recovering Party its PRO RATA share
of the sum required to be returned without interest. For purposes of this
Agreement, calculations of the amount of the PRO RATA share of each Lender shall
be rounded to the nearest whole dollar.
(c) The Borrower acknowledges and agrees that, if any Recovering Party
shall be obligated to pay to the other Lenders a portion of any Recovery
pursuant to SECTION 1.14(B) and
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shall make such recovery payment, the Borrower shall be deemed to have satisfied
its obligations in respect of Indebtedness held by such Recovering Party only to
the extent of the Recovery actually retained by such Recovering Party after
giving effect to the PRO rata payments by such Recovering Party to the other
Lenders. The obligations of the Borrower in respect of Indebtedness held by each
other Lender shall be deemed to have been satisfied to the extent of the amount
of the Recovery distributed to each such other Lender by the Recovering Party.
SECTION 1.15. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified in writing by a Lender or the
Borrower prior to the date on which such Lender or the Borrower is scheduled to
make payment to the Administrative Agent of (in the case of a Lender) the
proceeds of a Loan to be made by it hereunder or (in the case of the Borrower) a
payment to the Administrative Agent for the account of any or all of the Lenders
hereunder (such payment being herein referred to as a "REQUIRED PAYMENT"), which
notice shall be effective upon actual receipt, that it does not intend to make
such Required Payment to the Administrative Agent, the Administrative Agent may
(but shall not be required to) assume that the Required Payment has been made
and may (but shall not be required to), in reliance upon such assumption, make
the amount thereof available to the intended recipient(s) on such date and, if
such Lender or the Borrower (as the case may be) has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, or with respect to payment received by the Borrower, within
three (3) Business Days after such receipt repay to the Administrative Agent for
the Administrative Agent's own account the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Administrative Agent until the
date the Administrative Agent recovers such amount at a rate per annum equal to
(a) the Federal Funds Rate for such day, with respect to interest paid by such
Lender, or (b) the applicable rate provided under SECTION 1.03, with respect to
interest paid by the Borrower.
SECTION 1.16. REPLACEMENT OF NOTES. Upon receipt of evidence reasonably
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
any Note and (a) in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Borrower
(PROVIDED, HOWEVER, that if the holder of such Note is the original holder of
such Note or a financial institution with net capital, capital surplus and
undivided profits in excess of $50,000,000 its own agreement of indemnity shall
be deemed to be satisfactory), or (b) in the case of any such mutilation, upon
the surrender of such Note for cancellation, the Borrower will execute and
deliver, in lieu of such lost, stolen, destroyed, or mutilated Note, a new Note
of like tenor.
SECTION 1.17. LETTERS OF CREDIT. From time to time prior to the Expiration
Date and on the terms and subject to the conditions contained in this Agreement,
the Administrative Agent shall cause the Issuing Banks to issue stand-by letters
of credit (or to provide renewals thereof) for the account of the Borrower (each
a "LETTER OF CREDIT" and collectively, the "LETTERS OF CREDIT") as follows:
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(A) ISSUANCE OF LETTERS OF CREDIT. The obligations of the Issuing Banks to
issue any Letter of Credit requested by the Borrower is subject to the following
conditions:
(i) The Issuing Bank shall not issue any Letter of Credit if, after
giving effect to the issuance thereof, (A) the sum of (i) the aggregate
principal amount of all Loans then outstanding and (ii) the Letter of
Credit Exposure would exceed the aggregate Commitments, as then in effect,
(B) the aggregate Letter of Credit Exposure would exceed $2,500,000, or
(C) any Default would exist.
(ii) The initial Letters of Credit shall be jointly issued by Fleet
and Paribas, each in the face amount of $1,250,000, to replace the
$2,500,000 letter of credit issued for the Borrower's account by Toronto
Dominion Bank in favor of Tadiran Ltd., as beneficiary (the "TD LETTER OF
CREDIT"). No subsequent Letters of Credit shall be issued other than as
renewals of, or substitutions for, such initial Letters of Credit, in
accordance with the provisions of this SECTION 1.17 and the applicable
Letter of Credit Documents.
(iii) Such initial Letters of Credit and any related documentation
shall be in form and scope and upon terms acceptable to the Issuing Banks,
in their sole discretion but, in any event, in accordance with their then
customary practices (and, as between or among the Issuing Banks pursuant
to substantially comparable terms) (collectively with the Letters(s) of
Credit issued pursuant hereto, the "LETTER OF CREDIT DOCUMENTS"). The
Borrower will furnish to each of the Issuing Banks on their standard
written application (which shall be received by the Issuing Bank not less
than three (3) Business Days and not more than ten (10) Business Days
prior to the proposed issue date of such Letter of Credit) such
information as is required thereby, including the following: (A) the
proposed issue date (which must be a Business Day), (B) the expiration
date, which must be prior to the Expiration Date and in any event, no
later than 365 days from issuance (subject to customary automatic annual
renewal provisions), (C) the name and address of the beneficiary, (D) the
face amount of such Letter of Credit, (E) the purpose of such Letter of
Credit, which shall be solely to replace the TD Letter of Credit, and (F)
the form of such Letter of Credit.
(iv) Each Letter of Credit must expire on or prior to the Expiration
Date (or earlier, subject to customary renewal options, in accordance with
the Issuing Bank's customary practices).
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(B) LETTER OF CREDIT FEES. The Borrower shall pay the Agent, for the
ratable account of each Lender, a non-refundable letter of credit fee (the
"LETTER OF CREDIT FEE") which shall accrue from the date of issuance of any
Letter of Credit through and including the Expiration Date and shall be payable
quarterly in arrears on each Quarterly Date, without setoff, deduction or
counterclaim, with a final payment on the Expiration Date. The letter of Credit
Fee shall be calculated by multiplying the aggregate face amount of all
outstanding Letters of Credit by the Applicable Margin applicable from time to
time to LIBOR Loans. The Administrative Agent will promptly remit to each
Lender its share of all payments received by the Issuing Bank or the
Administrative Agent in respect of the Letter of Credit Fee. Upon the issuance,
renewal or amendment of any Letter of Credit, the Borrowers shall also pay the
applicable Issuing Bank's customary issuance, renewal or amendment fee,
respectively, for letters of credit.
(C) CASH COLLATERAL. For so long as the Companies' cash on hand (without
giving effect to the Interest Reserve is less than $10,000,000, but greater than
or equal to $5,000,000, in the aggregate, the Borrower shall provide sash
collateral for its obligations in respect of any and all Letters of Credit in an
amount equal to at least fifty percent (50%) of the aggregate Letter of Credit
Exposure. for so long as the Companies' cash on hand (without giving effect to
the Interest Reserve) is less than $5,000,000 in the aggregate and, in any
event, during the existence of any Default, the Borrower shall provide cash
collateral (collectively, the "CASH COLLATERAL") shall be provided within three
(3) Business Days following the occurrence of the event giving rise to such Cash
Collateral requirement in such manner, and pursuant to such instruments and
agreements, as the Documentation Agent shall require.
(D) OBLIGATION OF BORROWER TO REPAY LETTER OF CREDIT DISBURSEMENTS, ETC.
The Borrower assumes all risks in connection with the Letters of Credit and the
Borrower's obligation to repay any payments made by any Issuing Bank on a draft
presented under any Letter of Credit (each a "LETTER OF CREDIT DISBURSEMENT")
shall be absolute, unconditional and irrevocable under any and all circumstances
and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower or any other person may at any time have against
the beneficiary under any Letter of Credit, either Agent, any Issuing Bank,
any Lender or any other Person, whether in connection with this Agreement
or otherwise;
(iii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect,
unless payment by the applicable Issuing Bank under such Letter of Credit
(A) shall have been made against presentation of drafts or documents that,
on
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their face, do not substantially conform to the requirements of such Letter
of Credit, or (B) shall have been the result of the gross negligence or
willful misconduct of such Issuing Bank; and
(iv) any other circumstance or event whatsoever, whether or
not similar to any of the foregoing, provided that such circumstance or
event shall not have been the result of the gross negligence or willful
misconduct of an Issuing Bank.
(E) PARTICIPATION BY LENDERS. Each of the Issuing Banks shall give each
Lender prompt notice of its receipt of each application for the issuance of a
Letter of Credit and the Proposed face amount, beneficiary, purpose and
expiration date thereof. By the issuance of a Letter of Credit and without any
further action, the applicable Issuing Bank hereby grants to each Lender, and
each Lender hereby agrees to acquire from such Issuing Bank, a participation in
such Letter of Credit equal to such Lender's PRO RATA share of the face amount
thereof, determined as provided in SECTION 1.14, effective upon the date of
issuance. In furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the applicable Issuing Bank, the amount of such Lender's PRO RATA share of each
Letter of Credit Disbursement. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this SECTION 1.17(E) is
absolute and unconditional and shall not be affected by any circumstances
whatsoever, and that each payment obligation arising from a Letter of Credit
Disbursement shall be made promptly by each Lender to the Administrative Agent
without any offset, abatement, withholding or reduction whatsoever.
(F) PAYMENTS BY LENDERS TO ISSUING BANK; FEE SHARING. Upon notification
by the Issuing Bank to the Administrative Agent that a Letter of Credit
Disbursement has been made and that the Borrower has failed to meet its
reimbursement obligations to the applicable issuing Bank, the Administrative
Agent shall promptly notify such Issuing Bank and each other Lender of the
amount of the Letter of Credit Disbursement and, in the case of each Lender,
its PRO RATA share thereof. Each Lender shall pay to the Administrative
Agent, not later than 2:00 P.M., New York time, on such date such Lender's
PRO RATA share of such Letter of Credit Disbursement, which the
Administrative Agent shall promptly pay to such Issuing Bank. The
Administrative Agent will promptly remit to each Lender its share of any
amounts subsequently received by any Issuing Bank or the Administrative Agent
from the Borrower in respect of all Letter of Credit Disbursements.
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II. SECURITY; SUBORDINATION; USE OF PROCEEDS
SECTION 2.01. SECURITY FOR THE OBLIGATIONS; SUBORDINATION; ETC.
(A) COLLATERAL. Except as Limited in SCHEDULE 2.01, the Borrower's
obligation hereunder, under the Notes and the Letter of Credit Documents and in
respect of any Rate Hedging Obligations entered into with any Hedging Lenders
shall be secured at all times by:
(i) the unconditional guaranty of each of the Operating
Subsidiaries, if any, and the Parent;
(ii) a first priority perfected security interest in and lien upon
all presently owned and hereafter acquired tangible and intangible personal
property and fixtures of each of the Borrower and any Operating Subsidiaries,
if, any including any intercompany notes, Obligations or agreements, subject
only to (A) any prior Liens expressly permitted under this Agreement and (B) the
exclusion of any license, permit or other authorization issued by the FCC,
except to the extent (if any) that such a security interest is permitted or not
prohibited by the Communication Act of 1934, as amended, and the rules,
regulations and policies of the FCC (but including, to the maximum extent
permitted by lay, all rights incident or appurtenant to any such license, permit
or other authorization, including without limitation the right to receive all
proceeds derived or arising from or in connection with the sale, assignment or
transfer thereof);
(iii) first mortgages on all Key Sites, subject only to any prior
Liens expressly permitted under this Agreement, together with Mortgagee's title
insurance policies acceptable to the Lenders;
(iv) first priority perfected collateral assignments of or
leasehold mortgages on all leases of Key Sites (A) together with (and subject
to), such third party consents, lien waivers, non-disturbance agreements and
estoppel certificates as the Documentation Agent shall reasonably require (and
which are required under applicable law), in each case on a best efforts basis
to the extent that such third parties are not under the control of any Company,
and (B) together with mortgagee's title insurance policies reasonably acceptable
to the Documentation Agent;
(v) a first priority perfected collateral assignment and/or pledge
of all of the issued and outstanding ownership interests of each of the borrower
and the Subsidiaries and all warrants, options and other rights to purchase such
ownership interests; and
(vi) a first priority perfected collateral assignment of all
trademarks, service marks, patents and other intellectual property of the
Companies, recorded as required with the United States Patent and Trademark
Office;
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(vii) first priority perfected collateral assignments of (i) the
Tadiran Agreements and (ii) such other material agreements as the Documentation
Agent shall reasonably deem necessary to protect the interests of the Lenders,
together, in each case with such third party consents, lien waivers and estoppel
certificates as the Documentation Agent shall reasonably require; and
(viii) the Cash Collateral, if any, required under SECTION 1.17.
(b) SUBORDINATION. All existing and hereafter arising indebtedness of the
Borrower and the Subsidiaries, if any, to the Parent shall be subordinated to
all Indebtedness of the Companies to the Agents or the Lenders pursuant to a
subordination agreement satisfactory in form and substance to the Required
Lenders (the "AFFILIATE SUBORDINATION AGREEMENT").
(c) SECURITY DOCUMENTS. All Agreements and instruments described or
contemplated in this SECTION 2.01, together with any and all other agreements
and instruments heretofore or hereafter securing the Notes, the Rate Hedging
Obligations and the other Obligations or otherwise executed in connection with
this Agreement, are sometimes hereinafter referred to collectively as the
"SECURITY DOCUMENTS" and each individually as a "SECURITY DOCUMENT". the
Borrower agrees to take such action as the Lenders may reasonably request from
time to time in order to cause the Documentation Agent and the Lenders to be
secured at all times as described in this Section.
SECTION 2.02 USE OF PROCEEDS. The proceeds of the Loans shall be used (a)
for working capital, (b) for Capital Expenditures, (c) to support the
issuance of Letters of Credit under SECTION 1.17 to replace the TD Letter of
Credit and (d) for general corporate purposes of the Borrower in the Expanded
Core Markets. Attached as SCHEDULE 2.02 hereto is the Borrower's current
projection, as of the date hereof, of its sources and uses of proceeds as of
the Closing Date.
III. CONDITIONS OF MAKING THE LOANS
SECTION 3.01. CONDITIONS TO THE FIRST LOANS. The obligations of the
Lenders to enter into this Agreement and to make the first Loans to the Borrower
are subject to the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Borrower and its Affiliates set forth in this Agreement and in the other
Loan Documents shall be true and correct in all material respects on and as of
the date hereof and on the Borrowing Date of
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such Loans and the Borrower shall have performed all obligations which were to
have been performed by it hereunder prior to the date hereof or such Borrowing
Date, as the case may be.
(B) LOAN DOCUMENTS AND ORGANIZATIONAL DOCUMENTS. The Borrower shall have
executed and/ or delivered to the Documentation Agent (or shall have caused to
be executed and delivered to the Documentation Agent by the appropriate Persons)
as of the date hereof, the following:
(i) The Notes;
(ii) All of the Security Documents, including without limitation all
Uniform Commercial Code Financing Statements and Termination Statements and
all mortgages, deeds of trusts and amendments thereto, lessor consents and
waivers and related title insurance policies, if any, required by the
Documentation Agent or its counsel, in connection with the Borrower's
compliance with the provisions of SECTION 2.01;
(iii) Certified copies (pursuant to PART A of the form attached as
SCHEDULE 3.01(A)) of the resolutions of the Board of Directors of each
Company authorizing the execution and delivery of the Loan Documents to
which it is a party;
(iv) A copy of the Certificate or Articles of Incorporation of each
Company, with any amendments thereto, certified by the appropriate
Secretary of State and (pursuant to PART A of the form attached as SCHEDULE
3.01(A)) by the Secretary or an Assistant Secretary of such Company;
(v) For each Company, certificates of legal existence and good
standing (both as to corporation law, if applicable, and, if available, tax
matters) issued as of a reasonably recent date by such Company's state of
organization and any other state in which such Company is authorized or
qualified to transact business;
(vi) No later than three (3) Business Days prior to the Closing
Date, to the extent requested by the Documentation Agent, true and correct
copies of the Senior 14% Notes, the Senior Note Indenture, the Tadiran
Agreements and the Preferred Stock Exchange Agreements, all material
governmental licenses, franchises and permits, all material third party
consents and all other material leases, contracts, agreements, instruments
and other documents specified in SCHEDULES 4.04, 4.07, 4.16 and 4.19;
(vii)Such Uniform Commercial Code, Federal tax lien and judgment
searches with respect to the Companies and any other third parties as the
Documentation Agent shall require, the results thereof to be satisfactory
to the Documentation Agent;
(viii)The Opening Balance Sheet;
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(ix) Certificates of insurance evidencing the insurance coverage
and policy provisions required in this Agreement; and
(x) Such other supporting documents and certificates as the
Documentation Agent or the Lenders may have reasonably requested prior to
the date hereof.
(C) OFFICER'S CERTIFICATES AS TO COMPLIANCE, DOCUMENTS, ETC. On or prior to
the date hereof and on or prior to the Borrowing Date for the first Loans, the
Borrower shall have provided to the Documentation Agent one or more compliance
and other closing certificates, in forms satisfactory to the Documentation
Agent, executed on behalf of the Borrower by an Authorized Signatory, certifying
as to satisfaction by the Borrower of the conditions set forth in this SECTION
3.01 and, if applicable, in SECTION 3.02 and, specifically, as to certain
matters specified therein, and including the certifications and attachments
referred to in SECTIONS 3.01(B)(III), (IV) and (V), substantially in the form of
PART B of SCHEDULE 3.01(A) attached hereto.
(D) NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE 3.01(B), as
of the date hereof and as of the Borrowing Date for the first Loans hereunder,
and since December 31, 1996, no event or circumstance shall have occurred which
could have a Material Adverse Effect.
(E) COMPANY COUNSEL OPINION. The Documentation Agent shall have received
the written opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol, general
counsel to the Companies dated as of the date hereof, addressed to the Agents
and the Lenders and reasonably satisfactory to the Documentation Agent in scope
and substance;
(F) FCC COUNSEL OPINION. The Documentation Agent shall have received the
favorable written opinion of Dow, Lohnes & Albertson, special communications
counsel to the Companies dated as of the date hereof, addressed to the Agents
and the Lenders and reasonably satisfactory to the Documentation Agent in scope
and substance;
(G) LEGAL AND OTHER FEES. As of the date hereof and as of the Borrowing
Date for the first Loans hereunder, all fees owed to the Agents and, the Lenders
under the Fee and Warrant Letters (it being understood that the "Closing Date"
referred to therein is the date hereof) and all legal fees and expenses of
special counsel to the Documentation Agent incurred through such date shall have
been paid in full.
(H) WARRANTS. As of the date hereof and as of the Borrowing Date for the
first Loans hereunder, the Warrants shall have been duly issued to Fleet and
Paribas as contemplated under
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the Fee and Warrant Letters and Fleet and Paribas, by execution of the Equity
Holder Agreement, shall each have become parties to (i) the Stockholders'
Agreement with rights as "Investors" thereunder and (ii) to the Registration
Rights Agreement with rights as "Holders" of "Registrable Securities" thereunder
(and with the shares of Parent's common stock issuable upon the exercise of the
Warrants being included in the definition of "Registrable Securities").
(I) REVIEW BY DOCUMENTATION AGENT'S COUNSEL. All legal matters incident to
the transactions hereby contemplated shall be reasonably satisfactory to counsel
for the Documentation Agent as of the date hereof and as of the Borrowing Date
for the first Loans hereunder.
SECTION 3.02. ALL LOANS. The obligations of the Lenders to make any Loans
and the obligation of the Issuing Banks to issue and renew Letters of Credit
are, in each case, subject to the following conditions:
(a) All warranties and representations set forth in this Agreement shall be
true and correct in all material respects as of the date such Loans are made or
such Letter of Credit is issued or renewed (except to the extent they expressly
relate to an earlier specified date or are affected by transactions or events
occurring after the Closing Date and are permitted or not prohibited hereunder).
Each telephonic or written request for Loans or for the issuance or renewal of a
Letter of Credit shall constitute a representation to such effect as of the date
of such request and as of the date of such borrowing or such issuance or
renewal.
(b) As of the Borrowing Date of such Loans or the date of issuance of such
Letter of Credit and since the date hereof, no event or circumstance shall have
occurred which has had or could reasonably be expected to have a Material
Adverse Effect. Each telephonic or written request for Loans or for the issuance
or renewal of a Letter of Credit shall constitute a representation to such
effect as of the date of such request and as of the date of such borrowing or
such issuance or renewal.
(c) After giving effect to such Loans or the issuance or renewal of such
Letter of Credit (both as of the proposed date thereof and, on a PRO FORMA
basis, the last day of the most recent fiscal quarter for which financial
statements have been delivered to the Lenders under SECTION 6.05) and the use of
proceeds thereof, no Default shall have occurred and be continuing. Each
telephonic or written request for Loans or for the issuance or renewal of a
Letter of Credit shall constitute a representation to such effect as of the date
of such request and as of the date of such borrowing or such issuance or
renewal.
(d) The Administrative Agent shall have received a properly completed Loan
Request, together with all such financial and other information as the
Administrative Agent shall require to substantiate the current and PRO FORMA
certifications of no Default contained therein, or properly completed Letter of
Credit Documents.
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(e) No event of the type described in paragraph (i) or (j) of ARTICLE VIII
shall have occurred with respect to Tadiran and Tadiran shall have not failed
for any reason to perform any of its material obligations under the Tadiran
Agreements. Each telephonic or written request for Loans or for a Letter of
Credit shall constitute a representation to such effect as of the date of such
request and as of the date of such borrowing.
(f) The Agents shall have received such other supporting documents and
certificates as the Agents and the Required Lenders may reasonably request.
SECTION 3.03. LENDER APPROVALS. For purposes of determining compliance with
the conditions precedent referred to in SECTIONS 3.01, 3.02 and 3.03, on the
date of the first Loans hereunder, each of the Lenders shall be deemed to have
consented to, approved or accepted or be satisfied with each document or other
matter which is the subject of such Lender's consideration under any of the
provisions of such Sections, unless an officer of the Documentation Agent
responsible for the transactions contemplated by the Loan Documents shall have
received notice from such Lender prior to the first Loans hereunder specifying
its objection thereto and such Lender shall have failed to make available to the
Administrative Agent such Lender's ratable share of the first Loans.
IV. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to
the Lenders (which representations and warranties shall give effect to the
consummation of all of the transactions referred to in SECTION 3.01 and shall
survive the delivery of the Notes, the making of the Loans and the issuance of
all Letters of Credit) that:
SECTION 4.01. FINANCIAL STATEMENTS. The Borrower has heretofore
furnished to the Lenders:
(a) the audited balance sheet of the Borrower dated as of December 31, 1996
and the related statements of operations, stockholders' equity and cash flow for
the fiscal year then ended (the "FINANCIAL STATEMENTS"); and
(b) the August 31, 1997 balance sheet of the Borrower and the Subsidiaries
showing their PRO FORMA financial condition after the consummation of any and
all transactions contemplated to have occurred as of the date hereof, as if they
occurred on August 31, 1997, attached as SCHEDULE 4.01 (the "OPENING BALANCE
SHEET").
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The Financial Statements have been prepared in accordance with GAAP. Except
in connection with the issuance of the Senior 14% Notes, since December 31,
1996, there has been no material adverse change in the assets, properties,
business or condition (financial or otherwise) of the Borrower and no dividends
or distributions have been declared or paid by the Borrower. Except as set forth
on the Schedules hereto, none of the Companies has any material contingent
obligations, liabilities for taxes or unusual forward or long-term commitments
except as specified in such Financial Statements and in respect of the Senior
14% Notes. The Opening Balance Sheet fairly represents the PRO FORMA financial
condition of the Companies as of its date. All financial projections submitted
to the Lenders by the Borrower (including all projections set forth in the
Budget) are believed by the Borrower to be reasonable in light of all
information presently known by the Borrower.
SECTION 4.02. ORGANIZATION, QUALIFICATION, ETC. Each of the Companies (a)
is a corporation duly organized, validly existing and in good standing under the
laws of its state of organization, all as specified in Schedule 4.02, (b) has
the power and authority to own its properties and to carry on its business as
now being conducted and as presently contemplated, (c) has the power and
authority to execute and deliver, and perform its respective obligations under,
this Agreement, the Notes, the Warrants, Security Documents, Equity Holder
Agreement (and, in connection therewith, the Stockholders' Agreement and the
Registration Rights Agreement) and all other agreements and instruments
contemplated hereby and thereby (all of the foregoing being hereinafter referred
to collectively as the "TRANSACTION DOCUMENTS") and (d) is duly qualified to
transact business in the jurisdictions specified in such SCHEDULE 4.02 and in
each other jurisdiction where the nature of its activities requires such
qualification except for jurisdictions where failure to so qualify would not in
the aggregate have a Material Adverse Effect. As of the date of this Agreement
none of the Companies has any Subsidiaries, except as described in SCHEDULE
4.19.
SECTION 4.03. AUTHORIZATION; COMPLIANCE; ETC. The execution and delivery
of, and performance by the Companies of their respective obligations under, the
Transaction Documents have been duly authorized by all requisite corporate and
partnership action and will not violate any provision of law, any order,
judgment or decree of any court or other agency of government, including without
limitation the FCC, the charter documents or by-laws of any corporate Company,
the limited partnership agreement or certificate of limited partnership of any
partnership Company, the operating agreement of any limited liability company
which is a Company or any indenture, agreement or other instrument to which any
Company is a party, or by which any Company is bound (including without
limitation the Tadiran Agreements, the Preferred Stock Provisions and the Senior
Note Indenture), or be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or except as may be
permitted under this Agreement, result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of any Company pursuant to, any such indenture, agreement or instrument.
Each of the Transaction Documents constitutes the valid and binding obligation
of each of the Companies party thereto, enforceable
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against such party in accordance with its terms, subject, however to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights and
remedies of creditors generally or the application of principles of equity,
whether in any action in law or proceeding in equity, and subject to the
availability of the remedy of specific performance or of any other equitable
remedy or relief to enforce any right under any such agreement.
SECTION 4.04. GOVERNMENTAL AND OTHER CONSENTS, ETC.
(a) Except for filings and recording required under SECTION 2.01 and the
Security Documents and except as set forth in SCHEDULE 4.04, none of the
Companies is required to obtain any consent, approval or authorization from, to
file any declaration or statement with or to give any notice to, any
Governmental Authority (including without limitation the FCC and the Copyright
Office), or any other Person (including, without limitation, any notices
required under the applicable bulk sales law) in connection with or as a
condition to the execution, delivery or performance of any of the Transaction
Documents. Except as set forth in such SCHEDULE 4.04, all consents, approvals
and authorizations described in such Schedule have been duly granted and are in
full force and effect on the date hereof and all filings described in such
Schedule have been properly and timely made.
(b) Without limiting the generality of the provisions of SECTION 4.04(A),
(i) from time to time, the Companies may be required to obtain certain
authorizations of or to make certain filings with the FCC which are required in
the course of its business and are otherwise unrelated to the Transaction
Documents, (ii) copies of certain documents, including without limitation
certain Transaction Documents, may be required to be filed with the FCC, (iii)
the FCC must consent to any assignments or transfers of control of FCC
authorizations and (iv) prior to the exercise of certain rights or remedies
under the Loan Documents by the Documentation Agent or the Lenders, FCC consents
and notifications with respect to such exercise may be required to be timely
obtained or made.
SECTION 4.05. LITIGATION. Except as specified in SCHEDULE 4.05, there is no
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, including without limitation the FCC and any
arbitration board or tribunal, now pending or, to the knowledge of the Borrower,
threatened (nor is any basis therefor known to the Borrower), (a) which
questions the validity of any of the Transaction Documents, or any action taken
or to be taken pursuant hereto or thereto, in a manner or to an extent which has
had, or could reasonably be expected to have, a Material Adverse Effect, or (b)
against or affecting any Company which, if adversely determined, either in any
case or in the aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect.
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SECTION 4.06. COMPLIANCE WITH LAWS AND AGREEMENTS. Except as disclosed in
this Agreement, none of the Companies is a party to any agreement or instrument
or subject to any corporate, partnership, limited liability company or other
restriction which has had, or could reasonably be expected to have, a Material
Adverse Effect. None of the Companies or the Parent is in violation of any
provision of its corporate charter or by-laws, partnership agreement or
operating agreement, as the case may be, or of any material indenture, agreement
or instrument to which it is a party or by which it is bound or, to the best of
the Borrower's knowledge and belief, of any provision of law, the violation of
which has had, or could reasonably be expected to have, a Material Adverse
Effect, or any order, judgment or decree of any court or other agency of
government (including without limitation the FCC and the Copyright Office).
Without limiting the generality of the foregoing, all of the Obligations are
permitted under, and do not and will not violate, the Preferred Stock Provisions
or the Senior Note Indenture.
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SECTION 4.07. LICENSES, ETC.
(a) As of the date of this Agreement, each of the Companies has all
material authorizations, licenses, permits and franchises granted or assigned by
any public or governmental regulatory body, including all material
multilateration Location Monitoring Service licenses and other licenses,
authorizations and permits issued by the FCC (collectively, the "FCC LICENSES"),
required in connection with the conduct of their business as currently
conducted, subject to the qualifications and exceptions set forth in SCHEDULE
4.07 (such licenses, permits, franchises and authorizations, together with any
extensions or renewals thereof and any other licenses, permits, franchises and
authorizations hereafter issued to any Company, being hereinafter sometimes
referred to collectively as the "LICENSES"). All of the FCC Licenses that have
been issued are in full force and effect, and all such FCC Licenses are duly
issued in the name of, or validly assigned to, the Licenses Subsidiary as set
forth on SCHEDULE 4.07, subject to the qualifications and exceptions set forth
therein. As of the date hereof, except as limited by the provisions of the
Communications Act of 1934, as amended, and the FCC's rules and regulations and
as otherwise specified on the face of any FCC License, none of the FCC Licenses
is subject to any restriction or condition that would limit in any material
respect the operation of the business as it is now conducted. Except as
specified in SCHEDULE 4.07, there is not, as of the date hereof, pending, or the
knowledge of the Borrower and the License Subsidiary threatened, any action by
or before the FCC to revoke, cancel, rescind or modify (including a reduction in
coverage area) any of the FCC Licenses (other than proceedings to amend FCC
rules of general applicability) or refuse to renew the FCC Licenses, and there
is not now issued or outstanding, pending, or to the knowledge of Borrower and
the License Subsidiary threatened, by or before the FCC, any order to show
cause, notice of violation, notice of apparent liability, or notice of
forfeiture or complaint against Borrower and the License Subsidiary with respect
to the FCC Licenses. Except as specified in SCHEDULE 4.07, none of the FCC
Licenses is the subject of a pending license renewal application and the
Borrower has no reason to believe that any of the FCC Licenses will be revoked
or will not be renewed in the ordinary course. No renewal of any FCC License,
individually or in the aggregate, would constitute a major environmental action
under the FCC's rules and regulations, except to the extent that such renewal
could not reasonably be expected to have a Material Adverse Effect.
(b) With respect to each station's call sign listed in SCHEDULE 4.07, the
FCC has issued a modified license reflecting the band plan adopted in the FCC's
decision in its Report and Order, PR Docket No. 93-61, 10 FCC Rcd 4695 (February
6, 1995) as modified or reconsidered, for "grandfathered" authorizations
pursuant to the rules and regulations of the FCC, specifically including Section
90.363 thereof, 47 C.F.R. ss. 90.363.
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(c) Except as specified in SCHEDULE 4.07, the Borrower has not received,
and the FCC has not notified the Borrower that the FCC has received, any
complaint alleging that the Borrower's operations under the FCC Licenses have
subjected any other authorized users of the radio spectrum to radio frequency
interference.
(d) The Companies also possess all such other contract rights, including
agreements with public utilities, use, access or rental agreements and utility
easements that are necessary for the operation of their business, except to the
extent the absence thereof has not had, and could not reasonably be expected to
have, a Material Adverse Effect. Each of such other contract rights and
agreements is in full force and effect and no material default has occurred and
is continuing thereunder.
SECTION 4.08. PROPRIETARY RIGHTS. The Companies possess or have the rights
to all trade names, trademarks, copyrights and other proprietary rights
necessary for the operation of the Companies' businesses, free and clear of any
attachments, liens, encumbrances or adverse claims (except to the extent the
absence thereof has not had, and could not reasonably be expected to have, a
Material Adverse Effect), and neither the present or contemplated activities or
products of any of such entities infringe any such trade names, trademarks,
copyrights or other proprietary rights of others. Each of such trade names,
trademarks, copyrights and other rights is in full force and effect and no
material default has occurred and is continuing thereunder. All such registered
proprietary rights which have been registered, or as to which registration
applications have been submitted, are described on SCHEDULE 4.08.
SECTION 4.09. TITLE TO PROPERTIES; CONDITION OF PROPERTIES.
(a) The Companies have good title to all of their properties and assets
free and clear of all mortgages, security interests, restrictions (other than
FCC restrictions on the transfer of capital stock or FCC authorizations), liens
and encumbrances of any kind, including without limitation liens or encumbrances
in respect of unpaid taxes (collectively, "LIENS"), except liens and
encumbrances permitted under this Agreement.
(b) Except as set forth on SCHEDULE 4.09, each of the Companies enjoys
quiet possession under all leases to which it is a party as lessee, and all of
such leases are valid, subsisting and in full force and effect, in each case
except to the extent the same has not had, and could not reasonably be expected
to have, a Material Adverse Effect. None of such leases contains any provision
restricting the incurrence of indebtedness by the lessee.
SECTION 4.10. INTERESTS IN OTHER BUSINESSES. Except as reflected in
SCHEDULE 4.10 or SCHEDULE 4.19, none of the Companies holds or owns any of the
issued and outstanding capital stock, partnership interests or similar equity
interests, or any rights to acquire the same, of any corporation, partnership,
firm or entity other than as specified or permitted in this Agreement.
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SECTION 4.11. SOLVENCY.
(a) The aggregate amount of the full salable value of the assets and
properties of each Company exceeds the amount that will be required to be paid
on or in respect of such Company's existing debts and other liabilities
(including contingent liabilities) as they mature.
(b) No Company's assets and properties constitute unreasonably small
capital for such Company to carry out its business as now conducted and as
proposed to be conducted, including such Company's capital needs, taking into
the account the particular capital requirements of such Company's business and
the projected capital requirements and capital availability thereof.
(c) The Companies do not intend to, nor will the Companies, incur debts
beyond their ability to pay such debts as they mature, taking into account the
timing and amounts of cash reasonably anticipated to be received by each Company
and the amounts of cash reasonably anticipated to be payable on or in respect of
each Company's obligations. The Companies' aggregate cash flow, after taking
into account all anticipated sources and uses of cash, will at all times be
sufficient to pay all such amounts on or in respect of their indebtedness when
such amounts are required to be paid.
(d) The Borrower believes that no reasonably anticipated final judgment in
a pending action or, to its knowledge, any threatened actions for money damages
will be rendered at a time when, or in an amount such that, any Company will be
unable to satisfy such judgment promptly in accordance with its terms (taking
into account the maximum reasonable amount thereof and the earliest reasonable
time at which such judgment might be rendered). The cash available to each
Company, after taking into account all other anticipated uses of cash (including
the payment of all such Company's indebtedness) is anticipated to be sufficient
to pay any such judgment promptly in accordance with their terms.
(e) No Company is contemplating either the filing of a petition by it under
any state or federal bankruptcy or insolvency laws or the liquidating of all or
a substantial portion of its property, and the Borrower has no knowledge of any
Person contemplating the filing of any such petition against any Company.
SECTION 4.12. FULL DISCLOSURE. No statement of fact made by or on behalf of
any Company other than the Lenders in this Agreement, the Security Documents or
in any certificate or schedule furnished to the Lenders pursuant hereto or
thereto contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained therein or
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herein not misleading. There is no fact presently known to the Borrower which
has not been disclosed to the Lenders in writing which has had, or, as far as
the Borrower can reasonably foresee, could reasonably be expected to have, a
Material Adverse Effect, other than facts and circumstances generally known
within the Location Monitoring Service industry.
SECTION 4.13. MARGIN STOCK. The Companies do not own or have any present
intention of acquiring any "margin stock" within the meaning of Regulation U (12
CFR Part 221), of the Board of Governors of the Federal Reserve System (herein
called "MARGIN STOCK").
SECTION 4.14. TAX RETURNS. Each of the Companies has filed all material
federal, state and local tax and information returns required to be filed (or
has timely filed requests for extensions), and has paid or made adequate
provision for the payment of all material federal, state and local taxes,
franchise fees, charges and assessments shown thereon.
SECTION 4.15. PENSION PLANS, ETC.
(a) Except as described in SCHEDULE 4.15, neither the Borrower nor any
member of the Controlled Group has any pension, profit sharing or other similar
plan providing for a program of deferred compensation to any employee.
(b) Neither the Borrower nor any member of the Controlled Group has any
material liability (i) under Section 412 of the Code for failure to satisfy the
minimum funding requirements for pension plans, (ii) as the result of the
termination of a defined benefit plan under Title IV of ERISA, (iii) under
Section 4201 of ERISA for withdrawal or partial withdrawal from a multiemployer
plan, or (iv) for participation in a prohibited transaction with an employee
benefit plan as described in Section 406 of ERISA and Section 4975 of the Code.
SECTION 4.16. MATERIAL AGREEMENTS. SCHEDULE 4.16 accurately and completely
lists all agreements, if any, among the stockholders of the Parent and all
material construction, engineering, supplier, management, consulting and other
agreements, if any, which are in effect on the date hereof in connection with
the conduct of the business of the Companies.
SECTION 4.17. PROJECTIONS. Attached as SCHEDULE 4.17 are projections
of the operation of the Companies' businesses through December 31, 2003 (the
"PROJECTIONS").
SECTION 4.18. BROKERS, ETC. None of the Companies has dealt with any
broker, finder, commission agent or other similar Person in connection with the
Loans or the transactions contemplated by this Agreement or is under any
obligation to pay any broker's fee, finder's fee or commission in connection
with such transactions.
SECTION 4.19. CAPITALIZATION. Attached as SCHEDULE 4.19 is a schematic
diagram of the ownership relationships among the Companies showing, as to the
Companies, accurate ownership
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percentages of the principal stockholders of record and accompanied by a
statement of authorized and issued equity securities for each such entity as of
the date hereof. Such SCHEDULE 4.19 also includes a narrative indicating, as of
the date hereof: (a) which of such securities, if any, carry preemptive rights;
(b) to the best of the Borrower's knowledge whether there are any outstanding
subscriptions, warrants or options to purchase any securities of any Company;
(c) whether any Company is obligated to redeem or repurchase any of its
securities, and the details of any such committed redemption or repurchase; and
(d) any other agreement, arrangement or plan to which any Company is a party or
participant or of which any Company has knowledge which will directly or
indirectly affect the capital structure of the Companies. All such equity
securities of the Companies are validly issued and fully paid and
non-assessable, and owned as set forth on such SCHEDULE 4.19. All such equity
securities of the Companies are owned, legally and beneficially, free of any
assignment, pledge, lien, security interest, charge, option or other
encumbrance, except for liens and security interests granted to the
Documentation Agent or the Lenders or permitted under SECTION 7.02, restrictions
imposed by the Stockholders Agreement and restrictions on transfer imposed by
applicable securities laws, indicated on the certificates evidencing such shares
or as may be imposed by the FCC.
SECTION 4.20. ENVIRONMENTAL COMPLIANCE.
(a) To the best of the Borrower's knowledge, all real property leased,
owned, controlled or operated by the Companies (the "PROPERTIES") and their
existing and, to the best of the Borrower's knowledge, prior uses and activities
thereon, including, but not limited to, the use, maintenance and operation of
each of the Properties and all activities in conduct of business related thereto
comply and have at all times complied in all material respects with all
Environmental Laws.
(b) None of the Companies, and to the best of the Borrower's knowledge, no
previous owner, tenant, occupant or user of any of the Properties or any other
Person, has engaged in or permitted any operations or activities upon any of the
Properties for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal of a material amount of any Hazardous Materials the removal of which is
required or the maintenance of which is prohibited or penalized.
(c) To the best of the Borrower's knowledge, no Hazardous Material has been
or is currently located in, on, under or about any of the Properties in a manner
which materially violates any Environmental Law or which requires cleanup or
corrective action of any kind under any Environmental Law.
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(d) No notice of violation, lien, complaint, suit, order or other notice or
communication concerning any alleged violation of any Environmental Law in, on,
under or about any of the Properties has been received by any Company or, to the
best of the Borrower's knowledge, any prior owner or occupant of any of the
Properties which has not been fully satisfied and complied with in a timely
fashion so as to bring such Property into full compliance with all Environmental
Laws.
(e) The Companies have all permits and licenses required under any
Environmental Law to be issued to them by any Governmental Authority on account
of any or all of its activities on any of the Properties, except to the extent
that the absence of any such permit or license has had, or could reasonably be
expected to have, a Material Adverse Effect, and are in material compliance with
the terms and conditions of such permits and licenses. To the best of the
Borrower's knowledge, no change in the facts or circumstances reported or
assumed in the application for or granting of such permits or licenses exist,
and such permits and licenses are in full force and effect.
(f) No portion of any of the Properties has been listed, designated or
identified in the National Priorities List (NPL) or the CERCLA information
system (CERCLIS), both as published by the United States Environmental
Protection Agency, or any similar list of sites published by any Federal, state
or local authority proposed for or requiring cleanup, or remedial or corrective
action under any Environmental Law.
SECTION 4.21. INVESTMENT COMPANY ACT. None of the Companies is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or 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," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 4.22. LABOR MATTERS. No Company is experiencing any strike, labor
dispute, slow down or work stoppage due to labor disagreements which has had, or
could reasonably be expected to have, a Material Adverse Effect; there is no
such strike, dispute, slow down or work stoppage threatened against any Company;
none of the Companies is subject to any collective bargaining or similar
arrangements.
V. FINANCIAL COVENANTS. The Borrower covenants and agrees that, so long as
any Lender has any obligation to extend credit to the Borrower hereunder, and
for so long thereafter as there remains outstanding any portion of the
Obligations, whether now existing or arising hereafter, the Borrower and the
Subsidiaries will (on a consolidated or combined basis, as applicable):
SECTION 5.01. MINIMUM VLUS AND MESSAGING UNITS. At all times during each
period indicated below, cause the sum of (a) all Commercial VLUs PLUS (b) all
Consumer VLUs PLUS (C) one-third of all Messaging Units to equal or exceed the
following:
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PERIOD MINIMUM AGGREGATE AMOUNT
Closing Date through December 30, 1997 55,680
December 31, 1997 through March 30, 1998 63,690
March 31, 1998 through June 29, 1998 77,600
June 30, 1998 through September 29, 1998 94,575
September 30, 1998 through December 30, 1998 112,700
December 31, 1998 through March 30, 1999 138,600
March 31, 1999 through June 29, 1999 164,000
June 30, 1999 through September 29, 1999 189,000
September 30, 1999 through December 30, 1999 216,000
December 31, 1999 through March 30, 2000 244,000
SECTION 5.02. MAXIMUM ADJUSTED TOTAL FUNDED DEBT TO REVENUE UNITS. At all
times during each period indicated below, cause Adjusted Total Funded Debt
DIVIDED by Total Revenue Units for the fiscal quarter then or most recently
ended to be less than or equal to the following:
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PERIOD MAXIMUM AMOUNT
Closing Date through September 29, 1997(1) $325
September 30, 1997 through December 30, 1997 $400
December 31, 1997 through March 30, 1998 $525
March 31, 1998 through June 29, 1998 $600
June 30, 1998 through September 29, 1998 $575
September 30, 1998 through December 30, 1998 $525
December 31, 1998 through March 30, 1999 $500
March 31, 1999 through June 29, 1999 $475
June 30, 1999 through September 29, 1999 $425
September 30, 1999 through December 30, 1999 $400
December 31, 1999 through March 30, 2000 $350
_______________________
(1) Notwithstanding the foregoing provisions of Sections 5.02 and 5.03, for
purposes of measuring the Borrower's and the Subsidiaries' compliance with
Sections 5.02 and 5.03 during the period commencing on the Closing Date and
ending on September 29, 1997, Adjusted Total Funded Debt shall be (a) divided by
Total Revenue Units for the three-month period ended on August 31, 1997 and (b)
compared by ratio to Annualized Adjusted Operating Cash Flow for such
three-month period, respectively.
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SECTION 5.03. MAXIMUM ADJUSTED TOTAL FUNDED DEBT TO ANNUALIZED ADJUSTED
OPERATING CASH FLOW. As of any date during each period indicated below, maintain
a ratio of Adjusted Total Funded Debt to Annualized Adjusted Operating Cash Flow
for the fiscal quarter then or most recently ended not exceeding the following:
PERIOD MAXIMUM RATIO
Closing Date through December 30, 1997 4.50:1.00
December 31, 1997 through March 30, 1998 4.75:1.00
March 31, 1998 through June 29, 1998 6.75:1.00
June 30, 1998 through September 29, 1998 5.00:1.00
September 30, 1998 through December 30, 1998 4.50:1.00
December 31, 1998 through March 30, 1999 4.25:1.00
March 31, 1999 through June 29, 1999 3.50:1.00
June 30, 1999 through September 29, 1999 3.00:1.00
September 30, 1999 through December 30, 1999 2.75:1.00
December 31, 1999 through March 30, 2000 2.50:1.00
SECTION 5.04. MAXIMUM NET MARKETING EXPENSE. For each fiscal quarter
ending on the dates indicated below, cause Net Marketing Expense DIVIDED BY
Total VLU Net Additions to be less than or equal to the following:
QUARTERLY DATE MAXIMUM RATIO
September 30, 1997 $425
December 31, 1997 $250
March 31, 1998 $200
June 30, 1998 through December 31, 1999 $150
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SECTION 5.05. MAXIMUM TOTAL LEVERAGE. At all times during each period
indicated below, maintain a ratio of (a) Total Funded Debt to (b) Annualized
EBITDA for the then or most recently ended fiscal quarter of not more than the
following:
PERIOD MAXIMUM RATIO
March 31, 2000 through June 29, 2000 6.00:1.00
June 30, 2000 through September 29, 2000 5.00:1.00
September 30, 2000 through December 30, 2000 4.50:1.00
December 31, 2000 through March 30, 2001 4.00:1.00
March 31, 2001 through March 30, 2002 3.00:1.00
March 31, 2002 and thereafter 2.00:1.00
SECTION 5.06. INTEREST COVERAGE. For each period of four (4) consecutive
fiscal quarters ending on the dates indicated below, maintain a ratio of EBITDA
to Total Interest Expense of at least the following:
MINIMUM RATIO OF EBITDA
QUARTERLY DATE TO TOTAL INTEREST EXPENSE
March 31, 2000 through December 31, 2000 2.00:1.00
March 31, 2001 through December 31, 2001 2.50:1.00
March 31, 2002 and each Quarterly Date thereafter 3.00:1.00
SECTION 5.07. PRO FORMA DEBT SERVICE COVERAGE. As of each Quarterly Date
indicated below, maintain a ratio of Annualized EBITDA for the fiscal quarter
then ended to Pro Forma Debt Service for the immediately succeeding period of
four (4) consecutive fiscal quarters of at least the following:
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QUARTERLY DATE MINIMUM RATIO
March 31 through December 31, 2000 1.00:1.00
March 31 through December 31, 2001 1.25:1.00
March 31, 2002 and
each Quarterly Date thereafter 1.50:1.00
SECTION 5.08. CAPITAL EXPENDITURES. Not make or incur Capital Expenditures
in any of the following periods in excess of the respective aggregate amounts
for all of the Companies indicated below:
MAXIMUM
PERIOD CAPITAL EXPENDITURES
Closing Date through December 31, 1997 $ 9,000,000
Fiscal year ended December 31, 1998 $12,500,000
Fiscal year ended December 31, 1999 $ 3,000,000
Fiscal year ended December 31, 2000 $ 4,000,000
Fiscal year ended December 31, 2001
and each December 31 thereafter $ 8,000,000
PROVIDED, however, that so long as no Event of Default shall then exist, Capital
Expenditures permitted, but not made, in any such fiscal year (or portion
thereof) as provided under the foregoing table may be deferred and made in the
subsequent fiscal year in addition to (and computed after the application of)
permitted Capital Expenditures for such subsequent fiscal year specified above,
PROVIDED that no such deferred Capital Expenditures may be further deferred.
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SECTION 5.09. ENGINEERING EXPENSES AND SUSTAINING COSTS. Not permit
Engineering Expenses and Sustaining Costs in any of the following periods to
exceed the respective amounts indicated below:
PERIOD MAXIMUM AMOUNT
Closing Date through December 31, 1997 $1,500,000
Each Fiscal Quarter ended March 31,
1998 $ 800,000
through December 31, 1999
SECTION 5.10. HEADQUARTERS EXPENSE. Not permit Headquarters Expense in
any of the following periods to exceed the respective amounts indicated below:
PERIOD MAXIMUM AMOUNT
Closing Date through December 31, 1997 $2,200,000
Each Fiscal Quarter ended March 31,
1998 $1,800,000
through December 31, 1998
Each Fiscal Quarter ended March 31, 1999
through December 31, 1999 $1,900,000
SECTION 5.11. R&D EXPENSE. Not permit R&D Expense in any of the following
periods to exceed the respective amounts included below:
PERIOD MAXIMUM AMOUNT
Closing Date through December 31, 1997 $1,700,000
Fiscal Quarter ended March 31, 1998 $ 500,000
Each Fiscal Quarter ended June 30, 1998
through December 31, 1999 $ 250,000
SECTION 5.12. RESTRICTED PAYMENTS. Not directly or indirectly declare,
order, pay or make any Restricted Payment or set aside any sum or property
therefor.
VI. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees to and
with each of the Lenders that, so long as any Lender has any obligation to
extend credit to the Borrower hereunder, and for so long thereafter as there
remains outstanding any portion of any
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Obligation, whether now existing or hereafter arising, the Borrower and each of
the Subsidiaries shall:
SECTION 6.01. PRESERVATION OF ASSETS; COMPLIANCE WITH LAWS, ETC.
(a) Do or cause to be done all things necessary to preserve, renew and keep
in full force and effect its corporate, partnership or limited liability company
existence, as the case may be, all material rights, licenses, permits and
franchises (including all FCC Licenses material to the business of the Borrower
and its Subsidiaries, taken as a whole) and comply in every material respect
with all laws and regulations applicable to it (including without limitation the
Communications Act of 1934, as amended, the Copyright Act of 1976, as amended,
and all rules, regulations, administrative orders and policies of the FCC) and
all material agreements to which it is a party, including without limitation the
Tadiran Agreements, and all agreements with its stockholders, partners or
members, as the case may be, unless the non-compliance, non-renewal,
termination, or violation of any such material agreement or agreement with
stockholders has not had, and could not reasonably be expected to have, a
Material Adverse Effect;
(b) at all times maintain, preserve and protect all material trade
names and proprietary rights; and
(c) preserve all the remainder of its material property used or useful in
the conduct of its business and keep the same in good repair, working order and
condition (reasonable wear and tear and damage by fire or other casualty
excepted), and from time to time, make or cause to be made all needful and
proper repairs, renewals, replacements, betterments and improvements thereto, so
that the business carried on in connection therewith may be conducted at all
times in the ordinary course in a manner substantially consistent with past
practices.
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SECTION 6.02. INSURANCE.
(a) Keep all of its insurable properties now or hereafter owned adequately
insured at all times against loss or damage by fire or other casualty to the
extent customary with respect to like properties of companies conducting similar
businesses, PROVIDED that no such insurance shall be required to be maintained
on its transmitter and receiver equipment located in the Expanded Core Markets;
maintain public liability, business interruption and workers' compensation
insurance insuring such Company to the extent customary with respect to
companies conducting similar businesses, all by financially sound and reputable
insurers and furnish to the Lenders satisfactory evidence of the same (including
certification by the chief executive officer or chief financial officer of the
Borrower of timely renewal of, and timely payment of all insurance premiums
payable under, all such policies, which certification shall be included in the
next succeeding Compliance Report delivered pursuant to SECTION 6.05(D); notify
each of the Lenders of any material change in the insurance maintained on its
properties after the date hereof and furnish each of the Lenders satisfactory
evidence of any such change; maintain insurance with respect to its facilities
and related equipment in an amount equal to the full replacement cost thereof;
provide that each insurance policy pertaining to any of its insurable properties
shall: (i) name the Documentation Agent, on behalf of the Lenders, as loss payee
pursuant to a so-called "standard mortgagee clause" or "Lender's loss payable
endorsement", or as additional insured (as appropriate), (ii) provide that no
action of any Company shall void such policy as to the Documentation Agent or
the Lenders, and (iii) provide that the insurer(s) shall notify the
Documentation Agent of any proposed cancellation of such policy at least thirty
(30) days in advance thereof (unless such proposed cancellation arises by reason
of non-payment of insurance premiums in which case such notice shall be given at
least ten (10) days in advance thereof) and that the Documentation Agent or the
Lenders will have the opportunity to correct any deficiencies justifying such
proposed cancellation.
(b) In the event of a casualty loss, the Lenders will deliver to such
Company the proceeds of any insurance thereon, subject to the provisions of
SECTION 1.06(B), PROVIDED that (i) such Company shall use such proceeds for the
restoration or replacement of the property or asset which was the subject of
such loss within two hundred seventy (270) days after the receipt thereof, (ii)
such Company shall have demonstrated to the reasonable satisfaction of the
Lenders that such property or asset will be restored to substantially its
previous condition or will be replaced by substantially identical property or
assets, and (iii) if the Documentation Agent, on behalf of the Lenders, had a
security interest in and lien upon the property or asset which was the subject
of such loss, the Lenders shall have received, at their request, a favorable
opinion from the Borrower's counsel, in form and substance satisfactory to the
Documentation Agent, as to the perfection of the Documentation Agent's security
interest in and lien upon such restored or replaced property or asset and such
evidence satisfactory to the Documentation Agent as to the priority of such
security interest and liens. Notwithstanding the foregoing, and subject to
SECTION 1.06(B), if a casualty loss results in the Documentation Agent's receipt
of insurance proceeds aggregating $500,000 or more, then in lieu of delivering
such proceeds to a Company, the
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Lenders shall have the right to retain such proceeds for the purpose of making
disbursement thereof jointly to such Company and any contractors, subcontractors
and materialmen to whom payment is owed in connection with such restoration.
(c) To the extent, if any, that any improved real property (whether owned
or leased) of the Companies that is mortgaged as required under SECTION
2.01(A)(III) or SECTION 2.01(A)(IV) is situated in a flood zone designated as
type "A", "B", or "V" by the U.S. Department of Housing and Urban Development,
obtain and maintain flood insurance in coverage and amount satisfactory to the
Required Lenders.
SECTION 6.03. TAXES, ETC. Pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or levies imposed
upon it or upon its income and profits or upon any of its property, real,
personal or mixed, or upon any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided that no Company shall be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings and it shall have set aside on its books adequate
reserves with respect to any such tax, assessment, charge, levy or claim, so
contested; and provided, further that, in any event, payment of any such tax,
assessment, charge, levy or claim shall be made before any of its property shall
be seized or sold in satisfaction thereof.
SECTION 6.04. NOTICE OF PROCEEDINGS, DEFAULTS, ADVERSE CHANGE, ETC.
Promptly (and in any event within five (5) days after the discovery by the
Borrower thereof) give written notice to each of the Lenders of (a) any
proceedings, other than rulemakings of general applicability to the location
monitoring service industry, instituted or threatened against it by or in any
federal, state or local court or before any commission or other regulatory body,
whether federal, state or local, including without limitation the FCC, which, if
adversely determined, could have a Material Adverse Effect; (b) any notices of
default received by any Company (together with copies thereof, if requested by
any Lender) with respect to (i) any alleged default under or violation of any of
its material licenses, permits or franchises (including the FCC Licenses), the
Tadiran Agreements or any other material agreement to which it is a party, or
(ii) any alleged default with respect to, or redemption or acceleration or other
action under, the Preferred Stock Provisions, the Senior Note Indenture or the
Senior 14% Notes or any other evidence of material Indebtedness of any Company
or any mortgage, indenture or other agreement relating thereto; (c) (i) any
notice of any material violation or administrative or judicial complaint or
order filed or to be filed against any Company and/or any real property owned or
leased by it alleging any violations of any law,
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ordinance and/or regulation or requiring it to take any action in connection
with the release and/or clean-up of any Hazardous Materials, or (ii) any notice
from any governmental body or other Person alleging that any Company is or may
be liable for costs associated with a release or clean-up of any Hazardous
Materials or any damages resulting from such release; (d) any change in the
condition, financial or otherwise, of any Company which could have a Material
Adverse Effect; or (e) the occurrence of any Default or Event of Default.
SECTION 6.05. FINANCIAL STATEMENTS AND REPORTS. Furnish to the
Administrative Agent (with multiple copies for each of the Lenders, which the
Administrative Agent shall promptly provide to the respective Lenders):
(a) Within one hundred twenty (120) days after the end of each fiscal year,
the consolidated and consolidating balance sheets and statements of income,
stockholders' and cash flows of the Borrower and its Subsidiaries, together with
supporting schedules in form and substance satisfactory to the Lenders, audited
by independent certified public accountants selected by the Borrower and
reasonably acceptable to the Required Lenders (the "Accountants"), the form of
opinion to be unqualified and otherwise reasonably satisfactory to the Required
Lenders, showing the financial condition of the Borrower and its Subsidiaries at
the close of such fiscal year and the results of operations during such year,
and containing a statement to the effect that the Accountants have examined
ARTICLE V of this Agreement and such other provisions of this Agreement as they
may deem necessary or advisable and that, to the best of their knowledge, no
Event of Default, nor any event which upon notice or lapse of time or both would
constitute an Event of Default, has occurred under ARTICLE V or otherwise (or,
if such an event has occurred, a statement explaining its nature and extent);
PROVIDED, however, that in issuing such statement, the Accountants shall not be
required to exceed the scope of normal auditing procedures conducted in
connection with their opinion referred to above;
(b) Within forty-five (45) days after the end of each quarter in each
fiscal year the consolidated and consolidating balance sheets and statements of
income, stockholders' equity and cash flows of the Borrower and its
Subsidiaries, together with supporting schedules, setting forth in each case in
comparative form the corresponding figures from the preceding fiscal period of
the same duration, prepared by the Borrower in accordance with GAAP (except for
the absence of notes) and certified by an Authorized Signatory, such balance
sheets to be as of the close of such quarter, such statement of income to be for
the quarter then ended and the period from the beginning of the then current
fiscal year to the end of such quarter and such statements of stockholders'
equity and cash flow to be for the period from the beginning of the then current
fiscal year to the end of such quarter (in each case subject to normal audit and
year-end adjustments) and to include a comparison of actual results to results
for the comparable period of the preceding fiscal year (if available) and
projected results set forth in the Budget for such period;
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(c) Within thirty (30) days after the end of each month, the consolidated
balance sheets and statements of income, stockholder's equity and cash flow of
the Borrower and its Subsidiaries, together with supporting schedules, prepared
by the Borrower in accordance with GAAP (except for the absence of notes) and
certified by an Authorized Signatory, such balance sheets to be as of the end of
such month and such income statements to be for the period from the beginning of
the then current fiscal year to the end of such month (subject to normal audit
and year-end adjustments);
(d) Concurrently with the delivery of any annual financial statements
required by SECTION 6.05(A) and any quarterly financial statements required by
SECTION 6.05(B), a certified report (hereafter, a "COMPLIANCE REPORT") in the
form of SCHEDULE 6.05 attached hereto (or otherwise in a form satisfactory to
the Agents, with appropriate calculations and computations, signed on behalf of
the Borrower by an Authorized Signatory, setting forth the calculations
contemplated in ARTICLE V of this Agreement and certifying as to the fact that
such Person has examined the provisions of this Agreement and that no Event of
Default nor any event which upon notice or lapse of time, or both, would
constitute such an Event of Default;
(e) As soon as reasonably possible and in any event within thirty (30) days
after the end of each month, a certificate of an Authorized Signatory setting
forth in reasonable detail, as to each Expanded Core Market, (i) revenues,
expenses and EBITDA for such month, (ii) the numbers of Commercial Subscribers
and Consumer Subscribers as of the end of such month, (iii) the numbers of
Commercial VLUs and Consumer VLUs as of the end of such month, (iv) Commercial
Churn and Consumer Churn for such month, (v) the average revenue per VLU for
such month (excluding revenues in respect of connects, disconnects, repair calls
or other related services) and (vi) the numbers of Commercial Subscribers and a
receivables aging report with respect thereto;
(f) (i) On or before February 15 of each fiscal year, an updated quarterly
budget approved by the Board of Directors of the Parent, including planned
Capital Expenditures and projected borrowings for such fiscal year, with updated
Projections showing financial covenant compliance (collectively, the "BUDGET"),
for the operation of the Companies' businesses during the current fiscal year,
setting forth in detail reasonably satisfactory to the Lenders the projected
results of operations of the Borrower and the Subsidiaries and stating
underlying assumptions, and (ii) within five (5) days after the effective date
thereof, notice of any material changes or modifications in the Budget (which
shall not include changes resulting from non-material adjustments to the timing
of any proposed borrowings);
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(g) Promptly, and in any event within five (5) days, after the Borrower or
any member of the Controlled Group (i) is notified by the Internal Revenue
Service of its liability for the tax imposed by Section 4971 of the Code, for
failure to make required contributions to a pension, or Section 4975 of the
Code, for engaging in a prohibited transaction, (ii) notifies the PBGC of the
termination of a defined benefit pension plan, if there are or may not be
sufficient assets to convert the plan's benefit liabilities as required by
Section 4041 of ERISA, (iii) is notified by the PBGC of the institution of
pension plan termination proceedings under Section 4042 of ERISA or that it has
a material liability under Section 4063 of ERISA, or (iv) withdraws from a
multiemployer pension plan and is notified that it has withdrawal liability
under Section 4202 of ERISA which is material, copies of the notice or other
communication given or sent;
(h) Promptly upon receipt or issuance thereof, and in any event within five
(5) Business Days after such receipt, copies of all audit reports submitted to
any Company by its accountants in connection with each yearly, interim or
special audit of the books of any Company made by such accountants, including
any material related correspondence between such accountants and the Borrower's
management;
(i) Promptly upon circulation thereof, and in any event within five (5)
Business Days after such circulation, copies of any material written reports
issued by the Borrower or any Subsidiary to any of its stockholders, partners or
material creditors relating to the Notes, the Senior 14% Notes or any material
change in any Company's financial condition;
(j) Within ten (10) days after the receipt or filing thereof by any
Company, as applicable, copies of any periodic or special reports filed by any
Company with the FCC, and copies of any material notices and other material
communications from the FCC which specifically relate to any Company or FCC
License, but in each case only if such reports or communications indicate any
material adverse change in such Company's standing before the FCC or in respect
of any FCC License or if copies thereof are requested by either Agent;
(k) Within ten (10) days after the receipt or filing thereof by any
Company, copies of (i) any registration statements, prospectuses and any
amendments and supplements thereto, and any regular and periodic reports
(including without limitation reports on Form 10-K, Form 10-Q or Form 8-K), if
any, filed by any Company with any securities exchange or with the United States
Securities and Exchange Commission (the "SEC"); and (ii) any letters of comment
or correspondence with respect to filings or compliance matters sent to any
Company by any such securities commission or the SEC in relation to any Company
and its respective affairs; and
(l) As soon as reasonably possible after request therefor, such other
information regarding its operations, assets, business, affairs and financial
condition or regarding any of the Companies or (to the extent available to the
Borrower without undue effort and expense) their stockholders or other
Affiliates as any Lender may reasonably request, including copies of any and all
material agreements to which any Company is a party from time to time.
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SECTION 6.06. INSPECTION. Permit employees, agents and representatives of
the Lenders to inspect, during normal business hours, its premises and its books
and records and to make abstracts or reproductions thereof. In connection with
any such inspections, the Lenders will use reasonable efforts to avoid an
unreasonable disruption of the Companies' businesses and, to the extent possible
or appropriate absent any Default, will give reasonable notice thereof.
SECTION 6.07. ACCOUNTING SYSTEM. Maintain a system of accounting in
accordance with generally accepted accounting principles and maintain a fiscal
year ending December 31 for each of the Companies.
SECTION 6.08. ADDITIONAL ASSURANCES. From time to time hereafter:
(a) execute and deliver or cause to be executed and delivered, such
additional instruments, certificates and documents, and take all such actions,
as the Documentation Agent or the Lenders shall reasonably request for the
purpose of implementing or effectuating the provisions of this Agreement and the
other Loan Documents, including without limitation (i) the items set forth in
SCHEDULE 2.01 which require action after the Closing Date, as stated in such
Schedule, and (ii) only if reasonably requested by the Documentation Agent, the
execution and delivery to the Documentation Agent of a mortgage or deed of trust
or collateral assignment of lease or leasehold mortgage in form and substance
satisfactory to the Documentation Agent (in a recordable form and in such number
of copies as the Documentation Agent shall have requested) covering any Key
Site(s) acquired by the Borrower or any of the Subsidiaries, together with any
necessary consents relating thereto; and
(b) upon the exercise by the Documentation Agent or the Lenders of any
power, right, privilege or remedy pursuant to this Agreement or any other Loan
Document which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority, execute and deliver all
applications, certifications, instruments and other documents and papers that
the Lenders may be so required to obtain.
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SECTION 6.09. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Comply, and cause all tenants or other occupants of any of the
Properties to comply in all material respects with all Environmental Laws and
not generate, store, handle, process, dispose of or otherwise use and not permit
any tenant or other occupant of any of the Properties to generate, store,
handle, process, dispose of or otherwise use Hazardous Materials in, on, under
or about the Property in a manner that could lead or potentially lead to
imposition on any Company, either Agent or any Lender or any of the Properties
of any liability or lien of any nature whatsoever under any Environmental Law.
(b) Notify the Documentation Agent promptly in the event of any spill or
other release of any Hazardous Material in, on, under or about any of the
Properties which is required to be reported to a Governmental Authority under
any Environmental Law, promptly forward to the Documentation Agent copies of any
notices received by any Company relating to any alleged violation of any
Environmental Law and promptly pay when due any fine or assessment against the
Lenders, any Company or any of the Properties relating to any Environmental Law.
(c) If at any time it is determined that the operation or use of any of the
Properties violates any applicable Environmental Law or that there is any
Hazardous Material located in, on, under or about the Properties which under any
Environmental Law requires special handling in collection, treatment, storage or
disposal or any other form of cleanup or remedial or corrective action, then,
within thirty (30) days after receipt of notice thereof from a Governmental
Authority (or such other time period as may be specified in the notice sent by
such Governmental Authority) or from the Lenders, take, at its sole cost and
expense, such actions as may be necessary to fully comply in all material
respects with all Environmental Laws, provided, however, that if such compliance
cannot reasonably be completed within such thirty (30) day period, the Borrower
shall commence such necessary action within such thirty (30) day period and
shall thereafter diligently and expeditiously proceed to fully comply in all
material respects and in a timely fashion with all Environmental Laws. Nothing
herein shall prohibit the Borrower from asserting any good faith defenses
against the government in any governmental demands.
(d) If a lien is filed against any of the Properties by any Governmental
Authority resulting from the need to expend or the actual expending of monies
arising from an action or omission, whether intentional or unintentional, of any
Company or for which any Company is responsible, resulting in the releasing,
spilling, leaking, leaching, pumping, emitting, pouring, emptying or dumping of
any Hazardous Material, then, within thirty (30) days from the date that such
Company is first given notice such lien has been placed against the Properties,
either (i) pay the claim and remove the lien or (ii) furnish a cash deposit,
bond or such other security with respect thereto as is satisfactory in all
respects to the Lenders and is sufficient to effect a complete discharge of such
lien on the Properties.
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SECTION 6.10. INTEREST RATE PROTECTION.
(a) Within thirty (30) days after the date the outstanding Loans first
equal or exceed $15,000,000 in aggregate principal amount, enter into, and,
thereafter, maintain in full force and effect, one or more Rate Hedging
Agreements sufficient to ensure that at least fifty percent (50%) of the
aggregate principal amount of the Loans then outstanding is protected at all
times against increases in the applicable Base Rate or LIBOR Rate for a term
(the "HEDGE PERIOD") extending for at least twenty-four (24) months.
(b) Each Rate Hedging Agreement entered into as required under SECTION
6.10(A) shall contain terms and conditions reasonably satisfactory to the
Documentation Agent, and, in connection with any interest rate cap arrangement,
shall provide for a "strike price" which is no more than two percent (2%) over
the effective annual yield of U.S. Treasury obligations having a maturity date
on or about the last day of the relevant Hedge Period.
(c) Deliver to the Documentation Agent copies of each such Rate Hedging
Agreement, including any and all amendments thereto and substitutions thereof,
and such other documentation relating thereto as the Documentation Agent or the
Lenders may from time to time request.
VII. NEGATIVE COVENANTS. The Borrower covenants and agrees that, so long as
any Lender has any obligation to extend credit to the Borrower hereunder, and
for so long thereafter as there remains outstanding any portion of any
Obligation, whether now existing or arising hereafter, unless the Required
Lenders shall otherwise consent in writing in accordance with the terms of
ARTICLE XII, none of the Companies will, directly or indirectly:
SECTION 7.01. INDEBTEDNESS. Incur, create, assume, become or be
liable, directly, indirectly or contingently, in any manner with respect to,
or permit to exist, any Indebtedness or liability, except:
(a) Indebtedness of the Borrower to the Lenders hereunder, under the
Notes and under the Letter of Credit Documents;
(b) the guaranties of the Parent and the Operating Subsidiaries
required under SECTION 2.01;
(c) any Rate Hedging Obligation incurred in accordance with SECTION
6.10;
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(d) Indebtedness of the Borrower under the Senior Note Indenture and
the Senior 14% Notes;
(e) Indebtedness of the License Subsidiary to the FCC incurred after the
date hereof in accordance with SECTION 7.04(C) in connection with the
acquisition of FCC Licenses (any and all such Indebtedness incurred as permitted
under this paragraph (e) being referred to herein as "FCC DEBT"), PROVIDED that
(i) no Excess FCC Debt shall mature earlier than June 30, 2003, (ii) no payments
of principal of any such Indebtedness shall be scheduled or otherwise required
under the terms of any Excess FCC Debt, or shall be made, prior to June 30,
2003, (iii) the Borrower shall have provided the related FCC License Acquisition
Notice on a timely basis as required under SECTION 7.04(C) and (iv) the
incurrence of FCC Debt shall be subject to the provisions of SECTION 1.06(G);
(f) Indebtedness of the License Subsidiary to the Borrower for loans made
to finance the acquisition of Additional FCC Licenses, as permitted under
SECTION 7.04;
(g) Indebtedness existing on the date hereof and described in SCHEDULE
7.01; provided however, that the terms of such indebtedness shall not be
modified or amended in any material respect, nor shall payment thereof be
modified, without the prior written consent of the Required Lenders;
(h) Indebtedness in respect of endorsements of negotiable instruments
for collection in the ordinary course of business; and
(i) Indebtedness under Capital Leases and purchase money Indebtedness
relating to the purchase price of real estate and equipment to be used in the
Companies' businesses in the aggregate principal amount (including any such
amounts set forth on SCHEDULE 7.01) of not more than $10,000,000 outstanding at
any time.
SECTION 7.02. LIENS. Create, incur, assume, suffer or permit to exist any
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or ownership interests, now or hereafter owned, other than:
(a) liens securing the payment of taxes, either not yet due or the validity
of which is being contested in good faith by appropriate proceedings, and as to
which it shall have set aside on its books adequate reserves;
(b) deposits under workers' compensation, unemployment insurance and social
security laws, or to secure the performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity, performance or
other similar bonds arising in the ordinary course of business;
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(c) liens existing on the date hereof and described on SCHEDULE 7.02
attached hereto;
(d) liens against the Companies imposed by law, such as vendors',
carriers', lessors', warehouser's or mechanics' liens, incurred by it in good
faith in the ordinary course of business;
(e) liens arising out of a prejudgment attachment, a judgment or award
against it with respect to which it shall currently be prosecuting an appeal, a
stay of execution pending such appeal having been secured, except any such lien
arising in connection with a judgment, attachment or proceeding which gives rise
to an Event of Default under paragraph (l) or (m) of ARTICLE VIII;
(f) liens in favor of the Documentation Agent or the Lenders (and any
Hedging Lenders) securing the Notes or the other obligations of the Companies to
the Lenders hereunder or under Rate Hedging Obligations entered into with any
Hedging Lender;
(g) liens against the Borrower and any Operating Subsidiaries arising under
or securing Capital Leases and liens or mortgages securing purchase money
Indebtedness described in SECTION 7.01(G), PROVIDED that the obligation secured
by any such lien shall not exceed one hundred percent (100%) of the lesser of
cost or fair market value as of the time of the acquisition of the property
covered thereby and that each such lien or mortgage shall at all times be
limited solely to the item or items of property so acquired;
(h) liens in favor of the FCC on Additional FCC Licenses in consideration
for competitive bid payments made under one or more government installment
payment plans entered into with respect to FCC Debt; and
(i) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business of the Borrower and its Subsidiaries
which, in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the Borrower
and its Subsidiaries, taken as a whole.
SECTION 7.03. DISPOSITION OF ASSETS; ETC. Sell, lease, transfer or
otherwise dispose of its properties, assets, rights, licenses and franchises to
any Person (including without limitation dispositions in exchange for similar
assets and properties and commonly referred to as "asset swaps") (all of the
foregoing being referred to herein as a "DISPOSITION"), except for dispositions
made in the ordinary course of business (including the Disposition, without
replacement, of
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equipment which is obsolete or no longer needed by the Companies in the conduct
of their businesses and the replacement of equipment with other equipment of at
least equal utility and value), PROVIDED that the Documentation Agent's or the
Lenders' lien upon such newly acquired equipment shall have the same priority as
the Documentation Agent's or the Lenders' lien upon the replaced equipment
subject to any prior liens permitted by SECTION 7.02(G).
SECTION 7.04. FUNDAMENTAL CHANGES; ACQUISITIONS.
(a) (i) Form any subsidiary or otherwise change the corporate structure or
organization of the Borrower or the Subsidiaries from that set forth in SCHEDULE
4.19; (ii) permit or suffer any amendment of its charter documents which could
have a Material Adverse Effect (it being expressly agreed that the inclusion in
any such charter documents of any provision similar to those set forth in
Section 102(b)(2) of Title 8 of the Delaware Code is prohibited under this
Section); (iii) (A) dissolve, liquidate, consolidate or merge with, or otherwise
acquire any FCC Licenses or all or any substantial portion of the ownership
interests or assets or properties of, any corporation, partnership, limited
liability company or other entity or (B) acquire any other material assets,
other than pursuant to (1) Capital Expenditures permitted hereunder and (2)
purchases of inventory and supplies in the ordinary course of business; (iv)
repurchase or redeem any shares of capital stock, partnership interests or other
ownership interests, other than repurchases of Employee Shares upon the
termination of employment of the holders thereof in accordance with the
applicable employee stock plan(s); or (v) issue any additional shares of capital
stock, partnership interests or other ownership interests, except as permitted
in SECTION 7.04(B).
(b) Notwithstanding the provisions of SECTION 7.04(A), the Borrower may
issue additional shares of its capital stock to the Parent, and the Parent may
issue additional shares of its capital stock, or warrants for the purchase
thereof, to its employees or those of any of its Subsidiaries, its existing
stockholders or to new stockholders, PROVIDED that (i) the issuing Company has
no obligation to redeem or to pay cash distributions or dividends in respect
thereof other than (A) repurchases of Employee Shares upon the termination of
employment of the holders thereof in accordance with the applicable employee
stock plan(s), and (B) as set forth in the Preferred Stock Provisions, (ii) the
issuance of such securities does not result in an Event of Default, (iii) any
such securities issued by the Borrower shall have been collaterally assigned or
pledged to the Documentation Agent as required hereunder, (iv) the net proceeds
of any such securities issued by the Parent shall have been contributed to the
Borrower and (v) the net proceeds of all such issuances of securities, other
than the New Equity and Employee Shares, shall be applied to prepay the Notes,
to the extent required under SECTION 1.06(F).
(c) Notwithstanding the provisions of SECTION 7.04(A), the License
Subsidiary may acquire FCC Licenses from the FCC in addition to those held as of
the date hereof through the auction processes of the FCC or otherwise
("ADDITIONAL FCC LICENSES"), subject to the right of the Lenders to require
prepayment in full of the Notes under the circumstances set forth in SECTION
1.06(G), provided that the Borrower shall give written notice of each such
proposed acquisition (each an "FCC
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LICENSE ACQUISITION NOTICE") to the Documentation Agent (in sufficient copies
for all of the Lenders), with a copy to its counsel as provided in SECTION
14.03, on or before the date which is ten (10) days prior to the date thereof
or, if earlier in the case of FCC Licenses acquired at auction, the date as of
which the License Subsidiary pays a so-called "up front payment", a bid deposit
or an application fee in respect of the related FCC auction. The Lenders
acknowledge that, given the nature of such competitive auctions, the Borrower
need not specify the particular FCC Licenses with respect to which the Borrower
may cause the License Subsidiary to bid.
(i) To the extent that the Borrower intends to enter into an
installment payment plan arrangement available from the FCC for the
financing of Additional FCC Licenses, (A) the related FCC License
Acquisition Notice shall include, to the extent reasonably available to
the Borrower as of the date thereof, (1) a description of the terms under
which the FCC proposes to make such installment payment plan available and
(2) copies of the forms of the acquisition, credit, security and other
agreements and instruments to be executed and delivered to evidence such
acquisition and any related FCC Debt (collectively, "ACQUISITION CLOSING
DOCUMENTS"), which forms, if not then available, shall be delivered to the
Documentation Agent and its counsel as soon thereafter as reasonably
practicable, (B) prior to the consummation of such acquisition, the
Borrower shall provide to the Documentation Agent and the Lenders such
additional information with respect thereto as either Agent or any Lender
may reasonably require and which is reasonably available to the Borrower
and (C) within ten (10) days following the execution and delivery of any
Acquisition Closing Documents or other agreements and instruments relating
to the consummation of such acquisition, the Borrower shall furnish the
Documentation Agent (in sufficient copies for all of the Lenders) and its
counsel with true and complete copies thereof.
(ii) With respect to all other acquisitions of Additional FCC
Licenses, the Borrower shall (A) prior to the consummation of each such
acquisition, provide to the Documentation Agent and the Lenders such
additional information with respect thereto as either Agent or any Lender
may reasonably require and which is reasonably available to the Borrower
and (B) deliver to the Documentation Agent (in sufficient copies for all
of the Lenders) and its counsel, within ten (10) days following the
consummation of each such acquisition, true and complete copies of any and
all agreements and instruments executed and delivered in connection
therewith.
(iii) In connection with any FCC License Acquisition Notice or at
any time within sixty (60) days of any opportunity for the Borrower to
acquire Additional FCC
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Licenses, the Borrower may, by written notice to each of the Agents,
request the Lenders, in their sole and absolute discretion, to waive their
rights of full prepayment under SECTION 1.06(G) and agree to the Borrower
incurring obligations to make FCC License Acquisition Payments which
exceed $6,000,000 by the amount stated in such written request, and no
such request shall trigger the rights of Lenders under SECTION 1.06(G) to
terminate the Commitments or require repayments of the Notes. The Agents,
on behalf of the Required Lenders, shall respond in writing to any such
request for waiver within seven (7) days of their receipt thereof.
SECTION 7.05. MANAGEMENT. Turn over the management of its properties,
assets, rights, licenses and franchises to any Person other than a full-time
employee of the Companies.
SECTION 7.06. SALE AND LEASEBACK. Enter into any arrangements, directly or
indirectly, with any Person whereby it shall sell or transfer any property,
real, personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property; PROVIDED,
however, that the Borrower and the Subsidiaries may engage in such transactions
to the extent structured as Capital Leases and subject to the limitations in
SECTION 7.01(G), or with respect to vehicle location units, entered into with
any Person that has acquired such equipment from the supplier thereof (which may
include the Borrower) and has leased such equipment to the Borrower, which shall
offer such equipment to its customers in the ordinary course of its business.
SECTION 7.07. INVESTMENTS. Except for Permitted Investments, purchase,
invest in or otherwise acquire or hold securities, including, without
limitation, capital stock and evidences of indebtedness of, or make loans or
advances to, or enter into any arrangement for the purpose of providing funds or
credit to, any other Person.
SECTION 7.08. CHANGE IN BUSINESS. Engage, directly or indirectly, in any
business other than the businesses in which it is currently engaged.
SECTION 7.09. ACCOUNTS RECEIVABLE. Sell, assign, discount or dispose in any
way of any accounts receivable, promissory notes or trade acceptances held by
any Company, with or without recourse, except for collection (including
endorsements) in the ordinary course of business.
SECTION 7.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
assets or the rendering or accepting of any service with or to any Affiliate of
any Company, except in the ordinary course of business and pursuant to the
reasonable requirements of its business and upon terms not less favorable to
such Company than it could obtain in a comparable arm's-length transaction with
a third party other than such Affiliate.
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SECTION 7.11. AMENDMENT OF CERTAIN AGREEMENTS, ETC.
(a) Amend, modify or terminate the Senior Note Indenture, the Senior 14%
Notes, the Preferred Stock Exchange Agreements or any material agreement (other
than the Tadiran Agreements) to which any Company is a party, or enter into any
material agreement, in each case, if the effect thereof would be to increase
materially the obligations of any Company thereunder or to confer additional
rights upon the other parties thereto which could, in any case, reasonably be
expected to have a Material Adverse Effect.
(b) (i) Amend or modify any of the Tadiran Agreements except if, in the
reasonable business judgment of the Borrower, such amendment or modification is
in the best interests of the Borrower, or (ii) terminate any of the Tadiran
Agreements unless the Borrower shall have entered into an agreement or
agreements with one or more reputable alternative suppliers which the Borrower
reasonably believes, after due investigation, has the financial stability and
technical expertise to meet the requirements of the Borrower's business for the
foreseeable future, which agreement(s) shall have been conditionally assigned to
the Documentation Agent pursuant to terms and conditions substantially
comparable to those set forth in the Tadiran Assignment and which alternative
supplier(s) shall have consented to such conditional assignment pursuant to
terms and conditions substantially comparably to those set forth in the Tadiran
Consent; in each case provided, however, that no such amendment, modification or
termination shall be permitted without the prior written consent of the Required
Lenders, unless such amendment, modification or termination (A) could not
reasonably be expected to have a Material Adverse Effect or (B) is required by
applicable law or ordinance or by applicable rule or regulation of a
governmental authority. Notwithstanding the foregoing, the Borrower shall not
amend or modify any of the Tadiran Agreements (except for de minimus amendments,
modifications or changes thereto) without at least three (3) Business Days'
prior written notice to the Documentation Agent.
SECTION 7.12. ERISA. (a) Fail to make contributions to pension plans
required by Section 412 of the Code, (b) fail to make payments required by Title
IV of ERISA as the result of the termination of a single employer pension plan
or withdrawal or partial withdrawal from a multiemployer pension plan, or (c)
fail to correct a prohibited transaction with an employee benefit plan with
respect to which it is liable for the tax imposed by Section 4975 of the Code.
SECTION 7.13. MARGIN STOCK. Use or permit the use of any of the proceeds of
the Loans, directly or indirectly, for the purpose of purchasing or carrying, or
for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry, any Margin Stock or for any other purpose which
might constitute the transactions contemplated hereby a "purpose
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credit" within the meaning of Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System, or cause any Loan, the application of
proceeds thereof or this Agreement to violate Regulation G, Regulation U,
Regulation T or Regulation X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board or the Securities Exchange Act of
1934, as amended, or any rules or regulations promulgated under such statutes.
SECTION 7.14. NEGATIVE PLEDGES, ETC. Enter into any agreement (excluding
this Agreement, any other Transaction Document and the Senior Note Indenture)
prohibiting (a) any Company from amending or otherwise modifying this Agreement
or any other Transaction Document or (b) the creation or assumption of any lien
upon the properties, revenues or assets of any Company, whether now owned or
hereafter acquired.
VIII. DEFAULTS. In each case of happening of any of the following
events (each of which is herein sometimes called an "EVENT OF DEFAULT"):
(a) any representation or warranty made by or on behalf of any Company or
any of its Affiliates in this Agreement or the Security Documents, or in any
report, certificate, financial statement or other instrument furnished in
connection with this Agreement, or the borrowing hereunder, shall prove to be
false or misleading in any material respect when made or reconfirmed;
(b) default in the payment or mandatory prepayment of any installment of
the principal Lender of any Note, any repayment of any Letter of Credit
Disbursement or any payment of any installment of the principal of any other
indebtedness of any Company to either Agent or any Lender, or any payment in
respect of any Rate Hedging Obligations entered into with any Lender or Hedging
Lender, when the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment or by acceleration or otherwise;
(c) default in the payment of any interest on any Note, or any premium or
fee or any other indebtedness of any Company to either Agent or any Lender for
more than five (5) Business Days after the date when the same shall become due
and payable, whether at the due date thereof or at a date fixed for prepayment
or by acceleration or otherwise;
(d) default in the due observance or performance by the Borrower of, or
compliance by the Borrower with, any covenant or agreement contained in ARTICLE
V, SECTIONS 6.02(A), 6.03 (but only if the same involves any seizure or
property), 6.04, 6.05, 6.06, 6.07 and 6.10 or ARTICLE VII of this Agreement;
(e) default in the due observance or performance of, or compliance with,
any other covenant, condition or agreement, on the part of any Company to be
observed or performed pursuant to the terms of this Agreement or pursuant to the
terms of any Security Document or any Rate Hedging Obligation entered into by
such Company with any Lender or any Hedging
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Lender, which default is not referred to in paragraphs (a) through (d),
inclusive, of this ARTICLE VIII and which default shall continue unremedied for
thirty (30) days after the earlier to occur of (i) the Borrower's discovery of
such default, or (ii) written notice thereof from the Documentation Agent or any
Lender to the Borrower, PROVIDED, however, that if any such default cannot be
remedied, then such default shall be deemed to be an Event of Default as of the
date of the occurrence thereof;
(f) any default under the Senior Note Indenture or the Senior 14% Notes or
with respect to any other Indebtedness of any Company (other than to the Lenders
hereunder) for borrowed money, or default under any agreement giving rise to
monetary remedies, in each case which, when aggregated with all other such
defaults of the Companies, exceeds $1,000,000, if the effect of such default is
to permit the holder of such Indebtedness to accelerate the maturity of such
Indebtedness, unless such holder shall have permanently waived the right to
accelerate the maturity of such Indebtedness on account of such default;
(g) (i) the Borrower or any Subsidiary shall lose, fail to keep in force,
suffer the termination, suspension or revocation of or terminate, forfeit or
suffer a material adverse amendment to any material FCC License or material
group of FCC Licenses; (ii) any governmental regulatory authority shall conduct
a hearing on the renewal of any FCC License and the result thereof is reasonably
likely to be the termination, revocation, suspension or material adverse
amendment of such FCC License(s), if the same is reasonably likely to have a
Material Adverse Effect; or (iii) any governmental regulatory authority shall
commence an action or proceeding seeking the termination, suspension, revocation
or material adverse amendment of any material FCC License or material group of
FCC Licenses and the result thereof is likely to be the termination, suspension,
revocation or material adverse amendment of such FCC License(s), if (in the case
of clause (i) through (iii)) the same is reasonably likely to have a Material
Adverse Effect;
(h) vehicle location services provided to the Borrower's customers shall be
interrupted or terminated, whether due to equipment malfunction, damage or
destruction or other circumstances, if the same has or could have a Material
Adverse Effect;
(i) any Company shall (i) discontinue its business, (ii) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of it
or any of its property, (iii) be unable, or admit in writing its inability, to
pay its debts as they mature, (iv) make a general assignment for the benefit of
creditors, (v) be adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code or (vi) file a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or
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to take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law or corporate action shall be taken for the purpose of effecting any of
the foregoing;
(j) there shall be filed against any Company an involuntary petition
seeking reorganization of such company or the appointment of a receiver,
trustee, custodian or liquidator of such company or a substantial part of its
assets, or an involuntary petition under any bankruptcy, reorganization or
insolvency law of any jurisdiction, whether now or hereafter in effect and such
involuntary petition shall not have been dismissed within sixty (60) days
thereof;
(k) final judgment for the payment of money which, when aggregated with all
other outstanding judgments against any of the Companies, exceeds $1,000,000
(exclusive of amounts covered by insurance or actually contributed in cash by
third party obligors with respect to such judgments) shall be rendered against
any Company, and the same shall remain undischarged (unless fully bonded upon
terms satisfactory to the Required Lenders) for a period of thirty (30)
consecutive days, during which execution shall not be effectively stayed;
(l) the occurrence of any attachment of any deposits or other property of
any Company in the hands or possession of either Agent or any of the Lenders, or
the occurrence of any attachment of any other property of any Company in an
amount which, when aggregated with all other attachments against the Companies,
exceeds $750,000 and which shall not be discharged within thirty (30) days of
the date of such attachment;
(m) for any reason, (i) the Borrower shall cease to own directly or
indirectly all of the issued and outstanding capital stock of each of its
Subsidiaries; (ii) the Parent shall cease to own all of the issued and
outstanding capital stock of the Borrower or (iii) a "Change of Control" (as
defined in the Senior Note Indenture shall occur;
(n) for any reason, James Queen and any one of Larry Jennings, Alan Howe
and Steven Scheiwe shall cease to be actively involved in the day to day
management and operation of the Companies and a Person or Persons with knowledge
and experience in the location recovery service industry comparable to those of
such Person(s) and reasonably acceptable to the Required Lenders shall not have
been appointed to replace such Person(s) within ninety (90) days after such
cessation; or
(o) for any reason (other than the gross negligence or willful misconduct
of either Agent or the Lenders, it being nonetheless understood and agreed that
the Borrower shall have the primary responsibility for filing continuation
statements under the Uniform Commercial Code and making other conforming
amendments to the Security Documents to reflect changed circumstances and assure
continued compliance therewith and with SECTION 2.01), any material Security
Document shall not be in full force and effect in all material respects or shall
not be enforceable in all material respects in accordance with its terms, or any
security interest(s) or lien(s) granted pursuant thereto which is,
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or are in the aggregate, material shall fail to be perfected, or any party
thereto other than either Agent or the Lenders shall contest the validity of any
material lien(s) granted under, or shall disaffirm its obligations under, any
material Security Document (in each case, other than any action or event
affecting a security interest in any license, authorization or permit issued by
the FCC, if the same results from a change in applicable law);
then and upon every such Event of Default and at any time thereafter during the
continuance of such Event of Default, at the election of the Required Lenders as
provided in ARTICLE XII, the Commitments shall terminate and the Notes and any
and all other Indebtedness of the Borrower to the Lenders shall immediately
become due and payable, both as to principal and interest, without presentment,
demand, prior notice, or protest, all of which are hereby expressly waived,
anything contained herein or in the Notes or other evidence of such indebtedness
to the contrary notwithstanding (except in the case of an Event of Default under
paragraph (i) or (j) of this ARTICLE VIII which, under applicable law, would
result in the automatic acceleration of the Borrower's Indebtedness, in which
event the Commitments shall automatically terminate and such Indebtedness shall
automatically become due and payable).
IX. REMEDIES ON DEFAULT, ETC. In case any one or more Events of Default
shall occur and be continuing, the Documentation Agent and the Lenders may
proceed to protect and enforce their rights by an action at law, suit in equity
or other appropriate proceeding, whether for the specific performance of any
agreement contained in this Agreement, any Security Document or the Notes, or
for an injunction against a violation of any of the terms hereof or thereof or
of the exercise of any power granted hereby or thereby or by law, all subject to
the provisions of ARTICLE XII. In the event that the Documentation Agent shall
apply for the appointment of, or taking possession by, a trustee, receiver or
liquidator of the Borrower or any Subsidiary or of any other similar official,
to hold or liquidate all or any substantial part of the properties or assets of
the Borrower or such Subsidiary following the occurrence of a default in payment
of any amount owed to the Documentation Agents or any Lender hereunder, the
Borrower, for itself and on behalf of the Subsidiaries (with all due and proper
authorization of the Boards of Directors and partners, as the case may be of the
Subsidiaries), hereby jointly and severally consent to such appointment and
taking of possession and agree to execute and deliver any and all documents
requested by the Documentation Agent relating thereto (whether by joining in a
petition for the voluntary appointment of, or entering no contest to a petition
for the appointment of, such an official or otherwise, as appropriate under
applicable law). No right conferred upon the Documentation Agent or the Lenders
hereby or by any Security Document or the Notes shall be exclusive of any other
right referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise.
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X. THE AGENTS
SECTION 10.01. APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably (subject to SECTION 10.08) designates and appoints Banque Paribas,
which designation and appointment is coupled with an interest, as the
Administrative Agent of such Lender under this Agreement and each such Lender
irrevocably authorizes Banque Paribas, as the Administrative Agent of such
Lender, to take such action on its behalf under the provisions of this Agreement
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the Notes,
together with such other powers as are reasonably incidental thereto. Each
Lender hereby irrevocably (subject to SECTION 10.08) designates and appoints
Fleet National Bank, which designation and appointment is coupled with an
interest, as the Documentation Agent of such Lender under this Agreement and the
other Transaction Documents, and each such Lender irrevocably authorizes Fleet
National Bank, as the Documentation Agent of such Lender, to take such action on
its behalf under the provisions of this Agreement and the other Transaction
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Documentation Agent by the terms of this Agreement and the
other Transaction Documents, together with such other powers as are reasonably
incidental thereto, PROVIDED, that, with respect to any license, authorization
or permit issued by the FCC and any operation of radio facilities conducted
pursuant thereto, the rights granted by this Section shall be only those (if
any) permitted or not prohibited by the Communications Act of 1934, as amended,
and the rules, regulations and policies of the FCC. The Administrative Agent and
the Documentation Agreement (which terms as used in this sentence and in SECTION
10.05 and such first sentence of SECTION 10.06, shall include reference to the
respective Agent's affiliates and its own and such affiliates' officers,
directors, employees and agents) shall not: (a) have any duties or
responsibilities to be a trustee for any Lender; (b) be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement, or in any certificate or other document referred to or provided
for in, or received by either of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, enforceability, perfection or sufficiency
of this Agreement, any Note, any Security Document or any other document
referred to or provided for herein or for any failure by any Company or any
other Person to perform any of its obligations hereunder or thereunder; (c) be
required to initiate or conduct any litigation or collection proceedings
hereunder except, with respect to the Documentation Agent, to the extent
requested by the Required Lenders; and (d) be responsible for any action taken
or omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith, except for its own
gross negligence or willful misconduct. The Agents may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact it selects with reasonable care. Subject
to the
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foregoing, to ARTICLE XII and to the provisions of any intercreditor agreement
among the Lenders in effect from time to time, the Documentation Agent shall, on
behalf of the Lenders, (a) hold and apply any and all Collateral, and the
proceeds thereof, at any time received by it, in accordance with the provisions
of the Security Documents and this Agreement; (b) exercise any and all rights,
powers and remedies of the Lenders under this Agreement or any of the Security
Documents, including the giving of any consent or waiver or the entering into of
any amendment, subject to the provisions of ARTICLE XII; (c) execute, deliver
and file UCC Financing Statements, mortgages, deeds of trust, lease assignments
and other such agreements, and possess instruments on behalf of any or all of
the Lenders; and (d) in the event of acceleration of the Borrower's Indebtedness
hereunder, sell or otherwise liquidate or dispose of any portion of the
Collateral held by it and otherwise exercise the rights of the Lenders hereunder
and under the Security Documents.
SECTION 10.02. RELIANCE BY AGENTS. The Agents shall be entitled to rely
upon any certification, notice or other communication (including any
communication by telephone, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agents. As to any
matters not expressly provided for by this Agreement, the Agents shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by the Required Lenders or the Lenders, as
the case may be, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on the Lenders.
SECTION 10.03. EVENTS OF DEFAULT. Neither Agent shall be deemed to have
knowledge of the occurrence of an Event of Default (other than, in the case of
the Administrative Agent, the non-payment of principal of or interest on the
Notes) unless it has received written notice from any Lender or the Borrower
specifying such Event of Default and stating that such notice is a "Notice of
Default". In the event that either Agent receives such a notice of the
occurrence of an Event of Default, such Agent shall give prompt notice thereof
to the other Agent and the Lenders (and the Administrative Agent shall give each
Lender prompt notice of each such non-payment). The Documentation Agent shall
(subject to SECTION 10.07) take such action with respect to such Event of
Default as shall be directed by the Required Lenders, as provided under ARTICLE
XII, provided that, unless and until the Documentation Agent shall have received
such directions, the Documentation Agent may (but shall not be obligated to)
take such action on behalf of the Lenders, or refrain from taking such action,
with respect to such Event of Default as it shall deem advisable in the best
interest of the Lenders.
SECTION 10.04. RIGHTS AS A LENDER. With respect to its respective
Commitments and the Loans made by Fleet and Paribas hereunder, Fleet and Paribas
shall have the same rights and powers hereunder as any other Lenders and may
exercise the same as though they were not acting as Agents. Each Agent and its
respective affiliates may, without having to account therefor to the Lenders and
without giving rise to any fiduciary or other similar duty to any Lender, accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business
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with the Borrower and any of its Affiliates as if it were not acting as an Agent
and as if it were not a Lender, and each Agent may accept fees and other
consideration from any Company for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
SECTION 10.05. INDEMNIFICATION. The Lenders agree to indemnify each of the
Agents (to the extent not reimbursed under SECTION 14.02, but without limiting
the obligations of the Borrower under such SECTION 14.02), ratably in accordance
with the aggregate principal amount of the Notes and Commitments held by the
Lenders, for any and all liabilities, obligations, losses, damages, penalties,
action, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in any way relating to or arising out of this Agreement or any Security
Document or any other document contemplated by or referred to herein or the
transactions contemplated by or referred to herein or therein (including,
without limitation, the costs and expenses which the Borrower is obligated to
pay under SECTION 14.02) or the enforcement of any of the terms of this
Agreement or of any Security Document or of any such other documents, provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
SECTION 10.06. NON-RELIANCE ON THE AGENTS AND OTHER LENDERS. Each Lender
agrees that it has, independently and without reliance on either Agent or any
other Lenders, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Companies and its own decision
to enter into this Agreement and that it will, independently and without
reliance upon either Agent or any other Lenders, 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.
Neither of the Agents shall be required to keep itself informed as to the
performance or observance by the Companies of this Agreement or any other
document referred to or provided for herein or to inspect the properties or
books of the Companies. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agents
hereunder, neither Agent shall have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or businesses of the Companies (or any of their Affiliates) which may
come into the possession of such Agent or any of its affiliates. Notwithstanding
the foregoing, each Agent will provide to the Lenders any and all information
reasonably requested by them and reasonably available to such Agent promptly
upon such request.
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SECTION 10.07. FAILURE TO ACT. Except for action expressly required of the
Agents hereunder, each Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
SECTION 10.08. RESIGNATION OF AGENTS. Paribas (or any other Administrative
Agent hereunder), may resign as the Administrative Agent, and Fleet (or any
other Documentation Agent) may resign as the Documentation Agent, at any time by
giving fifteen (15) days' prior written notice thereof to the Lenders and the
Borrower. Any such resignation shall take effect at the end of such fifteen (15)
day period or upon the earlier appointment of a successor Agent by the Required
Lenders as provided below. Upon any resignation of an Agent, and subject to the
Borrower's approval (which approval shall not be unreasonably withheld or
delayed and shall not be required with respect to any such appointment made
during the existence of any Event of Default), the Required Lenders shall
appoint a successor agent from among the Lenders or, if such appointment is
deemed inadvisable or impractical by the Required Lenders, another financial
institution with a combined capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Agent hereunder by such successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent. After the effective
date of the resignation of an Agent hereunder, the retiring Agent shall be
discharged from its duties and obligations hereunder, provided that the
provisions of this ARTICLE X shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as an
Agent. In the event that there shall not be a duly appointed and acting
Administrative Agent, the Borrower agrees to make each payment due to the
Administrative Agent hereunder and under the Notes, if any, directly to each
Lender entitled thereto, pursuant to written instructions provided by the
retiring Administrative Agent, and to provide copies of each certificate or
other document required to be furnished to the Administrative Agent hereunder,
if any, directly to each Lender.
SECTION 10.09. COOPERATION OF LENDERS. Each Lender shall (a) promptly
notify the other Lenders and the Agents of any Event of Default known to such
Lender under this Agreement and not reasonably believed to have been previously
disclosed to the other Lenders; (b) provide the other Lenders and the Agents
with such information and documentation as such other Lenders or the Agents
shall reasonably request in the performance of their respective duties
hereunder, including without limitation all information relative to the
outstanding balance of principal, interest and other sums owed to such Lender by
the Borrower; and (c) cooperate with the Documentation Agent with respect to any
and all collections and/or foreclosure procedures at any time commenced against
the Borrower or otherwise in respect of the Collateral by the Documentation
Agent in the name and on behalf of the Lenders.
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XI. DEFINITIONS
As used herein the following terms have the following respective meanings:
ACCOUNTANTS. See SECTION 6.05.
ACQUISITION CLOSING DOCUMENTS. See SECTION 7.04.
ADDITIONAL FCC LICENSES. See SECTION 7.04.
ADJUSTED TOTAL FUNDED DEBT. As of any date, Total Funded Debt as of such
date MINUS the aggregate amount of the Borrower's cash on hand as of such
date, including cash then on deposit in (a) the Interest Reserve and (b)
the Collateral Account under the provisions of SECTION 1.06(B).
ADMINISTRATIVE AGENT. See the PREAMBLE.
AFFILIATE(S). Any Person that directly or indirectly controls, or is under
common control with, or is controlled by, the Borrower and, if such Person
is an individual, any member of the immediate family (including parents,
spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "CONTROL", including, its correlative
meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH", shall mean
possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership or
securities or partnership or other ownership interests, by contract or
otherwise), PROVIDED that, in any event, any Person that owns directly or
indirectly securities having ten percent (10%) or more of the voting power
for the election of directors or other governing body of a corporation or
ten percent (10%) or more of the partnership or other ownership interests
of any other Person (other than as a limited partner of such other Person)
will be deemed to control such corporation or other Person. Notwithstanding
the foregoing, (i) no individual shall be an Affiliate solely by reason of
his or her being a director, officer or employee of the Borrower or any
Subsidiary and (ii) no Person shall be deemed to be an Affiliate if such
Person is controlled by a holder of Preferred Stock and is under common
control with the Borrower solely by operation of the PROVISO set forth in
the preceding sentence.
AFFILIATE SUBORDINATION AGREEMENT. See SECTION 2.01.
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AGENTS. The Administrative Agent and the Documentation Agent.
ANNUALIZED ADJUSTED OPERATING CASH FLOW. For any fiscal quarter, EBITDA for
such fiscal quarter PLUS, to the extent deducted in the determination of
Net Income and not restored in accordance with the definition of such term,
(a) the sum of Headquarters Expense, R&D Expense and Engineering Expenses
and Sustaining Costs for such period and (b) marketing and sales expenses
of the Borrower and its Subsidiaries for such period; all MULTIPLIED BY
four (4).
ANNUALIZED EBITDA. For any fiscal quarter, EBITDA for such fiscal quarter
MULTIPLIED BY four (4).
APPLICABLE MARGIN. The percentage determined as provided in SECTION
1.03.
ASSIGNMENT AND ACCEPTANCE. See ARTICLE XIII.
AUDITED FINANCIAL STATEMENTS. See SECTION 1.03.
AVAILABLE COMMITMENTS. At any time, an amount equal to the excess, if
any, of (a) the aggregate Commitments MINUS (b) the Letter of Credit
Exposure.
BASE FCC DEBT. As of any date, the aggregate outstanding principal amount
of FCC Debt MINUS Excess FCC Debt, if any.
BASE RATE. As of any date, the fluctuating interest rate per annum equal to
the rate established by Banque Paribas from time to time at its office in
New York City as its "Base Rate" for commercial loans in United States
Dollars. The Base Rate is not necessarily intended to be the lowest rate of
interest determined by Banque Paribas in connection with extensions of
credit.
BASE RATE LOANS. Loans bearing interest at a rate determined on the basis
of the Base Rate.
BORROWER. See the PREAMBLE.
BORROWING DATE. With respect to any Loans requested hereunder, the date
such Loans are to be made.
BUDGET. See SECTION 6.05.
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BUSINESS DAY. (a) For all purposes other than as provided in clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which
banks in Boston, Massachusetts, Los Angeles, California and New York, New
York are open for the transaction of a substantial part of their commercial
banking business; and (b) with respect to all notices and determinations in
connection with, and payments of principal and interest on, LIBOR Loans,
any day that is a Business Day described in clause (a) and that is also a
day for trading by and between banks in U.S. Dollar deposits in the London
interbank market.
CAPITAL EXPENDITURES. For any period, expenditures (including, without
duplication, the aggregate amount of Capital Lease Obligations incurred
during such period) made by the Borrower and the Subsidiaries to acquire or
construct fixed assets, plant or equipment (including renewals,
improvements and replacements, but excluding repairs and acquisitions
permitted hereunder) during such period, computed in accordance with GAAP
and excluding capitalized interest and FCC Licenses.
CAPITAL LEASE. Any lease of property (real, personal or mixed) which, in
accordance with GAAP and Statement No. 13 of the Financial Accounting
Standards Board, would be permitted or required to be capitalized on the
lessee's balance sheet.
CAPITAL LEASE OBLIGATIONS. All obligations of the Borrower and the
Subsidiaries to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) property (real, personal or mixed) to
the extent such obligations are required to be classified and accounted for
as a capital lease on any such Company's balance sheet under GAAP, and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
CASH COLLATERAL. See SECTION 1.17.
CASUALTY EVENT. Any loss of, or damages to, or any condemnation or other
taking of any assets or property of the Borrower or any Subsidiary for
which the Borrower or any Subsidiary receives insurance proceeds, proceeds
of a condemnation award or other compensation.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act of 1989 (42 USC 9601, ET. SEQ.).
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CODE. The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
COLLATERAL. Collectively, any and all collateral referred to herein and
in the Security Documents.
COLLATERAL ACCOUNT. The "Collateral Account", as defined in the
Security Agreements.
COMMERCIAL CHURN. For any period, Commercial Subscribers as of the first
day of such period which are disconnected for non-payment, terminate
service or otherwise cease to be Commercial Subscribers during such period
MINUS any Commercial Subscribers which resubscribe to the Borrower's
services during such period.
COMMERCIAL SUBSCRIBER. A commercial subscriber to the Borrower's vehicle
location and/or management services which (a) is installed and is receiving
services provided by the Borrower, (b) is paying in cash or its equivalent
the regular rate (including any discount rate applied in the ordinary
course of business and consistent with past practice) then in effect for
such services, (c) has paid in cash at least one month's charges for such
services at such rate within the past ninety (90) days, (d) is not more
than 120 days past due in the payment of its most recent invoice for
services (assuming for purposes of this definition that payment of such
invoice is due on the date of such invoice) and (e) shall not have
requested that such service be discontinued.
COMMERCIAL SUBSCRIBER ADDITIONS. For any period, the aggregate amount of
Commercial Subscribers added in the ordinary course of operations of the
Borrower, EXCLUDING any Commercial Subscribers which resubscribe to the
Borrower's services during such period.
COMMERCIAL VLU. A vehicle location unit installed by the Borrower on behalf
of a Commercial Subscriber in the Expanded Core Markets.
COMMITMENT FEE. See SECTION 1.07.
COMMITMENT FEE RATE. See SECTION 1.07.
COMMITMENT REDUCTION NOTICE. See SECTION 1.06.
COMMITMENTS. See SECTION 1.01.
COMPANIES. Collectively, the Borrower, the Subsidiaries and the Parent.
COMPLIANCE REPORT. See SECTION 6.05.
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COMPLIANCE REPORT DELIVERY DATE. See SECTION 1.03.
CONSUMER CHURN. For any period, Consumer Subscribers as of the first day of
such period which are disconnected for non-payment, terminate service or
otherwise cease to be Consumer Subscribers during such period MINUS any
Consumer Subscribers which resubscribe to the Borrower's services during
such period.
CONSUMER SUBSCRIBER. A non-commercial subscriber to the Borrower's vehicle
location and/or management services who (a) is installed and is receiving
services provided by the Borrower, (b) is paying in cash or its equivalent
the regular rate (including any discount rate applied in the ordinary
course of business and consistent with past practice) then in effect for
such services, (c) has paid in cash at least one month's charges for such
services at such rate within the past ninety (90) days, (d) is not more
than 45 days past due in the payment of its most recent invoice for
services (assuming for purposes of this definition that payment of such
invoice is due on the date thereof), and (e) shall not have requested that
such service be discontinued.
CONSUMER SUBSCRIBER ADDITIONS. For any period, the aggregate amount of
Consumer Subscribers added in the ordinary course of operations of the
Borrower, EXCLUDING any Consumer Subscribers which resubscribe to the
Borrower's services during such period.
CONSUMER VLU. A vehicle location unit installed by the Borrower on behalf
of a Consumer Subscriber in the Expanded Core Markets.
CONTROLLED GROUP. All trades or businesses (whether or not incorporated)
under common control that, together with the Borrower, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section 40001
of ERISA.
COPYRIGHT OFFICE. The United States Copyright Office or any other federal
government agency which may hereafter perform its functions.
CORE MARKETS. The Cities of Los Angeles, Miami, Chicago, Detroit,
Dallas, Houston, Orlando, San Francisco and San Diego.
DEFAULT. An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute
an Event of Default.
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DEFAULTING LENDER. Any Lender with respect to which a Lender Default is
in effect.
DISPOSITION. See SECTION 7.03.
DOLLARS and $. Lawful money of the United States of America.
EBITDA. For any period, Net Income for such period, PLUS, to the extent
deducted in the determination of such Net Income and not restored in
accordance with the definition of such term, (a) Total Interest Expense,
(b) depreciation, (c) amortization, (d) taxes in respect of income and
profits expensed during such period and (e) other non-cash expenses; in
each case, for such period and determined on a consolidated basis, after
eliminating intercompany items, in accordance with GAAP.
EFFECTIVE DATE. See SECTION 1.08.
EMPLOYEE SHARES. Shares issued or issuable pursuant to options granted or
to be granted under the 1995 Teletrac Stock Option Plan and the 1996
Teletrac Stock Option and Restricted Stock Purchase Plan, as in effect on
the date hereof.
ENGINEERING EXPENSES AND SUSTAINING COSTS. For any period the aggregate
costs incurred and reported separately as "engineering costs" (which term
includes so-called "sustaining costs") in the Borrower's internal financial
statements and specified in the Compliance Reports required to be delivered
under SECTION 6.05(D).
ENVIRONMENTAL LAWS. Any and all present and future Federal, state, local
and foreign laws, rules or regulations, and any orders or decrees, in each
case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or
outdoor environment, including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes.
EQUITY HOLDER AGREEMENT. The Equity Holder Agreement of even date herewith
between the Parent and Fleet and Paribas, as holders of the Warrants, as
amended from time to time in accordance with its terms.
ERISA. The Employee Retirement Security Act of 1974, as amended.
EXCESS CASH FLOW. For any period, EBITDA for such period MINUS (a) Total
Debt Service for such period; MINUS (b) Capital Expenditures made by the
Borrower and its Subsidiaries
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during such period; MINUS (c) cash taxes paid or payable by the Borrower
and its Subsidiaries during such period in respect of income and profits
(other than taxes in respect of gains excluded from Net Income in the
calculation of EBITDA), MINUS (d) voluntary prepayments of the Notes made
in connection with voluntary reductions of the Commitments during such
period, as provided in SECTION 1.07(A).
EXCESS FCC DEBT. As of any date, (a) if FCC License Acquisition Payments
are less than or equal to $6,000,000, -0-, or (b) if FCC License
Acquisition Payments exceed $6,000,000, the lesser of (i) the aggregate
principal outstanding amount of FCC Debt, if any, and (ii) the amount by
which FCC License Acquisition Payments exceed $6,000,000.
EXPANDED CORE MARKETS. The Core Markets and the Cities of Washington,
D.C., New York, Boston, Philadelphia, Columbus and Indianapolis.
EXPIRATION DATE. See SECTION 1.01.
EVENT OF DEFAULT. See ARTICLE VIII.
FCC. The Federal Communications Commission or any other federal
governmental agency which may hereafter perform its functions.
FCC DEBT. See SECTION 7.01.
FCC LICENSE ACQUISITION NOTICE. See SECTION 7.04.
FCC LICENSE ACQUISITION PAYMENTS. As of any date, the aggregate purchase
price of any Additional FCC Licenses which the License Subsidiary has
committed to purchase, as permitted under SECTION 7.04(C).
FCC LICENSE ACQUISITION PAYMENTS NOTICE. See SECTION 1.06.
FCC LICENSES. See SECTION 4.07.
FEDERAL FUNDS RATE. For any period, a fluctuating interest rate per annum
(based on a 360 day year) equal for each day during such period to the
weighted average of the rates of interest charged on overnight federal
funds transactions with member banks of the Federal Reserve System arranged
by Federal funds brokers on such day, as published for any day
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which is a Business Day by the Federal Reserve Bank of New York (or, in the
absence of such publication, as reasonably determined by the Administrative
Agent).
FEE AND WARRANT LETTERS. The respective Fee and Warrant Letters entered
into as of July 21, 1997, between the Borrower and (a) Paribas and (b)
Fleet, each in its capacity as a Lender and an Agent, as amended on the
date hereof and from time to time in accordance with the respective terms
thereof.
FINANCIAL STATEMENTS. See SECTION 4.01.
FLEET. Fleet National Bank.
FUNDED DEBT. Without duplication, all Indebtedness with respect to any of
the following: (a) money borrowed (whether recourse or non-recourse),
including principal and overdue interest and premiums, (b) Rate Hedging
Obligations, (c) obligations evidenced by a bond, debenture, note or other
like written obligation to pay money, (d) Capital Lease Obligations, (e)
obligations under conditional sales or other title retention agreements or
secured by any Lien, (f) any letters of credit (including the Letters of
Credit), bankers acceptances or similar instruments (including
reimbursement obligations with respect thereto), (g) the deferred unpaid
purchase price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business, or (h) any guaranty
of any or all of the foregoing.
GAAP. 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 such other entity as may be
approved by a significant segment of the accounting profession, as in
effect on December 31, 1996, applied on a basis consistent with (a) the
application of the same in prior fiscal periods, (b) that employed by the
Accountants in preparing the financial statements referred to in SECTION
6.05(A) and (c) the accounting principles generally utilized in the
location monitoring service industry, as the case may be.
GOVERNMENTAL AUTHORITY. Any nation or government, any state or other
political subdivision thereof and any entity exercising any executive,
legislative, judicial, regulatory or administrative functions of, or
pertaining to, government.
HAZARDOUS MATERIALS. (a) any petroleum or petroleum products, flammable
materials, explosives, radioactive materials, asbestos, urea formaldehyde
foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB'S"), (b) any chemicals or other materials
or substances that are now or hereafter become defined as or included in
the definition of "hazardous substances", "hazardous wasters", "hazardous
materials", "extremely hazardous wastes", "restricted Hazardous wastes",
"toxic
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substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or
other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
HEADQUARTERS EXPENSE: For any period, the aggregate costs incurred and
reported separately as "headquarters expense" in the Borrower's internal
financial statements and specified in the Compliance Reports included in
the consolidated financial statements required to be delivered under
SECTION 6.05(D).
HEDGE PERIOD. See SECTION 6.10.
HEDGING LENDER. Any Lender, or any Affiliate of any Lender, which from time
to time enters into a Rate Hedging Agreement with any Company.
INDEBTEDNESS OR INDEBTEDNESS. As applied to any Person, (a) all items
(except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with GAAP, would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as at the date as of which Indebtedness is to be determined,
including Capital Lease Obligations BUT EXCLUDING Indebtedness of the
Companies with respect to trade obligations and other normal accruals in
the ordinary course of business not yet due and payable or not more than
ninety (90) days in arrears measured from the date of billing; (b) all
indebtedness secured by any mortgage, pledge, lien or conditional sale or
other title retention agreement to which any property or asset owned or
held by such Person is subject, whether or not the indebtedness secured
thereby shall have been assumed; and (c) all indebtedness of others which
such Person has directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of business), discounted
or sold with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, or in respect of which such Person has
agreed to supply or advance funds (whether by way of loan, stock or equity
purchase, capital contribution, makewell or otherwise) or otherwise to
become directly or indirectly liable.
INDEMNIFIED LIABILITIES. See SECTION 14.13.
INDEMNIFIED PARTIES. See SECTION 14.13.
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INTEREST EXPENSE. For any period, the aggregate amount (determined on a
consolidated basis, after eliminating intercompany items, in accordance
with GAAP) of interest and fees accrued (whether or not paid) during such
period (including without limitation the Commitment Fee, the Letter of
Credit Fee and the interest component of Capital Lease Obligations, but
excluding non-recurring structuring and facility fees payable under the Fee
and Warrant Letters, interest in respect of overdue trade payables and
capitalized interest) by the Companies in respect of all Indebtedness for
borrowed money.
INTEREST PERIOD. With respect to each LIBOR Loan, the period commencing on
the date such Loan is made or converted from a Base Rate Loan, or the last
day of the immediately preceding Interest Period, as to LIBOR Loans being
continued as such, and ending one (1), two (2), three (3) or six (6) months
thereafter, as the Borrower may elect in the applicable Loan Request or
Interest Rate Option Notice, provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (d) below) that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(b) if the Borrower shall fail to give notice as provided in SECTION
1.04, the Borrower shall be deemed to have requested a conversion of the
affected LIBOR Loan to a Base Rate Loan on the last day of the then current
Interest Period with respect thereto;
(c) any Interest Period relating to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (d) below, end on the last
Business Day of a calendar month;
(d) any Interest Period related to a LIBOR Loan that would otherwise
end after the final maturity date of the Loans shall end on such final
maturity date;
(e) no Interest Period shall include a principal repayment date for
the Loans unless an aggregate principal amount of Loans at least equal to
the principal amount due on such principal repayment date shall be Base
Rate Loans or LIBOR Loans having Interest Periods ending on or before such
date; and
(f) notwithstanding clauses (d) and (e) above, no Interest Period
shall have a duration of less than one (1) month.
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INTEREST RATE OPTION NOTICE. A notice given by the Borrower to the
Administrative Agent of the Borrower's election to convert Loans to a
different type or continue Loans as the same type, in accordance with
SECTION 1.04(A).
INTEREST RESERVE. See the RECITALS.
ISSUING BANKS. Each of Fleet and Paribas, any affiliate thereof designated
by Fleet or Paribas or any other Lender which may serve as the "Issuing
Bank" in the event that Fleet or Paribas elects to cease providing letter
of credit services hereunder.
KEY SITES. (a) The Borrower's leased office premises located at Garden
Grove, California and Kansas City, Missouri and (b) any interests in real
property hereafter owned or leased by the Borrower or any Subsidiary which,
in the reasonable judgment of the Documentation Agent, are substantially as
material to the operations of the Borrower's business as the sites
described in the foregoing clause (a).
LENDER DEFAULT. (a) The refusal (which has not been retracted) of a Lender
to make available its portion of any Loan, or (b) a Lender having notified
the Borrower and/or the Administrative Agent in writing that it does not
intend to lend under this Agreement; in the case of either (a) or (b) as a
result of any takeover of such Lender by any regulatory authority or agency
and other than by reason of any failure of the Borrower to meet any
conditions precedent thereto hereunder.
LENDERS. See the PREAMBLE.
LETTER OF CREDIT AND LETTERS OF CREDIT. See SECTION 1.17.
LETTER OF CREDIT DISBURSEMENT. See SECTION 1.17.
LETTER OF CREDIT DOCUMENTS. See SECTION 1.17.
LETTER OF CREDIT EXPOSURE. The sum of (a) the aggregate amount of all
outstanding obligations of the Borrower to repay Letter of Credit
Disbursements and (b) the aggregate undrawn amount under outstanding
Letters of Credit. The Letter of Credit Exposure of any Lender at any time
shall mean its PRO RATA percentage of the aggregate Letter of Credit
Exposure, based on the aggregate Commitments.
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LETTER OF CREDIT FEE. See SECTION 1.17.
LIBOR BASE RATE. With respect to each day during each Interest Period
pertaining to any LIBOR Loan, the rate per annum determined by the
Administrative Agent to be the arithmetic mean of the offered rates for
deposits in Dollars with a term comparable to such Interest Period that
appears on the Telerate British Bankers Assoc. Interest Settlement Rates
Page (as defined below) at approximately 11:00 A.M., London time, on the
second full Business Day preceding the first day of such Interest Period;
PROVIDED, HOWEVER, that if there shall at any time no longer exist a
Telerate British Bankers Assoc. Interest Settlement Rates Page, the term
"LIBOR Base Rate" shall mean, with respect to each day during each Interest
Period pertaining to any LIBOR Loan, the rate per annum equal to the rate
at which the Administrative Agent is offered Dollar deposits at or about
10:00 A.M., New York City time, two (2) Business Days prior to the
beginning of such Interest Period in the London interbank deposit market
where the eurodollar and foreign currency and exchange operations in
respect of its LIBOR Loans are then being conducted for delivery on the
first day of such Interest Period for the number of days comprised therein
and in an amount comparable to the amount of its LIBOR Loan to be
outstanding during such Interest Period. As used herein, the "TELERATE
BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" means the display
designated as Page 3750 on the Telerate System Incorporated Service (or
such other page as may replace such page on such service for the purpose of
displaying the rates at which Dollar deposits are offered by leading banks
in the London interbank deposit market).
LIBOR LOANS. Loans bearing interest at a rate determined on the basis of
the LIBOR Rate.
LIBOR RATE. With respect to each day during each Interest Period pertaining
to a LIBOR Loan, a rate per annum determined for such day in accordance
with the following formula (rounded upward, if necessary, to the nearest
1/16th of 1%):
LIBOR BASE RATE
---------------------------
1.00 - LIBOR Reserve Requirements
LIBOR RESERVE REQUIREMENTS. For any day as applied to a LIBOR Loan, the
aggregate (without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including without
limitation basic, supplemental, marginal and emergency reserves) under any
regulations of the Board of Governors of the Federal Reserve System (or
other Governmental Authority having jurisdiction with respect thereto)
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) maintained by a member bank of
the Federal Reserve System.
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LICENSE SUBSIDIARY. Collectively, Teletrac License, Inc., a Delaware
corporation wholly owned by the Borrower, and any other wholly-owned
Subsidiary of the Borrower formed for the purpose of acquiring Additional
FCC Licenses, which together hold all of the FCC Licenses used in
connection with the operation of the Borrower's business.
LIENS. See SECTION 4.09.
LMS ORDER. See SECTION 4.07.
LOAN DOCUMENTS. This Agreement, the Notes, the Security Documents, the
Letter of Credit Documents, the Warrant Documents and all other agreements,
instruments and certificates contemplated hereby and thereby, including
without limitation any Rate Hedging Agreements entered into with any of the
Lenders or their Affiliates.
LOAN REQUEST. See SECTION 1.04.
LOANS. See SECTION 1.01.
MARGIN STOCK. See SECTION 4.13.
MATERIAL ADVERSE EFFECT. (a) An adverse effect on the validity or
enforceability of this Agreement or the other Loan Documents in any
material respect, (b) an adverse effect on the condition (financial or
other), business, results of operations, prospects or properties of the
Borrower and the Subsidiaries, taken as a whole, in any material respect or
(c) an impairment of the ability of the Companies to fulfill their
obligations under this Agreement or any other Loan Document to which any
Company is a party, in any material respect.
MESSAGING UNITS. Mobile Data Terminals and Status Messaging Terminals,
the Borrower's two-way messaging systems.
NET CASH PROCEEDS. With respect to any Disposition, the aggregate amount of
all cash payments received by (a) any Company or (b) any Qualified
Intermediary, as defined in the United States Treasury Regulations
promulgated under Section 1031 of the Code and as used in connection with a
like-kind exchange under such Section 1031, directly or indirectly, in
connection with such Disposition, whether at the time thereof or after such
Disposition under deferred payment arrangements or investments entered into
or received in connection with such Disposition, MINUS the aggregate amount
of any legal, accounting,
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regulatory, title and recording tax expenses, commissions and other fees
and expenses paid by any Company in connection with such Disposition, and
MINUS any income or other taxes payable by any Company in connection with
such Disposition.
NET INCOME. For any period, net income of the Borrower and its Subsidiaries
from their respective operations, after deducting all operating expenses,
provisions for all taxes and reserves (including reserves for deferred
income taxes) and all other proper deductions (including Interest Expense),
but excluding any extraordinary gains or losses derived from any sales of
assets made during such period, to the extent such gains or losses are
properly includable in the determination of Net Income for such period, all
determined on a consolidated basis, after eliminating intercompany items,
in accordance with GAAP.
NET MARKETING EXPENSE. For any period, the aggregate amount of total
marketing and sales expenses incurred by the Borrower and its Subsidiaries
during such period MINUS corporate headquarters marketing and sales expense
MINUS gross profits of the Borrower and its Subsidiaries from equipment
sales during such period.
NEW EQUITY. The issuance of shares of the capital stock of the Borrower
or the Parent yielding net proceeds of up to $15,000,000 in the aggregate.
NOTES. See SECTION 1.01.
OBLIGATIONS. The Loans and the other obligations of the Companies under
this Agreement, the Notes, the Warrant Documents, the Security Documents,
the Letter of Credit Documents and the other Loan Documents, including
without limitation any and all future loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Companies to the Agents and
the Lenders, or any of them, of any kind or nature, whether or not
evidenced by any note, mortgage or other instrument, whether arising by
reason of an extension of credit, loan, guarantee, letter of credit or
indemnification or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The
term "Obligations" also includes, without limitation, all interest,
charges, expenses, fees (including attorneys', accountants', appraisers',
consultants' and other fees) and any other sums chargeable to the Companies
under this Agreement or any other Loan Documents.
OFFERING. See the RECITALS.
OFFERING MEMORANDUM. See the RECITALS.
OPENING BALANCE SHEET. See SECTION 4.01.
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OPERATING SUBSIDIARIES. The Borrower's Subsidiaries, other than the
License Subsidiary. As of the date hereof, the Borrower has no
Operating Subsidiaries and none are permitted under the terms of this
Agreement.
PARENT. See the PREAMBLE.
PARIBAS. Banque Paribas.
PARTICIPANT. See SECTION 1.13.
PERMITTED INVESTMENTS. (a) Investments in property to be used by the
Subsidiaries in the ordinary course of business; (b) current assets arising
from the sale of goods and services in the ordinary course of business; (c)
investments (of one year or less) in direct or guaranteed obligations of
the United States, or any agency thereof; (d) investments (of 90 days or
less) in certificates of deposit of the Lenders or any other domestic
commercial bank of recognized standing having capital, surplus and
undivided profits in excess of $100,000,000, membership in the Federal
Deposit Insurance Corporation ("FDIC") and senior debt rated carrying one
of the two highest ratings of Standard & Poor's Ratings Service, A Division
of McGraw Hill, Inc., or Moody's Investors Service, Inc. (an "APPROVED
INSTITUTION"); (e) investments (of 90 days or less) in commercial paper
given one of the two highest ratings by Standard and Poor's Ratings
Service, A Division of McGraw Hill, Inc., or by Moody's Investors Service,
Inc.; (f) investments redeemable at any time without penalty in money
market instruments placed through the Lenders or Approved Institutions; (g)
existing equity investments by the Parent in the Borrower and by the
Borrower in the License Subsidiary and additional equity investments by the
Parent in the Borrower permitted under SECTION 7.04 and made in compliance
with the prepayment requirements of SECTION 1.06(F); (h) repurchase
agreements fully collateralized by United States government securities; (i)
deposits fully insured by the FDIC; and (j) loans to employees and advances
to employees in the ordinary course of business for the payment of BONA
FIDE, properly documented, business expenses to be incurred on behalf of
the Companies, provided that the aggregate outstanding amount of all such
loans and advances shall not exceed $500,000 in the aggregate at any time.
PERSON OR PERSON. Any individual, corporation, partnership, joint venture,
trust, business unit, unincorporated organization, or other organization,
whether or not a legal entity, or any government or any agency or political
subdivision thereof.
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PREFERRED STOCK. The Parent's Series A Redeemable Convertible Participating
Preferred Stock issued on August 6, 1997 under the Preferred Stock Exchange
Agreements on the terms and conditions set forth in the Preferred Stock
Provisions.
PREFERRED STOCK EXCHANGE AGREEMENTS. The Exchange Agreement dated as of
July 31, 1997 among the Borrower, the Parent and the "Stockholders" named
therein, the Preferred Stock Provisions and any and all agreements and
instruments executed and delivered as required under such Exchange
Agreement.
PREFERRED STOCK PROVISIONS. Part B of Article Fourth of the Certificate of
Incorporation of Teletrac Holdings, Inc., as amended pursuant to the
Certificate of Amendment dated as of July 31, 1997 and filed with the
office of the Secretary of State of the State of Delaware on July 31, 1997,
without giving effect to any further amendments thereof.
PRICING PERIOD. See SECTION 1.03.
PRICING RATIO. See SECTION 1.03.
PROJECTIONS. See SECTION 4.17.
PROPERTIES. See SECTION 4.20.
PRO FORMA DEBT SERVICE. For any period of four (4) consecutive fiscal
quarters, Total Debt Service for such period, provided that (a) the
interest rate or rates applicable to any Indebtedness shall be determined
based upon the rate or rates in effect on the date of such computation and
(b) principal payable under the Notes during such period shall be a number
not less than -0- which is equal to (a) the sum of the aggregate principal
amount of the Notes outstanding on the date immediately preceding the first
day of such period PLUS the Letter of Credit Exposure on such date MINUS
(b) the aggregate scheduled Commitments under SECTION 1.02 as of the last
day of such period.
QUARTERLY DATES. The last day of each March, June, September and December
of each fiscal year.
RATE HEDGING AGREEMENTS. Any written agreements evidencing Rate Hedging
Obligations, including without limitation the LIBOR provisions of this
Agreement.
RATE HEDGING OBLIGATIONS. Any and all obligations of the Borrower, whether
direct or indirect and whether absolute or contingent, at any time created,
arising, evidenced or acquired (including all renewals, extensions,
modifications and amendments thereof and all substitutions therefor), in
respect of: (a) any and all agreements, arrangements, devices and
instruments designed or intended to protect at least one of the parties
thereto from the
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fluctuations of interest rates, exchange rates or forward rates applicable
to such party's assets, liabilities or exchange transactions, including
without limitation dollar-denominated or cross currency interest rate
exchange agreements, forward currency exchange agreements, interest rate
cap or collar protection agreements, forward rate currency or interest rate
options, puts and warrants and so-called "rate swap" agreements; and (b)
any and all cancellations, buy-backs, reversals, terminations or
assignments of any of the foregoing.
R & D EXPENSE. For any period, the aggregate amount paid by the Companies
to third parties for the research relating to and development of new
products or system improvements or enhancements not currently being offered
by the Borrower which is reported separately as "research and development
costs" in the consolidated financial statements required to be delivered
under SECTION 6.05(A).
RECOVERING PARTY. See SECTION 1.14.
RECOVERY. See SECTION 1.14.
REGISTRATION RIGHTS AGREEMENT. The Amended and Restated Registration Rights
Agreement dated as of December 6, 1996 between the Parent (as assignee of
the Borrower effective as of July 31, 1997), its stockholders and Fleet and
Paribas, as holders of the Warrants, as amended from time to time in
accordance with its terms.
REGULATION D. Regulation D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time.
REGULATORY CHANGE. With respect to any Lender, any change after the date of
this Agreement in any law, rule or regulation (including without limitation
Regulation D) of the United States, any state or any other nation or
political subdivision thereof, including without limitation the issuance of
any final regulations or guidelines, or the adoption or making after the
date of this Agreement of any interpretation, directive or request,
applying to a class of banks in which such Lender is included under any
such law, rule or regulation (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) by any court
or governmental or monetary authority charged with the interpretation
thereof.
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REMEDIAL WORK. All activities, including, without limitation, cleanup
design and implementation, removal activities, investigation, field and
laboratory testing and analysis, monitoring and other remedial and response
actions, taken or to be taken, arising out of or in connection with
Hazardous Materials, including without limitation all activities included
within the meaning of the terms "removal," "remedial action" or "response,"
as defined in 42 U.S.C. Section 9601(23), (24) and (25).
REQUIRED LENDERS. At any time, Lenders, excluding Defaulting Lenders,
holding at least two-thirds of the sum of (a) the aggregate outstanding
principal amount of the Loans, (b) the aggregate Letter of Credit Expense
and (c) the aggregate amount of the unutilized Available Commitments.
REQUIRED PAYMENT. See SECTION 1.15.
RESTRICTED PAYMENT. Any distribution or payment of cash or property, or
both, directly or indirectly to any equityholder of any of the Companies or
of any of their respective Affiliates for any reason whatsoever, including
without limitation, salaries, loans, debt repayment, consulting fees,
management fees, expense reimbursements, dividends, distributions, put,
call or redemption payments and any other payments in respect of equity
interests; PROVIDED, however, that Restricted Payments SHALL NOT INCLUDE:
(i) reasonable Transaction Costs;
(ii)BONA FIDE expense reimbursements and reasonable compensation (in
the reasonable business judgment of the Companies) paid to employees of the
Companies (it being agreed that compensation in effect as of the date
hereof is reasonable as of the date hereof and, with respect to any such
employee compensation which is contractually guaranteed, through the
respective term of each such contract); and
(iii)SCHEDULED payments of interest in respect of the Senior 14%
Notes, PROVIDED that such payments shall be made first from the Interest
Reserve until the Interest Reserve is exhausted;
(iv)up to $3,000,000 in the aggregate paid during the term of this
Agreement to repurchase Employee Shares upon the termination of employment
of the holders thereof in accordance with the applicable employee stock
plan(s);
(v) transactions that comply with SECTION 7.10; and
(vi)amounts paid to reimburse the Parent for the Parent's BONA FIDE
out-of-pocket expenses incurred to maintain its legal, corporate existence
and good standing, including
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amounts paid for franchise taxes, reasonable professional fees reasonably
incurred and the like, up to an aggregate amount expended in any fiscal
year of not more than $100,000.
REVOLVERS. See SECTION 1.01.
SCHEDULED PRINCIPAL PAYMENTS. For any fiscal period, (a) the aggregate
principal amount of Loans outstanding on the first day of such period MINUS
(b) the aggregate Commitments at the close of business on the first
Business Day following the end of such period, as reduced as provided under
SECTION 1.02, but in no event less than -0-.
SEC. See SECTION 6.05.
SECURITY AGREEMENTS. The Security and Pledge Agreement signed by the
Borrower as of the Closing Date or, with respect to Operating Subsidiaries
formed after the date hereof, the Guaranty and Security Agreement signed by
each such Operating Subsidiary, in connection with its formation as
required under SECTION 2.01.
SECURITY DOCUMENT(S). See SECTION 2.01.
SENIOR 14% NOTES. See the RECITALS.
SENIOR NOTE INDENTURE. The Indenture dated as of August 6, 1997 between the
Borrower and Norwest Bank Minnesota, National Association, as trustee and
as Collateral Agent, as originally executed and delivered.
STOCKHOLDERS AGREEMENT. The Stockholders' Agreement dated as of December 6,
1996 between the Parent (as assignee of the Borrower effective as of July
31, 1997), its stockholders and Fleet and Paribas, as holders of the
Warrants, as amended from time to time in accordance with its terms.
SUBSCRIBERS. Collectively, Commercial Subscribers and Consumer
Subscribers.
SUBSIDIARY. (a) Any corporation, association, joint stock company, business
trust or other similar organization of which more than 50% of the ordinary
voting power for the election of a majority of the members of the board of
directors or other governing body of such entity is held or controlled by
the Borrower or a Subsidiary of the Borrower; (b) any other such
organization the management of which is directly or indirectly controlled
by the
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Borrower or a Subsidiary of the Borrower through the exercise of voting
power or otherwise; or (c) any joint venture, association, partnership or
other entity in which the Borrower or a Subsidiary of the Borrower has a
50% equity interest. All of the Borrower's Subsidiaries as of the date
hereof are listed on SCHEDULE 4.02 and such term shall include each new
Subsidiary formed after the date hereof in compliance with the terms of the
foregoing definition and this Agreement.
TADIRAN. Collectively, Tadiran Telematics, Ltd., an Israeli
corporation, and Tadiran, Ltd., an Israeli corporation.
TADIRAN AGREEMENTS. The VLU Production Agreement dated as of September
6, 1996 between the Borrower and Tadiran, Ltd. and the Integrated Base
Station Unit Development Agreement dated December 13, 1996 between Tadiran
Telematics, Ltd. and the Borrower.
TADIRAN ASSIGNMENT. The Conditional Assignment of even date herewith
between the Agent, on behalf of the Lenders, as "Assignee", and the
Borrower, as "Assignor", as amended from time to time in accordance with
its terms.
TADIRAN CONSENT. The "Consent of Sellers" attached to the Tadiran
Assignment and executed and delivered by Tadiran as of the date hereof.
TAXES. See SECTION 1.10.
TD LETTER OF CREDIT. See SECTION 1.17.
THIRD PARTIES. See SECTION 14.02.
TOTAL DEBT SERVICE. For any period, the aggregate amount (determined on a
consolidated basis, after eliminating intercompany items, in accordance
with GAAP) of (a) principal required to be paid during such period in
respect of Total Funded Debt, (b) principal required to be paid during such
period in respect of Base FCC Debt (excluding, for purposes of SECTION
5.07, any principal payable after March 31, 2003) and (c) Total Interest
Expense for such period. For purposes of this definition, the aggregate
amount of all principal required to be paid in respect of the Loans shall
be limited to Scheduled Principal Payments.
TOTAL FUNDED DEBT. At any time, all outstanding Funded Debt of the Borrower
and its Subsidiaries other than the Base FCC Debt but including any Excess
FCC Debt, determined on a consolidated basis, after eliminating
intercompany items, in accordance with GAAP.
TOTAL INTEREST EXPENSE. For any period, Interest Expense for such period
which is payable, or currently paid, in cash.
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TOTAL REVENUE UNITS. For any period, gross recurring service revenues of
the Borrower and its Subsidiaries for such period DIVIDED BY $15.00 DIVIDED
BY three (3).
TOTAL VLU NET ADDITIONS. For any period, the sum of (a) Commercial
Subscriber Additions MINUS Commercial Churn, PLUS (b) Consumer Subscriber
Additions MINUS Consumer Churn.
TRANSACTION COSTS. For any period, nonrecurring out-of-pocket expenses
(including attorneys' fees, investment banking fees and facility fees, but
excluding recurring costs such as commitment and agency fees) accrued by
the Borrower and the Subsidiaries to Persons who are not Affiliates of any
Company during such period in connection with the closing of the
transactions under this Agreement and the Offering.
TRANSACTION DOCUMENTS. See SECTION 4.02.
WARRANTS. The meaning set forth in the Fee and Warrant Letters.
WARRANT DOCUMENTS. Collectively, the Warrants, the Equity Holder
Agreement, the Stockholders Agreement and the Registration Rights
Agreement, each as amended from time to time in accordance with its
respective terms.
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XII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE
ACTIONS BY THE LENDERS.
(a) This Agreement (including the Schedules hereto) and the other Loan
Documents constitute the entire agreement of the parties herein and supersede
any and all prior agreements, written or oral, as to the matters contained
herein, and no modification or waiver of any provision hereof or of the Notes or
any other Loan Document, nor consent to the departure by any Company therefrom,
shall be effective unless the same is in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. Except as hereafter provided, the consent of the Required
Lenders shall be required and sufficient (i) to amend, with the consent of the
Borrower, any term of this Agreement, the Notes or any other Loan Document or to
waive the observance of any such term (either generally or in a particular
instance or either retroactively or prospectively); (ii) to take or refrain from
taking any action under this Agreement, the Notes, any other Loan Document or
applicable law, including, without limitation, (A) the acceleration of the
payment of the Notes, (B) the termination of the Commitments, (C) the exercise
of the Documentation Agent's and the Lenders' remedies hereunder and under the
Security Documents and (D) the giving of any approvals, consents, directions or
instructions required under this Agreement or the Security Documents; PROVIDED
that no such amendment, waiver or consent shall, without the prior written
consent of each Lender (or subsequent holder of a Note) directly affected
thereby: (1) extend the final maturity or reduce the principal amount of, or
reduce the amount or extend the time of payment of any principal of, or interest
on, any Loan or Letter of Credit Disbursement (other than mandatory prepayments
of the Notes out of Excess Cash Flow required under SECTION 1.06(C)), (2)
increase or extend any Commitment or extend the Expiration Date (it being
understood that waivers or modifications of conditions precedent, covenants,
Defaults or Events of Default shall not constitute any such increase or
extension), (3) release any guaranties or any Collateral, unless such release of
guarantee or Collateral is in connection with a sale of Collateral permitted
hereby or to which any required consent of the Required Lenders has been given
and substantially all of the Net Cash Proceeds of such sale are applied to the
Borrower's indebtedness to the Lenders hereunder or otherwise used in a manner
permitted hereunder, (4) change the PRO RATA provisions of SECTION 1.14 or the
percentage referred to in the definition of "Required Lenders" contained in
ARTICLE XI, (5) amend the provisions of this ARTICLE XII, or (6) amend, modify
or otherwise affect the rights and duties of either Agent hereunder or under any
Loan Document without the prior written consent of such Agent; and PROVIDED,
FURTHER, that neither notice to, nor the consent of, the Borrower shall be
required for any modification, amendment or waiver of the provisions of this
ARTICLE XII governing the number of Lenders required to consent to any act or
omission under the Loan Documents or, subject to ARTICLE XIII, of the definition
of "Required Lenders".
(b) Any amendment or waiver effected in accordance with this ARTICLE XII
shall be binding upon each holder of any Note at the time outstanding, each
future holder of any Note and the Borrower. The Lenders' failure to insist
(directly or through either Agent) upon the strict
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performance of any term, condition or other provision of this Agreement, any
Note, or any of the Security Documents, or to exercise any right or remedy
hereunder or thereunder, shall not constitute a waiver by the Lenders of any
such term, condition or other provision or default or Event of Default in
connection therewith, nor shall a single or partial exercise of any such right
or remedy preclude any other or future exercise, or the exercise of any other
right or remedy; and any waiver of any such term condition or other provision or
of any such default or Event of Default shall not affect or alter this
Agreement, any Note or any of the Security Documents, and each and every term,
condition and other provision of this Agreement, the Notes and the Security
Documents shall, in such event, continue in full force and effect and shall be
operative with respect to any other then existing or subsequent default or Event
of Default in connection therewith. An Event of Default hereunder and a default
under any Note or under any of the Security Documents shall be deemed to be
continuing unless and until cured or waived in writing by the Required Lenders
or all of the Lenders, as provided in paragraph (a) above.
XIII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders and the Agents and their respective successors and
assigns, and all subsequent holders of any of the Notes or any portion thereof.
(b) Each Lender may assign its rights and interests under this Agreement,
the Notes and the Security Documents and/or delegate its obligations hereunder
and thereunder, in whole or in part, and sell participations in the Notes and
the Security Documents as security therefor, PROVIDED as follows:
(i) Any such assignment made other than to a separately organized
branch, or an Affiliate of, a Lender shall reflect an assignment of such
assigning Lender's Notes and Commitments which is in an aggregate principal
amount of at least $5,000,000, and if greater, an integral multiple of
$1,000,000.
(ii) Notwithstanding any provision of this Agreement to the contrary,
each Lender may at any time assign all or any portion of its rights under
this Agreement and each of the other Loan Documents, including, without
limitation, the Notes held by such Lender, to a Federal Reserve Bank (or
equivalent thereof in the case of Lenders chartered outside of the United
States); provided that no such assignment shall release a Lender from any
of its obligations and liabilities under the Loan Documents. Any Federal
Reserve Bank (or
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equivalent thereof) which receives such an assignment from any Lender may
make further assignments of such rights in accordance with the provisions
of this Section.
(iii) Any assignments and/or delegations made hereunder shall be
pursuant to an instrument of assignment and acceptance (the "ASSIGNMENT AND
ACCEPTANCE") substantially in the form of SCHEDULE 13(B)(III) and the
parties to each such assignment shall execute and deliver to the
Documentation Agent for its acceptance the Assignment and Acceptance
together with any Note or Notes subject thereto. Upon such execution and
delivery, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five (5) Business
Days after the execution thereof, (A) the assignee thereunder shall become
a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder with
applicable Commitments as set forth therein and (B) the assigning Lender
thereunder shall, to the extent provided in such assignment, be released
from its obligations under this Agreement as to that portion of its
obligation being so assigned and delegated. The Assignment and Acceptance
shall be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of the assignee as a Lender and
the resulting adjustment of Commitments arising from the purchase by and
delegation to such assignee of all or a portion of the rights and
obligations of such assigning Lender under this Agreement.
(iv) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee together with the Note or Notes subject
to such assignment and payment by the assignee to the Documentation Agent
of a registration and processing fee of $3,000, the Documentation Agent
shall accept such Assignment and Acceptance. Promptly upon delivering such
Assignment and Acceptance to the Documentation Agent, the assigning Lender
shall give notice thereof to the Borrower pursuant to a Notice of
Assignment and Acceptance substantially in the form of SCHEDULE 13(B)(IV)
and addressed to the Borrower and the Documentation Agent. Within five (5)
Business Days after receipt of such notice, the Borrower shall execute and
deliver to the Documentation Agent in exchange for each such surrendered
Note a new Note payable to the order of such assignee in an amount equal to
the portion of the applicable Commitment(s) assumed by such assignee
pursuant to such Assignment and Acceptance and a new Note payable to the
order of the assigning Lender in an amount equal to the portion of the
applicable Commitment(s) retained by it hereunder. Such new Notes shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form provided in SECTION 1.01. Canceled
Notes shall be returned to the Borrower upon the execution and delivery of
such new Notes.
(v) Each Lender may sell participations in all or a portion of its
rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitments and the Notes held by it); PROVIDED,
HOWEVER, that, (A) each such participation shall be in a minimum amount of
$5,000,000 (B) the selling Lender shall
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remain obligated under this Agreement to the extent as it would if it had
not sold such participation, (C) the selling Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (D) at no time shall the selling Lender agree with such
participant to take or refrain from taking any action hereunder or under
any other Loan Document, except that the selling Lender may agree not to
consent, without such participant's consent, to any of the actions referred
to in ARTICLE XII, to the extent that the same require the consent of each
Lender hereunder, (E) all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation and no
participant shall be entitled to receive any greater amount pursuant to
this Agreement than the selling Lender would have been entitled to receive
in respect of the amount of the participation transferred by such Lender to
such participant had no such transfer occurred, and (F) the Borrower, the
Agents and the other Lenders shall continue to deal solely and directly
with the selling Lender in connection with such Lender's rights and
obligations under this Agreement.
(vi) The Borrower may not assign any of its rights or delegate
any of its duties or obligations hereunder.
(vii) Any Lender may, in connection with any assignment or
participation pursuant to this Section, disclose to the assignee or
participant any information relating to the Companies furnished to such
Lender by or on behalf of the Borrower and such assignee or participant
shall treat such information as confidential.
XIV. MISCELLANEOUS
SECTION 14.01. SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lenders of the Loans and shall
continue in full force and effect so long as any Obligation is outstanding and
unpaid or any Lender has any obligation to advance funds to the Borrower
hereunder.
SECTION 14.02. FEES AND EXPENSES; INDEMNITY; ETC. The Borrower agrees (a)
to pay or reimburse the Agents for all their reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation, negotiation,
interpretation and execution of, and any amendment, supplement or modification
to, this Agreement, the Notes, the Letter of Credit Documents, the Warrant
Documents and any other Loan Documents and the consummation and administration
of the transactions contemplated hereby, including without limitation the
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reasonable fees and disbursements of (i) counsel to the Documentation Agent, and
(ii) such agents of the Documentation Agent not regularly in its employ, and
accountants, other auditing services, consultants and appraisers engaged by or
on behalf of the Documentation Agent or by the Borrower at the request of the
Documentation Agent (collectively, "THIRD PARTIES"); (b) to pay or reimburse the
Documentation Agent for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any other Loan Documents, including, without
limitation, the reasonable fees and disbursements of (i) counsel to the
Documentation Agent and (ii) Third Parties; (c) following the occurrence of an
Event of Default hereunder, to pay or reimburse the Lenders for the reasonable
fees and disbursements of counsel for the respective Lenders engaged for the
preservation or enforcement of such Lender's rights under this Agreement or any
other Loan Documents relating to such Event of Default; (d) to pay, indemnify,
and hold each Lender and each Agent harmless from, any and all recording and
filing fees and taxes, lien discharge fees and taxes, intangible taxes and any
and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the Letter of Credit Documents, the Warrant Documents
and any other Loan Documents; and (e) to pay, indemnify, and hold each Lender
and each Agent (and their respective directors, officers, employees, agents and
other affiliates) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of, or any
transaction contemplated by, any Loan Document or the use or proposed use of the
proceeds of the Loans or the Letters of Credit or the refinancing or
restructuring of the credit arrangement provided under this Agreement in the
nature of a "work-out" or any proceedings with respect to the bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation of
any Company or any other party other than the Lender or either Agent to any Loan
Document (all the foregoing in this clause (e), collectively, the "INDEMNIFIED
LIABILITIES"), PROVIDED, that the Borrower shall have no obligation hereunder to
either Agent or any Lender with respect to indemnified liabilities arising from
the gross negligence or willful misconduct of such Agent or any such Lender.
Notwithstanding the provisions of SECTION 14.01, the agreements in this Section
shall survive repayment of the Notes and all other amounts payable hereunder and
under the other Loan Documents.
SECTION 14.03. NOTICE.
(a) All notices, requests, demands and other communications provided for
hereunder (including without limitation Loan Requests) shall be in writing
(including telecopied communication) and mailed or telecopied or delivered to
the applicable party at the addresses indicated below.
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<PAGE>
If to the Administrative Agent:
Banque Paribas
2029 Century Park East - Suite 3900
Los Angeles, California
Attention: Ms. Darlynn Ernst
Telecopy: (310) 556-3762
If to the Documentation Agent:
Fleet National Bank
One Federal Street
Mail Stop: MAOFD03D
Boston, Massachusetts 02110
Telecopy: (617) 346-4345
Attention: Mr. Christopher A. Swindell
and if to any Lender, at the address set forth on the appropriate signature page
hereto or, with respect to any assignee of the Notes under ARTICLE XIII, at the
address designated by such assignee in a written notice to the other parties
hereto.;
in each case (except for routine communications), with a copy to:
Elizabeth H. Munnell, Esquire
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 439-4170
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If to the Borrower:
Steven D. Scheiwe, Esq.
Teletrac, Inc.
2323 Grand - Suite 1100
Kansas City, Missouri 64108-2670
Telecopy: (816) 474-3475
with a copy (except for routine communications) to:
Karen C. Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy: (212) 841-5725
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other party complying as to delivery with the
terms of this Section. All such notices, requests, demands and other
communication shall be deemed given upon receipt by the party to whom such
notice is directed.
(b) The address of the Administrative Agent for payment hereunder is as
follows:
Banque Paribas
2029 Century Park East, Suite 3900
Los Angeles, California 90067
Attention: Shirley Williams
Telecopy No.: (310) 553-1504
Bank of America
ABA: 1210-0035-8
San Francisco, California
For credit to: Banque Paribas, Los Angeles Agency
Account No.: 62902-10150
SECTION 14.04. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
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SECTION 14.05. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(A) THE BORROWER, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS
TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS
TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH
COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ANY OF ITS OBLIGATIONS ARISING HEREUNDER OR UNDER THE NOTES OR THE SECURITY
DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY
WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE, INCLUDING, WITHOUT
LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION,
TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE BORROWER CONSENTS TO THE SERVICE
OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO THE BORROWER AT THE ADDRESS PROVIDED HEREIN. TO
THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(B) WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENTS AND THE LENDERS
HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON
OR WITH RESPECT TO THIS AGREEMENT, THE NOTES, THE SECURITY DOCUMENTS OR ANY
OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 14.06. SEVERABILITY. Any provision of this Agreement, the Notes or
any of the Security Documents which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
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SECTION 14.07. SECTION HEADINGS, ETC. Any Article and Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
SECTION 14.08. SEVERAL NATURE OF LENDERS' OBLIGATIONS. Notwithstanding
anything in this Agreement, the Notes or any of the Security Documents to the
contrary, all obligations of the Lenders hereunder shall be several and not
joint in nature, and in the event any Lender fails to perform any of its
obligations hereunder, the Borrower shall have no recourse against any other
Lender(s) who has (have) performed its (their) obligations hereunder. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement, subject to the provisions of ARTICLE XII,
and it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
SECTION 14.09. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute one and the same Agreement.
SECTION 14.10. KNOWLEDGE AND DISCOVERY. All references in this Agreement to
"knowledge" of, or "discovery" by, the Borrower shall be deemed to include,
without limitation, any such knowledge of, or discovery by, the Borrower or any
executive officer of the Borrower.
SECTION 14.11. AMENDMENT OF OTHER AGREEMENTS. All references in this
Agreement to other documents and agreements to which the Lenders are not parties
(including without limitation the Preferred Stock Provisions, the Preferred
Stock Exchange Agreements, the Senior Note Indenture, the Senior 14% Notes and
the Tadiran Agreements) shall be deemed to refer to such documents and
agreements as presently constituted and, except for any amendments and
modifications not prohibited under SECTION 7.11, not as hereafter amended or
modified unless the Lenders shall have expressly consented in writing to such
amendment(s) or modification(s).
SECTION 14.12. DISCLAIMER OF RELIANCE. The Borrower has not relied on any
oral representations concerning any of the terms or conditions of the Loans, the
Notes, this Agreement or any of the Security Documents in entering into the
same. The Borrower acknowledges and agrees that none of the officers of either
Agent or any Lender has made any representations that are inconsistent with the
terms and provisions of this Agreement, the Notes and the Security Documents,
and neither the Borrower nor any of its Affiliates has relied on any oral
promises or representations in connection therewith.
SECTION 14.13. ENVIRONMENTAL INDEMNIFICATION. Without limiting the
generality of SECTION 14.02, in consideration of the execution and delivery of
this Agreement by the Lenders and the making of the Loans, the Borrower hereby
indemnifies, exonerates and holds the Lenders and each of their respective
officers, directors, employees and agents (collectively, the "INDEMNIFIED
PARTIES") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith
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(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
(a) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the release by any Company of any Hazardous
Material; or
(b) the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, discharging or releases from, any real property owned or
operated by any Company of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expense or claims asserted or arising
under any Environmental Law), regardless of whether caused by, or within the
control of, any Company; except for any such Indemnified Liabilities arising for
the account of a particular Indemnified Party by reason of the relevant
Indemnified Party's negligence or misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
Notwithstanding anything to the contrary herein contained, the obligations and
liabilities under this Section shall survive and continue in full force and
effect and shall not be terminated, discharged or released in whole or in part
irrespective of whether all the Obligations have been paid in full or the
Commitments have been terminated and irrespective of any foreclosure of any
mortgage, deed of trust or collateral assignment on any real property or
acceptance by any Lender of a deed or assignment in lieu of foreclosure.
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IN WITNESS WHEREOF, the Agents, the Lenders and the Borrower have caused
this Agreement to be duly executed by their duly authorized representatives, as
a sealed instrument, all as of the day and year first above written.
BORROWER:
TELETRAC, INC.
By:_________________________________
Alan Howe, Vice President of
Finance and Corporate Development
ADMINISTRATIVE AGENT:
BANQUE PARIBAS
By:
Darlynn Ernst, Assistant Vice
President,
Media-Entertainment Finance Group
By:_________________________________
Stanley P. Berkman,
General Manager, Western Region
DOCUMENTATION AGENT:
FLEET NATIONAL BANK
By:
Christopher A. Swindell, Vice
President,
Media & Communications Group
<PAGE>
BANQUE PARIBAS
By:________________________________
Darlynn Ernst, Assistant Vice
President,
Media-Entertainment Finance Group
By:____________________________
Stanley P. Berkman,
General Manager, Western Region
Address for Notices:
Banque Paribas
2029 Century Park East - Suite 3900
Los Angeles, California
Telephone: (310) 551-7300 (Main)
Telecopy: (310) 556-3762
Attention: Darlynn Ernst
Assistant Vice President
FLEET NATIONAL BANK
By:_________________________________
Christopher A. Swindell,
Vice President,
Media & Communications Group
Address for Notices:
Fleet National Bank
One Federal Street
Mail Stop: MAOFD03D
Boston, Massachusetts 02110
Telecopier: (617) 346-4346
Telephone: (617) 346-5579
Attention: Christopher A. Swindell
Vice President
<PAGE>
Exhibit 10.12
UNLIMITED GUARANTY
THIS UNLIMITED GUARANTY is made as of September 18, 1997 by TELETRAC
HOLDINGS, INC., a Delaware corporation (the "GUARANTOR"), having its chief
executive office at 2323 Grand - Suite 1100, Kansas City, Missouri 64108-2670,
to and with FLEET NATIONAL BANK, as agent (in such capacity, together with their
successors and assigns in such capacity, the "AGENT") on behalf of the financial
institutions and other Persons which are or which become Lenders under, and as
defined in, the Credit Agreement referred to below and any Affiliates of such
Lenders with which the Borrower (as defined below) shall maintain any Rate
Hedging Obligations (collectively, the "LENDERS" and each individually, a
"LENDER").
RECITALS
A. The Guarantor is the owner of 100% of the issued and outstanding shares
of capital stock of Teletrac, Inc. a Delaware corporation (the "Borrower").
B. The Borrower, the Lenders, the Agent, as Documentation Agent for the
Lenders, and Banque Paribas, as Administrative Agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT"), are entering into a Credit Agreement of
even date herewith (as the same may be amended, restated, renewed, replaced,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
pursuant to which the Lenders are extending credit to the Borrower. In
addition, the Borrower, from time to time, may be obligated to one or more of
the Lenders or any Affiliates of such Lenders in respect of Rate Hedging
Obligations. Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
C. It is a condition to such Lenders' willingness to enter into the Credit
Agreement and provide to the Borrower the financing contemplated thereby and to
extend credit to the Borrower that would constitute Rate Hedging Obligations
that the Guarantor shall have guaranteed, subject to the terms hereof, the
obligations of the Borrower under the Notes and certain other agreements as
hereinafter provided, including, without limitation, the punctual payment under
the Notes of both principal and interest.
D. The Guarantor wil benefit materially from the extension of credit to
the Borrower contemplated by the Credit Agreement and wishes, and has
voluntarily and freely agreed, to guaranty the payment of the aforesaid
obligations as hereinafter provided.
NOW, THEREFORE, in order to induce the Lenders and the Agents to enter into
the aforesaid loan transactions and to make said loans and extend such other
credit to the Borrower, and in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby covenants and agrees as follows:
1. GUARANTY. (a) The Guarantor, as primary obligor and not merely as
surety, hereby absolutely, unconditionally and irrevocably guarantees: (i) the
due and punctual payment
<PAGE>
in full (and not merely the collectibility) of the principal of the Notes, and
the interest thereon, in each case when due and payable, according to the terms
of the Notes, whether at stated maturity, by reason of acceleration or
otherwise; (ii) the due and punctual payment in full (and not merely the
collectibility) of all other sums and charges which may at any time be due and
payable in accordance with, or under the terms of, the Notes, whether at stated
maturity, by reason of acceleration or otherwise; (iii) the due and punctual
payment (and not merely the collectibility), performance and observance of all
of the other obligations, terms, covenants and conditions contained in the
Notes, the Credit Agreement, all agreements and instruments at any time executed
in connection with the Notes, the Credit Agreement and any other security
instruments and agreements relating to the Notes or the Credit Agreement,
whether now or hereafter existing, on the part of the Borrower to be performed
or observed (collectively, the Notes, the Credit Agreement, the Security
Documents, all other related security instruments and agreements, whether now
existing or arising hereafter, are referred to herein as the "LOAN DOCUMENTS");
(iv) the accuracy of the representations and warranties made by the Borrower in
the Loan Documents; and (v) the due and punctual payment and performance in full
(and not merely the collectibility) of any and all other indebtedness,
obligations and liabilities of the Borrower to the Lenders, the Agent and the
Administrative Agent of every kind and description, whether now existing or
hereafter arising, whether direct, indirect or contingent, whether secured or
unsecured, and howsoever evidenced, incurred or arising (all of the foregoing
are collectively hereinafter called the "OBLIGATIONS"). All Obligations paid by
the Guarantor hereunder shall be paid in U.S. Dollars at the place of payment
designated therefor by the Agent in immediately available funds.
(b) Notwithstanding any provision contained in this Unlimited Guaranty
or any security agreement or other agreement now or hereafter securing this
Unlimited Guaranty including, without limitation, the Securities Pledge
Agreement of even date herewith between the Guarantor and the Agent (as the same
may be amended, restated, renewed, replaced, supplemented or otherwise modified
from time to time, the "PLEDGE AGREEMENT"; the foregoing, together with this
Unlimited Guaranty and any and all other agreements now or hereafter securing
this Unlimited Guaranty being collectively referred to herein as the "GUARANTY
DOCUMENTS") to the contrary, it is the intention and agreement of the Guarantor,
the Agent and the Lenders that the Obligations of the Guarantor under this
Unlimited Guaranty shall be valid and enforceable against the Guarantor to the
maximum extent permitted by applicable law. Accordingly, if any provision of
this Unlimited Guaranty creating any obligation of the Guarantor in favor of the
Agent and the Lenders shall be declared to be invalid or unenforceable in any
respect or to any extent, it is the stated intention and agreement of the
Guarantor, the Agent and the Lenders that any balance of the obligation created
by such provision and all other obligations of the Guarantor to the Agent and
the Lenders created by other provisions of this Unlimited Guaranty shall remain
valid and enforceable. Likewise, if any sums which the Agent and the Lenders
may be otherwise entitled to collect from the Guarantor under this Unlimited
Guaranty shall be declared to be in excess of those permitted under any law
(including any federal or state fraudulent conveyance or like statute or rule of
law) applicable to the Guarantor's Obligations under this Unlimited Guaranty, it
is the stated intention and agreement of the Guarantor, the Agent and the
Lenders that all sums not in excess of those permitted under such applicable law
shall remain fully collectible by the Agent and the Lenders from the Guarantor
and such excess sums shall nevertheless survive as a subordinate obligation of
the Guarantor, junior in right to the claims of general unsecured creditors, but
prior
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to the claims of equityholders in the Guarantor. This provision shall control
every other provision of the Guaranty Documents.
2. SECURITY. This Unlimited Guaranty (as the same may be amended,
modified, supplemented, replaced or extended from time to time) and all
obligations, indebtedness or liabilities of the Guarantor arising hereunder
shall be secured by the Pledge Agreement and the Pledged Securities (as defined
therein).
3. SUBSEQUENT CHANGES. The Guarantor expressly agrees that the Agent
and each Lender may, in its sole and absolute discretion, without notice to or
further assent of the Guarantor and without in any way releasing, affecting or
impairing the Obligations and liabilities of the Guarantor hereunder: (a) waive
compliance with, or any default under, or grant any other indulgences with
respect to, the Obligations; (b) modify, amend or change any provisions of the
Obligations; (c) grant extensions or renewals of or with respect to the
Obligations, and/or effect any release, compromise or settlement in connection
therewith; (d) agree to the substitution, exchange, release or other disposition
of the Borrower or of all or any part of the collateral securing the
Obligations; (e) make advances for the purpose of performing any term or
covenant contained in the documents evidencing the Obligations, with respect to
which the Borrower shall be in default; (f) subject to the provisions of the
Credit Agreement, assign or otherwise transfer the Obligations, including
without limitation the assignment and transfer of the Agent's rights and
remedies under this Unlimited Guaranty, or any interest therein; (g) deal in all
respects with the Borrower, the Obligations or any collateral securing the
Obligations as if this Unlimited Guaranty were not in effect; (h) extend credit
to the Borrower whether or not (A) notice of election to terminate any of the
Loan Documents or any other agreement among the Agent, the Lenders and the
Borrower has been given by the Agent, on behalf of the Lenders, or by the
Borrower, (B) the limit of borrowings under the Loan Documents has been or will
be exceeded or (C) any Event of Default, or any event which with notice or lapse
of time, or both, would constitute an Event of Default, has occurred under the
Loan Documents or any other agreement among the Agent, the Lenders and the
Borrower; (i) replace any existing obligations and the documentation therefor
with an amended and restated obligation and the documentation therefor; and (j)
settle or compromise any or all of the Obligations with the Borrower, and/or any
other person or persons liable therein, and/or subordinate the payment of same
or any part hereof to the payment of any other debts or claims which may at any
time be due or owing to the Agent, any Lender and/or other person.
4. DIRECT AND ABSOLUTE OBLIGATION. The liability of the Guarantor
under this Unlimited Guaranty shall be primary, direct and immediate and not
conditional or contingent upon pursuit by the Agent or any Lender of any
remedies it may have against the Borrower or any other party with respect to the
Obligations, whether pursuant to the terms of the Loan Documents or otherwise.
The obligations of the Guarantor under this Unlimited Guaranty shall be absolute
and unconditional, irrespective of the genuineness, validity, regularity,
enforceability or priority of the Loan Documents, the Obligations or any other
circumstances which might otherwise constitute a legal or equitable discharge of
a surety or guarantor and without regard to any counterclaim, setoff,
declaration or defense of any kind which any party obligated under the Loan
Documents or any other document evidencing or securing any of the Obligations
may have or assert. No
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<PAGE>
exercise or nonexercise by the Agent or any Lender of any right given to it
hereunder or under the Loan Documents, and no change, impairment or suspension
of any right or remedy of the Agent or any Lender, shall in any way affect any
of the Guarantor's obligations hereunder or give the Guarantor any recourse
against the Agent or any Lender. Without limiting the generality of the
foregoing, neither the Agent nor any Lender shall be required to make any demand
on the Borrower and/or any other party, or otherwise pursue or exhaust its
remedies against the Borrower or any other party, before, simultaneously with or
after, enforcing its rights and remedies hereunder against the Guarantor. Any
one or more successive and/or concurrent actions may be brought hereon against
the Guarantor, either in the same action, if any, brought against the Borrower
and/or any other party, or in separate actions, as often as the Agent, in its
sole discretion, may deem advisable.
5. WAIVERS. (a) The Guarantor hereby expressly waives: (i)
diligence, presentment and demand for payment and protest of nonpayment; (ii)
notice of acceptance of this Unlimited Guaranty and of presentment, demand,
dishonor and protest; (iii) notice of any default hereunder or under the Loan
Documents or any other Obligations and of all indulgences; (iv) demand for
observance or performance of, or enforcement of, any terms or provisions of this
Unlimited Guaranty or the Loan Documents; (v) notice of extensions of credit by
the Agent or the Lenders to the Borrower and of any change in the rate at which
interest accrues under the Loan Documents or the other Obligations; (vi) all
other notices and demands otherwise required by law which the Guarantor may
lawfully waive; (vii) the right to assert in any action or proceeding hereupon
any setoff, counterclaim or other claim which it may have against the Agent or
any Lender; and (viii) the benefit of all other principles or provisions of law,
statutory or otherwise, which are or might be in conflict with the terms hereof.
As further consideration for the loan or loans by the Agent and the Lenders to
the Borrower and as a material inducement to the Agent and the Lenders to make
the loan or loans and accept this Unlimited Guaranty, the Guarantor hereby
irrevocably waives, disclaims and relinquishes all claims, whether based in
equity or law, whether by contract, statute or otherwise, that the Guarantor
might now or hereafter have against the Borrower or any other person that is
primarily or contingently liable on the Obligations guarantied hereby or that
arise from the existence or performance of the Guarantor's obligations under
this Unlimited Guaranty, including, but not limited to, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim or remedy of the Borrower against the Agent or any
Lender or any collateral security that the Agent or any Lender now has or
hereafter acquires.
(b) The Guarantor is presently informed of the financial
condition of the Borrower and of all of the circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. The Guarantor hereby covenants and agrees that the Guarantor will
continue to keep itself informed of the Borrower's financial condition, the
status of other guarantors, sureties, or other parties liable with respect to
the Obligations, if any, and of all of the circumstances which bear upon the
risk of nonpayment. Absent a written request for such information by the
Guarantor to the Agent, the Guarantor hereby waives its right if any, to require
the Agent to disclose to the Guarantor any information which the Agent may now
or hereafter acquire concerning such condition or circumstances, including,
without limitation, the
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<PAGE>
release of or revocation by any other guarantor or other party liable with
respect to the Obligations.
6. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER. If for any
reason the Borrower has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Borrower by reason of the Borrower's insolvency,
bankruptcy or reorganization or by other operation of law or for any other
reason, this Unlimited Guaranty shall nevertheless be binding on the Guarantor
to the same extent as if the Guarantor at all times had been the principal
obligor on all such Obligations. In the event that acceleration of the time for
payment of any of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower or for any other reason, all such amounts
otherwise subject to acceleration under the terms of the Credit Agreement, the
Notes, the other Loan Documents or any other agreement evidencing, securing or
otherwise executed in connection with any Obligation shall be immediately due
and payable by the Guarantor.
7. INSTRUMENT FOR THE PAYMENT OF MONEY. The Guarantor hereby
acknowledges that this Unlimited Guaranty constitutes an instrument for the
payment of money, and consents and agrees that the Agent, at its sole option on
behalf of Lenders, in the event of a dispute by the Guarantor in the payment of
monies due hereunder, shall have the right to bring motion-action under New York
CPLR Section 3213.
8. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents
and warrants to the Agent and the Lenders (which representations and warranties
shall survive the delivery of this Unlimited Guaranty) that:
(a) The Guarantor (i) is a corporation duly organized and
validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to transact business in each jurisdiction
where because of the nature of its business or property such qualification
is required except for jurisdictions where failure to qualify would not in
the aggregate have a Material Adverse Effect, (ii) has full power and
authority to own its properties and assets and to carry on its business as
now being conducted and as presently contemplated, and (iii) has full power
and authority to execute and deliver, and perform its obligations under,
the Guaranty Documents to which it is a party or signatory.
(b) The execution and delivery of, and performance by the
Guarantor of its obligations under, the Guaranty Documents are within its
corporate power, have been duly authorized by all requisite action and do
not and will not violate any provision of law, any order, judgment or
decree of any court or other agency of government, the corporate charter or
by-laws, of the Guarantor or any indenture, agreement or other instrument
to which the Guarantor is a party, or by which the Guarantor is bound, or
be in conflict with, result in a breach of, or constitute (with due notice
or lapse of time or both) a default under, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of the property or assets of the Guarantor pursuant to, any such
indenture, agreement or instrument except where such violation, conflict or
default would not have a material adverse effect on the properties, assets
or condition (financial or otherwise) of the Guarantor or any
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<PAGE>
rights of the Agent or the Lenders under any of the Guaranty Documents to
which it is a party. Each of the Guaranty Documents to which it is a
party, including without limitation the Pledge Agreement, constitutes the
valid and binding obligation of the Guarantor enforceable against it in
accordance with its terms except (x) as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights and remedies of creditors generally or the application
of principles of equity, whether in any action in law or proceeding in
equity, and (y) that the availability of the remedy of specific performance
or of any other equitable remedy or relief to enforce any right under any
such agreement is subject to the discretion of the Court before which
proceedings therefore may be brought.
(c) Except as set forth in SECTION 4.04 of the Credit Agreement,
the Guarantor is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any
governmental instrumentality or other agency, or any other person, in
connection with or as a condition to the execution, delivery or performance
of any of the Guaranty Documents to which it is a party.
(d) There is no action, suit or proceeding at law or in equity
or by or before any governmental instrumentality or other agency, including
any arbitration board or tribunal, now pending or, to the knowledge of the
Guarantor, threatened (nor is any basis therefor known to the Guarantor),
(i) which questions the validity of any of the Guaranty Documents, or any
action taken or to be taken pursuant hereto or thereto, or (ii) against or
affecting the Guarantor which, if adversely determined, either in any case
or in the aggregate, would have a material adverse effect on the business
prospects, operations, properties, assets or condition, financial or
otherwise of the Guarantor.
(e) The Guarantor is not (i) a party to any agreement or
instrument or subject to any restriction materially and adversely affecting
its properties, assets or condition, financial or otherwise, or (ii) in
violation of any indenture, agreement or instrument to which it is a party
or by which it is bound or any provision of law or any order, judgment or
decree of any court or other agency of government.
(f) The Guarantor is solvent as set forth in SECTION 4.11 of the
Credit Agreement. The Guarantor's obligations under this Unlimited
Guaranty do not render the Guarantor insolvent; the Guarantor is not
contemplating either the filing of a petition by the Guarantor under any
state or federal bankruptcy or insolvency laws or the liquidating of all or
a major portion of the Guarantor's property; and the Guarantor has no
knowledge of any person contemplating the filing of any such petition
against the Guarantor.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. The Guarantor hereby covenants
and agrees that, until payment in full of the Obligations, the Guarantor will
(a) furnish to the Agent, within ten (10) days after any such request, such
information regarding the business affairs and financial condition of the
Guarantor, as the Agent may reasonably request and (b) without limiting the
generality of the foregoing, comply with all of the provisions of the Credit
Agreement, including negative and affirmative covenants, which apply or relate,
directly or indirectly, to it.
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<PAGE>
10. EVENTS OF DEFAULT. In each case of happening of an "EVENT OF
DEFAULT" as defined in the Credit Agreement (each of which is herein sometimes
called an "Event of Default"), then and upon any such Event of Default and at
any time thereafter during the continuance of such Event of Default, at the
election of the Agent on behalf of the Lenders (or automatically in the case of
certain Events of Default as specified in the Credit Agreement), the Notes and
the Obligations and any and all other obligations of the Borrower and the
Guarantor and either of them to the Agent, the Administrative Agent and any of
the Lenders shall for the purposes of this Unlimited Guaranty immediately become
due and payable, both as to principal and interest, without presentment, demand,
or protest, all of which are hereby expressly waived, anything contained herein
or in the Notes or other evidence of such Obligations to the contrary
notwithstanding.
11. NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing (including telecopied communication)
and mailed or telecopied or delivered to the applicable party at the address
indicated below.
If to the Agent to:
Fleet National Bank
One Federal Street
Mail Stop: MAOFD03D
Attention: Christopher A. Swindell
Telecopy No.: (617) 346-4345/6
with a copy (which shall not constitute notice) to:
Elizabeth H. Munnell, Esq.
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 439-4170
If to the Guarantor addressed to it, at:
Teletrac Holdings, Inc.
2323 Grand - Suite 1100
Kansas City, Missouri 64108-2670
Attention: ____________________
Telecopy No.: (816) 474-3475
with a copy (which shall not constitute notice) to:
Karen C. Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
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<PAGE>
45 Rockefeller Plaza
New York, New York 10111
Telecopy No.: (212) 841-5725
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other party complying as to delivery with the
terms of this Section. All such notices, requests, demands and other
communication shall be deemed given upon receipt by the party to whom such
notice is directed.
12. PLACE OF PAYMENT. Any payments made by the Guarantor under the
provisions of this Unlimited Guaranty shall be made to the Agent at its office
at the address set forth above unless some other address is hereafter designated
by the Agent.
13. SETOFF. The Guarantor hereby agrees that the Agent and the Lenders
shall have a lien and a right to setoff for all liabilities whether or not
matured arising out of this Unlimited Guaranty upon and against all deposits,
credits, and property of the Guarantor now or hereafter in the possession or
control of the Agent or any Lender or in transit to it, whether or not Agent and
Lenders are otherwise fully secured.
14. SUBORDINATION, ASSIGNMENT & TRANSFER. Until the payment and
performance in full of all Obligations, the Guarantor shall not accept or retain
any distribution or other payment from the Borrower unless the same is permitted
under the terms of the Credit Agreement. The Guarantor further agrees with the
Agent and the Lenders that (a) all of the present and future indebtedness of the
Borrower to the Guarantor shall be and hereby is subordinated to, assigned and
transferred to the Agent on behalf of the Lenders and pledged and made security
for the payment of all Obligations; and (b) the Guarantor contemporaneously
herewith and from time to time hereafter shall on request execute such further
endorsements, assignments or other proper transfers as the Agent may request
further to evidence the assignment hereby agreed to and made. The Guarantor
hereby appoints irrevocably the Agent as the Guarantor's attorney-in-fact,
effect upon the occurrence of an Event of Default that is continuing, in its
name to demand and enforce payment of said indebtedness, to prove and vote all
claims, receive all dividends and take all other action on said indebtedness in
any liquidation or any proceedings whatsoever affecting the Borrower or its
property under any bankruptcy or other laws now or hereafter in effect for the
relief of debtors and in general to do any act or take any action in regard to
said indebtedness which the Guarantor might otherwise do.
15. TERMINATION OF GUARANTY. This Unlimited Guaranty is a continuing
Guaranty and shall remain in full force and effect until the indefeasible
payment in full in cash (or other property acceptable to the Lenders, in their
sole discretion) of the Obligations or the termination by the Agent, the
Administrative Agent, the Lenders and the Borrower of the Credit Agreement and
all Rate Hedging Obligations.
16. BORROWER'S INSOLVENCY. The obligations of the Guarantor to make
payment in accordance with the terms of this Unlimited Guaranty shall not be
impaired, modified, changed, released or limited in any manner whatsoever by any
impairment, modification, change, release or
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<PAGE>
limitation of the liability of the Borrower or its estate, in bankruptcy or
reorganization resulting from the operation of any present or future provision
of the United States Bankruptcy Code or other statute or from the decision of
any court. The Guarantor agrees that in the event any amounts referred to
herein are paid in whole or in part by the Borrower or by the Guarantor, the
Guarantor's liability hereunder shall continue and remain in full force and
effect in the event that all or any part of any such payment is recovered from
the Agent or any Lender as a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law. The Guarantor further agrees
that this Unlimited Guaranty includes the costs incurred by the Agent and any
Lender in defending any claim or suit seeking such recovery.
17. NONWAIVER OF RIGHTS. All rights and remedies afforded to
the Agent and the Lenders by reason of this Unlimited Guaranty and the Loan
Documents or by law are separate and cumulative and the exercise of one shall
not in any way limit or prejudice the exercise of any other such rights or
remedies. No delay or omission by the Agent or any Lender in exercising any
such right or remedy shall operate as a waiver thereof. No waiver of any rights
and remedies hereunder, and no modification or amendment hereof, shall be deemed
made by the Agent and the Lenders unless in writing and duly executed. Any such
written waiver shall apply only to the particular instance specified therein and
shall not impair the further exercise of such right or remedy or of any other
right or remedy of the Agent and the Lenders, and no single or partial exercise
of any right or remedy hereunder shall preclude further exercise of any other
right or remedy.
18. CONSENT TO JURISDICTION. THE GUARANTOR, TO THE EXTENT THAT THE
GUARANTOR MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN
APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR
OTHER PROCEEDING ARISING OUT OF THE GUARANTOR'S OBLIGATIONS UNDER OR WITH
RESPECT TO THIS UNLIMITED GUARANTY AND THE GUARANTY DOCUMENTS, AND EXPRESSLY
WAIVES ANY AND ALL OBJECTIONS THE GUARANTOR MAY HAVE AS TO VENUE INCLUDING,
WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN
ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE GUARANTOR CONSENTS TO
THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, ADDRESSED TO THE GUARANTOR AT THE ADDRESS PROVIDED
HEREIN. TO THE EXTENT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE GUARANTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
UNLIMITED GUARANTY.
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<PAGE>
19. WAIVER OF TRIAL BY JURY. THE GUARANTOR HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT IN OR WITH RESPECT TO
THIS UNLIMITED GUARANTY, THE GUARANTY DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED
IN CONNECTION HEREWITH.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED EXECUTED AS A SEALED
INSTRUMENT AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK AS A CONTRACT TO BE EXECUTED AND PERFORMED WITHIN THE
STATE OF NEW YORK.
21. SUCCESSORS. This Unlimited Guaranty shall inure to the benefit of,
and be enforceable by, the Agent and its successors and assigns on behalf of the
Lenders, and shall be binding upon, and enforceable against, the Guarantor and
its successors and assigns.
22. SEVERABILITY. In case this Unlimited Guaranty or any one or more of
the provisions contained herein shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Unlimited
Guaranty shall be construed as if such invalid, illegal or unenforceable
provision had never been included.
23. SECTION HEADINGS. The section headings in this Unlimited Guaranty are
inserted for convenience of reference only and shall not in any way affect the
meaning or construction of any provision of this Unlimited Guaranty.
24. AGENCY. The parties hereto, and any person not a party hereto for
whose benefit the Agent acts hereunder, acknowledge that the Agent has been
requested to act as agent for the Lenders hereunder pursuant to the terms of the
Credit Agreement, and that the Agent, to the extent it may so act hereunder,
shall exercise all of the rights and remedies hereunder on behalf of, and as
agent for the benefit of, the Lenders and each of them. Without limiting the
generality of the foregoing, the Agent is authorized to execute and deliver,
from time to time, on behalf of the Lenders, any and all amendments and
modifications to this Unlimited Guaranty and any and all waivers to any
conditions herein or any Event of Default hereunder.
25. INCONSISTENCIES. Any inconsistencies between the provisions of this
Agreement and the Credit Agreement shall be governed by a reference to the
provisions of the Credit Agreement.
*THE NEXT PAGE IS THE SIGNATURE PAGE*
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<PAGE>
IN WITNESS WHEREOF, the Agent and the Guarantor have caused this Unlimited
Guaranty to be duly executed under seal as of the day and year first above
written.
GUARANTOR:
TELETRAC HOLDINGS, INC.
By:_______________________________
Alan Howe, Vice President of
Finance and Corporate
Development
AGENT:
FLEET NATIONAL BANK
By:_______________________________
Christopher A. Swindell, Vice
President, Media &
Communications Group
<PAGE>
EXHIBIT 10.13
SECURITY AND PLEDGE AGREEMENT
THIS AGREEMENT made as of September 18, 1997, by and between TELETRAC,
INC., a Delaware corporation (the "DEBTOR"), and FLEET NATIONAL BANK, as agent
(in such capacity, together with its successors and assigns in such capacity,
the "AGENT") for the benefit of the financial institutions and other Persons
which are or which become Lenders under, and as defined in, the Credit Agreement
referred to below and any Affiliates of such Lenders with whom the Debtor shall
maintain any Rate Hedging Obligations (collectively with the Lenders, the
"SECURED PARTIES").
RECITALS
A. The Debtor, the Lenders, the Agent, as Documentation Agent for the
Lenders, and Banque Paribas, as Administrative Agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT"), are entering into a Credit Agreement of
even date herewith (as the same may be amended, restated, renewed, replaced,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
pursuant to which the Lenders are extending credit to the Debtor. In addition,
the Debtor, from time to time, may be obligated to one or more of the Lenders or
any Affiliates of such Lenders in respect of Rate Hedging Obligations.
Capitalized terms used herein without definition have the meanings assigned to
them in the Credit Agreement.
B. It is a condition to such Secured Parties' willingness to enter into
the Credit Agreement and provide to the Debtor the financing contemplated
thereby and to extend credit to the Debtor that would constitute Rate Hedging
Obligations that the Debtor shall have granted to the Secured Parties and the
Agent, for the benefit of the Secured Parties, the liens and security interests
contemplated hereby. The Debtor wishes hereby to grant such liens and security
interests.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereby agree as follows:
SECTION 1. THE SECURITY INTERESTS.
(a) In order to secure (i) the performance of all obligations of the
Debtor under the Credit Agreement; (ii) the due and punctual payment of the
Notes, as defined in the Credit Agreement and issued pursuant thereto, to any of
the Lenders, including, without limitation, all interest payable on the Notes at
the interest rates provided therein and in the Credit Agreement, regardless of
the extent allowed as a claim in any proceeding in respect of the bankruptcy,
reorganization or insolvency of the Debtor (a "REORGANIZATION"); (iii) the due
and punctual payment of the Debtor's notes or instruments as may hereafter from
time to time be issued in addition to, in place of or in amendment of the Notes
under the Credit Agreement, including, without limitation, all interest payable
on such notes or instruments at the interest rates provided therein, regardless
of the extent allowed as a claim in any Reorganization; (iv) the payment and
performance of all
<PAGE>
indebtedness, liabilities and obligations of the Debtor under the other Security
Documents contemplated by the Credit Agreement; (v) the payment and performance
of all obligations, indebtedness and liabilities of the Debtor's affiliates to
any of the Agent or the Lenders under the other Security Documents; (vi) the
performance of all of the obligations of the Debtor to the Agent, the
Administrative Agent and the Secured Parties contained herein or in any of the
other Loan Documents, including without limitation all Rate Hedging Obligations
entered into with any of the Secured Parties; and (vii) the payment of all other
future advances and other obligations of the Debtor to any of the Secured
Parties, including without limitation any future loans and advances made to the
Debtor by any of the Secured Parties prior to, during or following any
Reorganization, and any and all other indebtedness, liabilities and obligations
of the Debtor to any of the Secured Parties, the Administrative Agent or the
Agent of every kind and description, direct, indirect or contingent, now or
hereafter existing, due or to become due (all of the foregoing hereinafter
called the "OBLIGATIONS"), the Debtor hereby grants to the Agent and each of the
Secured Parties a continuing security interest in, and a collateral assignment
and pledge of, the following described fixtures and personal property
(hereinafter collectively called the "COLLATERAL"), in each case to the extent,
and only to the extent, it is lawful to grant a security interest in such
property:
All fixtures and all tangible and intangible personal property of the
Debtor, whether now owned or hereafter acquired by the Debtor, or in which
the Debtor may now have or hereafter acquire an interest, including without
limitation, the following property: (A) all properties and assets of every
type used or useful in connection with the ownership, construction, design,
procurement, installation and/or operation of location, fleet management
and/or related two-way messaging systems and businesses and any and all
other communication businesses (collectively, the "COMMUNICATION
BUSINESSES"); (B) all equipment (including, without limitation, all
machinery, motor vehicles, tools, furniture, towers, transmitters, vehicle
location units and other radio transceivers, messaging units, antennas,
receivers, distribution systems and components thereof (including without
limitation hardware, cables, fiber optic cables, switches, CODECs,
amplifiers and associated devices), integrated base station units and all
other equipment relating to the operation of Communications Businesses),
inventory (including, without limitation, all merchandise, raw materials,
work in process, finished goods, and supplies) and goods, whether now owned
or hereafter acquired by the Debtor, or in which the Debtor may now have or
hereafter acquire an interest; (C) all accounts, accounts receivable, other
receivables including, without limitation, intercompany receivables,
contract rights, chattel paper, leases and general intangibles, including,
without limitation, (i) all limited partnership interests, partnership
interests and limited liability company member interests now or hereafter
held by or issued to the Debtor, (ii) all existing and future rights of the
Debtor to any refund of any tax assessed against or paid by the Debtor,
loss carryback tax refunds, insurance premium refunds, unearned premiums,
insurance proceeds, choses in action, goodwill, going concern value,
trademarks, service marks, tradenames, patents, blueprints, designs,
product lines, and research and development, and all Debtor's rights as a
tenant under any and all Leases, (iii) all computer data and the concepts
and ideas on which such data is based, all developmental ideas and concepts
and papers, plans, schematics, drawings, blueprints,
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sketches and documents, all data bases and all customer lists; (iv) all of
the Debtor's rights under all present and future authorizations, permits,
licenses and franchises (collectively the "FCC LICENSES") heretofore or
hereafter granted or assigned to the Debtor by the Federal Communications
Commission (the "FCC") or any other public or governmental agency or
regulatory body for the operation or ownership of the Communication
Businesses (excluding, however, any such FCC Licenses to the extent, and
only to the extent, it is unlawful to grant a security interest in the
same, but including, to the maximum extent permitted by law, all rights
incident or appurtenant to such FCC Licenses, including without limitation
the right to receive all proceeds derived or arising from or in connection
with the sale, assignment or transfer of such FCC Licenses), whether now
owned or hereafter acquired by the Debtor, or in which the Debtor may now
have or hereafter acquire an interest, (v) all of the Debtor's rights under
all construction contracts, public utility agreements, access agreements,
rights of way, transmitter site agreements, transmission capacity
agreements, distribution agreements and licenses, leases, permits,
authorizations and other agreements to which the Debtor is a party relating
to the Communications Businesses, whether now existing or hereafter arising
(excluding, however, any such contracts, agreements and leases, to the
extent and only to the extent, the granting of a security interest in such
agreement would violate the terms of such agreement and cause a default
thereunder), (vi) all management agreements and all other agreements for
the provision of management, engineering or similar services, agreements
with subscribers and other similar agreements to which the Debtor is a
party relating to the Communication Businesses (excluding, however, any
such contracts, agreements and leases, to the extent and only to the
extent, the granting of a security interest in such agreement would violate
the terms of such agreement and cause a default thereunder), (vii) all
other agreements relating to Communications Businesses, whether now owned
or hereafter acquired by the Debtor, or in which the Debtor may now have or
hereafter acquire an interest (excluding, however, any such agreements, to
the extent and only to the extent, the granting of a security interest in
such agreement would violate the terms of the agreement and cause a default
thereunder); and (viii) all right, title and interest, if any, under any
intercompany notes, obligations or agreements, whether now owned or
hereafter acquired by the Debtor, or in which the Debtor may now have or
hereafter acquire an interest; (D) all securities and other investment
property now or hereafter held by or issued to the Debtor, including,
without limitation, all shares of stock, warrants, options, notes,
investment contracts, partnership interests and member interests in limited
liability companies; (E) all instruments, documents of title, policies and
certificates of insurance, securities, bank deposits, deposit accounts,
checking accounts and cash now or hereafter owned by the Debtor, or in
which the Debtor may now have or hereafter acquire an interest; (F) all
accessions, additions or improvements to, all replacements, substitutions
and parts for, and all proceeds and products of, and all distributions and
dividends relating to, all of the foregoing, including proceeds of
insurance; and (G) all books, records, documents and other information
relating to all of the foregoing (on whatever medium recorded and including
without limitation computer programs, tapes, discs, punch cards, data
processing software and related property and property rights).
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<PAGE>
(b) CUSTOMER RECEIVABLES. All Collateral consisting of accounts, contract
rights, chattel paper and general intangibles of the Debtor arising from the
sale, delivery or provision of goods and/or services are sometimes hereinafter
collectively called the "CUSTOMER RECEIVABLES".
(c) SECURITY INTERESTS. The security interests granted pursuant to this
SECTION 1 (the "SECURITY INTERESTS") are granted as security only and shall not
subject the Agent or any of the Secured Parties to, or transfer or in any way
affect or modify, any obligation or liability of the Debtor under any of the
Collateral or any transaction which gave rise thereto.
(d) COLLATERAL ACCOUNT.
(i) There is hereby established with the Agent a cash collateral
account (the "COLLATERAL ACCOUNT") in the name and under the control of the
Agent into which there shall be deposited from time to time the cash
proceeds of any of the Collateral and any other cash proceeds of insurance,
condemnation award or other compensation in respect of any casualty or
disposition affecting any property of the Debtor or any of its Subsidiaries
(whether received by the Agent or by the Debtor) required to be delivered
to the Agent pursuant hereto or the Credit Agreement and into which the
Debtor may from time to time deposit any additional amounts that the Debtor
wishes to pledge to the Agent for the benefit of the Secured Parties as
additional collateral security hereunder. The balance from time to time in
the Collateral Account shall constitute part of the Collateral hereunder
and shall not constitute payment of the Obligations until applied as
hereinafter provided.
(ii) The balance from time to time in the Collateral Account
shall be subject to withdrawal only as provided in this subparagraph (ii),
subparagraph (iv) below and in the Credit Agreement (including, without
limitation, SECTIONS 1.06 and 6.02 of the Credit Agreement). Unless an
Event of Default shall have occurred and shall be continuing, the Agent
shall (except as otherwise provided herein), remit the collected balance
outstanding to the credit of the Collateral Account to or upon the order of
the Debtor, as the Debtor shall from time to time instruct. Upon the
occurrence and during the continuance of an Event of Default, the Agent may
(and, if instructed by the Secured Parties as specified in the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied
(subject to collection) the balance from time to time outstanding to the
credit of the Collateral Account to the payment of the Obligations in the
manner specified in SECTION 13. Deposits in the Collateral Account that
constitute any proceeds of insurance, condemnation award or other
compensation in respect of any casualty or other event of the type referred
to in SECTION 1.06(B) of the Credit Agreement (a "CASUALTY EVENT"), or the
proceeds of any disposition of the type referred to in SECTION 1.06(D) of
the Credit Agreement, in each case affecting any property of the Debtor,
shall be subject to withdrawal and release only as provided in subsection
(iv) below and SECTIONS 1.06(B) and (D), resepctively, of the Credit
Agreement. Following the occurrence of any Default, the Agent shall have
no obligation to release any of such proceeds to the Debtor for restoration
or repair of damaged property.
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<PAGE>
(iii) Promptly following the occurrence of any Casualty Event
affecting any property of the Debtor (whether or not such property is
Collateral hereunder) resulting in losses aggregating $500,000 or more, the
Debtor shall give prompt notice thereof to the Agent and, to the extent any
proceeds of insurance, condemnation award or other compensation received as
a result of such casualty are to be paid to the Agent, shall cause such
proceeds to be paid to the Agent for deposit into the Collateral Account,
as additional collateral security for the payment of the Obligations. To
the extent the Agent shall receive proceeds of any such Casualty Event
resulting in a loss of less than $500,000, the Agent will, so long as no
Default shall have occurred, remit such proceeds to the Debtor, PROVIDED,
THAT, the provisions of SECTION 6.02(B) of the Credit Agreement shall have
been satisfied.
(iv) With respect to any proceeds that are required to be paid
into the Collateral Account pursuant to subparagraphs (ii) and (iii) above,
the Agent may, at its option, if no Default has occurred, elect to apply
any proceeds of insurance, condemnation award or other compensation
received as a result of such Casualty Event either: (i) to the restoration
and repair of the property affected by such Casualty Event (the "DAMAGED
PROPERTY"); or (ii) to the prepayment of the Loans in the manner and to the
extent specified in SECTION 1.06(B) of the Credit Agreement. In all other
cases, if no Default has occurred, the Debtor may, at its option, to be
exercised by delivery of notice to the Agent within one hundred eighty
(180) days of the respective Casualty Event, elect to apply any proceeds of
insurance, condemnation award or other compensation received as a result of
such Casualty Event either: (i) to the restoration and repair of the
Damaged Property; or (ii) to the prepayment of the Loans in the manner and
to the extent specified in SECTION 1.06(B) of the Credit Agreement.
Failure of the Debtor to make such an election within one hundred eighty
(180) days after the date of any such Casualty Event shall constitute an
election to so apply such proceeds to the prepayment of the Loans as
aforesaid.
(v) If the Debtor or Agent elects to so restore and repair the
Damaged Property, any such proceeds (and any earnings thereon) held in the
Collateral Account shall be applied to the restoration and repair of the
Damaged Property and advanced by the Agent in periodic installments upon
compliance by the Debtor with such reasonable conditions to disbursement as
may be imposed by the Agent, including, but not limited to, reasonable
retention amounts and receipt of lien releases and joint checks payable to
the Debtor and any contractors, subcontractors and materialmen to whom
payment is owed in connection with any restoration, repair and replacement
of the Damaged Property.
(vi) Following the occurrence and the continuance of any
Default, the Agent shall have no obligation to release any of such proceeds
to the Debtor for restoration or repair of Damaged Property. All insurance
proceeds remaining after the payment for restoration and repair of Damaged
Property pursuant to this Section may, at the option of the Agent, be
applied to the prepayment of the Loans in the manner and extent specified
in SECTION
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1.06(B) of the Credit Agreement or (if consented to by the Secured Parties)
released to the Debtor.
(vii) Subject to the $500,000 exclusion set forth in subsection
(iii), the Agent shall be entitled at its option to participate in any
compromise, adjustment or settlement in connection with any claims for
damage or destruction under any policy or policies of insurance, and the
Debtor shall within five (5) Business Days after request therefor reimburse
the Agent for all reasonable out-of-pocket expenses (including reasonable
attorneys' fees and disbursements) incurred by the Agent in connection with
such participation. The Debtor shall not make any compromise, adjustment
or settlement in connection with any such claim without the approval of the
Agent.
SECTION 2. DELIVERY OF PLEDGED SECURITIES AND CHATTEL PAPER.
All securities now or hereafter owned or held by the Debtor, including
without limitation, all shares of stock, warrants, options, notes, investment
contracts, partnership interests in limited or general partnerships and member
interests in limited liability companies, shall be promptly delivered to the
Agent, by the Debtor pursuant hereto (which securities, together with all other
securities and shares of stock which may hereafter be delivered to the Agent
pursuant to the terms hereof, are hereinafter called the "PLEDGED SECURITIES"),
shall be in suitable form for transfer by delivery, in the case of certificated
securities, or shall be accompanied by duly executed instruments of transfer or
assignments in blank, and accompanied in each case by any required transfer tax
stamps, all in form and substance satisfactory to the Agent. In the case of
uncertificated securities, the Debtor shall give written instructions to the
issuer thereof to register the pledge hereunder in the books and records
maintained by such issuer and such issuer, by signing a Confirmation of Issuer
in form satisfactory to the Agent, shall confirm that it has so registered said
pledge. EXHIBIT A attached hereto and made a part hereof sets forth a complete
description of all securities owned or held by the Debtor on the date hereof.
The Agent and the Secured Parties may at any time or from time to time, at
their sole discretion, require the Debtor to cause any chattel paper included in
the Customer Receivables to be delivered to the Agent or any agent or
representative designated by it for the purpose of causing a legend referring to
the Security Interests to be placed on such chattel paper and upon any ledgers
or other records concerning the Customer Receivables.
SECTION 3. FILING; FURTHER ASSURANCES.
The Debtor will, at its expense, execute, deliver, file and record (in such
manner and form as the Agent may require), or permit the Agent to file and
record, any financing statements, any carbon, photographic or other reproduction
of a financing statement or this Agreement (which shall be sufficient as a
financing statement hereunder), any specific assignments or other paper that may
be reasonably necessary or desirable, or that the Agent may reasonably request,
in order to create, preserve, perfect or validate any Security Interest or to
enable the Agent to exercise and enforce its rights and the rights of the
Secured Parties hereunder with respect to
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any of the Collateral. The Debtor hereby appoints the Agent, which appointment
is irrevocable and coupled with an interest, as the Debtor's attorney-in-fact
solely as to this SECTION 3 to execute and file in the name and on behalf of the
Debtor such additional financing statements as the Agent may reasonably request.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF DEBTOR.
The Debtor hereby represents and warrants to the Agent and the Secured
Parties that (a) the Debtor is, or to the extent that certain of the Collateral
is to be acquired after the date hereof, will be, the sole legal and beneficial
owner of the Collateral free from any lien, security interest, encumbrance or
restrictions on transfer except as permitted hereunder or under the Credit
Agreement or under any other Loan Document; (b) except as specified in and
permitted by the Credit Agreement, no financing statement covering the
Collateral is on file in any public office, other than the financing statements
filed pursuant to this Agreement; (c) all additional information,
representations and warranties contained in EXHIBIT B hereto as to the Debtor
and made a part hereof are true, accurate and complete on the date hereof; (d)
there are no restrictions upon the voting rights of any of the Pledged
Securities and the Debtor has the right to vote, pledge, grant a security
interest in and otherwise transfer the Pledged Securities owned by it free of
any encumbrances (other than applicable restrictions imposed by any Federal,
state or local authorities, or Federal or state securities laws or regulations);
and (e) the Pledged Securities are duly and validly issued, fully paid and
nonassessable, and each certificate or instrument evidencing the Pledged
Securities is issued in the name of the Debtor as described on EXHIBIT A.
SECTION 5. COVENANTS OF DEBTOR.
The Debtor hereby covenants and agrees with the Agent and the Secured
Parties that the Debtor (a) shall take such action as reasonably necessary to
protect the Collateral against all claims and demands of all persons at any time
claiming any interest therein senior to that of the Agent and the Secured
Parties; (b) shall provide the Agent with prompt written notice of (i) any
change in the Debtor's principal office or the office where the Debtor maintains
its books and records pertaining to the Customer Receivables, and (ii) the
movement or location of any Collateral to or at any address other than as set
forth in EXHIBIT B with respect to the Debtor; (c) shall promptly pay any and
all taxes, assessments and governmental charges upon the Collateral prior to the
date penalties are attached thereto, except to the extent permitted under the
Credit Agreement; (d) shall immediately notify the Agent of any event causing a
substantial loss or diminution in the value of all or any material part of the
Collateral and the amount or an estimate of the amount of such loss or
diminution, except as otherwise permitted by the Credit Agreement; (e) shall
have and maintain insurance at all times in accordance with the provisions of
the Credit Agreement; (f) except in accordance with the Credit Agreement, shall
not sell or offer to sell or otherwise assign, transfer or dispose of the
Collateral or any interest therein, without the written consent of the Agent;
(g) shall keep the Collateral free from any adverse lien, security interest or
encumbrance other than liens, security interests or encumbrances contemplated
hereby and permitted under the Credit Agreement; (h) shall keep the Collateral
in
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good order and repair, reasonable wear and tear excepted, and shall not waste,
destroy or dispose of the Collateral or any part thereof, except as otherwise
permitted by the Credit Agreement; and (i) shall not use the Collateral in
violation of any statute or ordinance, the violation of which could have a
Material Adverse Effect.
SECTION 6. RECORDS RELATING TO COLLATERAL.
The Debtor will keep its records concerning the Collateral, including the
Customer Receivables and all chattel paper included in the Customer Receivables,
at its office or one or more of the other locations designated in EXHIBIT B or
at such other place or places of business of which the Agent shall have been
notified in writing upon no less than thirty (30) days in advance. The Debtor
will hold and preserve such records and chattel paper and will permit
representatives of the Agent and the Secured Parties at any time during normal
business hours to examine and inspect the Collateral and to make abstracts from
such records and chattel paper in accordance with the terms of the Credit
Agreement, and will furnish to the Agent and the Secured Parties such
information and reports regarding the Collateral as the Agent and the Secured
Parties may from time to time reasonably request; PROVIDED, HOWEVER, that no
notice shall be required of the Agent if an Event of Default has occurred.
SECTION 7. RECORD OWNERSHIP OF PLEDGED SECURITIES.
Upon the occurrence of an Event of Default (as defined in SECTION 11) that
is continuing and subject to SECTION 17 and the requirements of applicable law,
the Agent may cause, upon written notification to the Debtor, any or all of the
Pledged Securities to be transferred of record into the Agent's name. The
Debtor shall promptly give to the Agent copies of any notices or other
communications received by the Debtor with respect to Pledged Securities
registered in its name.
SECTION 8. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED SECURITIES.
(a) Unless and until an Event of Default has occurred and is continuing,
and the Agent, at the Secured Parties' direction, shall have notified the Debtor
in writing of its election to exercise the Agent's rights under Subsection (b)
below, the Debtor shall be entitled, from time to time, to receive for its own
use any and all dividends, interest and other payments and distributions made
upon or with respect to the Pledged Securities (subject to any restrictions
thereon set forth in the Credit Agreement or any other Loan Document referred to
therein), except:
(i) stock dividends,
(ii) dividends payable in securities, member interests or other
property (except cash dividends or distributions),
(iii) dividends or distributions on dissolution or on partial or
total liquidation or in connection with a reduction of capital, capital
surplus or paid-in surplus, and
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(iv) other securities issued with respect to or in lieu of the
Pledged Securities (whether upon conversion of any convertible securities
included therein or through stock split, spin-off, split-off,
reclassification, merger, consolidation, sale of assets, combination of
shares or otherwise).
All of the foregoing, together with all new, substituted or additional shares of
capital stock, warrants, options, notes or other rights, or other securities
issued in addition to or in respect of all or any of the Pledged Securities
shall be delivered to the Agent hereunder as required by SECTION 2, to be held
as Collateral pursuant to the terms hereof in the same manner as the Pledged
Securities delivered to the Agent on the date hereof. The Debtor shall have the
right to receive and retain all dividends, distributions, principal, interest
and other payments made upon or with respect to the Pledged Securities, except
those which the Agent is specifically authorized to receive as provided above,
and the Agent, at the Secured Parties' direction, shall take all such action as
may be necessary or appropriate to give effect to such right. From time to time
upon receiving a written request from the Debtor accompanied by a certificate
signed by the Debtor stating that no Event of Default has occurred and is
continuing, the Agent shall deliver to the Debtor suitable assignments and
orders for the payment to the Debtor or upon its order of all dividends,
distributions, principal, interest and other payments to which the Debtor is
entitled as aforesaid, upon or with respect to any Pledged Securities which are
registered or standing in the name of the Agent. Nothing in this SECTION 8
shall be deemed to permit any issuance of debt or equity securities, exercise of
rights, distributions, payments or other actions not otherwise expressly
permitted by the Credit Agreement.
(b) Notwithstanding any provision herein to the contrary, if any Event of
Default shall have occurred and be continuing, upon the giving of written notice
referred to in subsection (a) above, then and whether or not any holder of the
Obligations exercises any available option to declare such Obligations due and
payable or seeks or pursues any other relief or remedy available to such holder
under this Agreement or any instrument or agreement evidencing or securing any
Obligations, all dividends, distributions or interest or principal payments, as
the case may be, on the Pledged Securities shall be paid directly to the Agent
on behalf of the Secured Parties, and retained by it as part of the Pledged
Securities, subject to the terms of this Agreement, and, if the Agent shall so
request in writing, each Debtor agrees to execute and deliver to the Agent
appropriate additional distributions and other orders and documents to that end.
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SECTION 9. RIGHT TO VOTE PLEDGED SECURITIES.
(a) Subject to SECTION 17 and applicable law, unless and until an Event of
Default has occurred and is continuing and the Agent shall have notified the
Debtor in writing of its election to exercise the Agent's rights under
Subsection (b) below, the Debtor shall have the right, from time to time, to
vote and to give consents, ratifications and waivers with respect to the Pledged
Securities and to exercise conversion rights with respect to any convertible
securities included therein (provided, however, that no vote shall be cast, and
no consent shall be given or shareholder action taken, which would have the
effect of impairing the position or interest of the Agent and the Secured
Parties with respect to the Pledged Securities or which would authorize or
effect any action then prohibited by the Credit Agreement or any other Loan
Document referred to therein). Subject to SECTION 17 and applicable law, the
Agent shall, upon receiving a written request from the Debtor, deliver to the
Debtor or as specified in such request such proxies, powers of attorney,
consents, ratifications and waivers in respect of any Pledged Securities which
are registered in the Agent's name, and make such arrangements with respect to
the conversion of convertible securities as shall be specified in the Debtor's
request.
(b) Notwithstanding any provision herein to the contrary, other than
SECTION 17, if any Event of Default shall have occurred and be continuing, upon
written notice to the Debtor of such election, then and whether or not any
holder of the Obligations exercises any available option to declare such
Obligations due and payable or seeks or pursues any other relief or remedy
available to such holder under this Agreement or any instrument or agreement
evidencing or securing any Obligations, the Agent, or its nominee, shall
forthwith, without further act on the part of any person, have the sole and
exclusive right, subject to SECTION 17 and (to the extent permitted by law) to
exercise all voting and other powers of ownership pertaining to the Pledged
Securities and shall exercise such powers in such manner as the Agent, at the
Secured Parties' direction, shall determine to be necessary, appropriate or
advisable. The Debtor hereby agrees to execute and deliver to the Agent such
additional powers, authorizations, proxies, dividends and such other documents
as the Agent may reasonably request to secure to the Agent the rights, powers
and authorities intended to be conferred upon the Agent by this subsection (b).
SECTION 10. GENERAL AUTHORITY.
Subject to SECTION 17 and to the extent permitted under FCC rules,
regulations and policies, and other Federal, state or local authorities,
including, without limitation, Federal and state securities laws, the Debtor
hereby appoints the Agent as the Debtor's lawful attorney, with full power of
substitution, in the name of the Debtor, for the sole use and benefit of the
Agent on behalf of the Secured Parties, but at the Debtor's expense, to
exercise, all or any of the following powers with respect to all or any of the
Collateral during the existence of any Event of Default:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due;
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(ii) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non-negotiable instruments and
chattel paper taken or received by the Agent;
(iii) to settle, compromise, initiate, prosecute or defend any action
or proceeding with respect thereto;
(iv) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof or the related goods securing the
Customer Receivables, as fully and effectually as if the Agent on behalf of
the Secured Parties was the absolute owner thereof;
(v) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
(vi) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon; and
(vii) to the extent permitted by law, including without limitation,
FCC, state and local rules, regulations and policies and Federal and state
securities laws, to execute any document or form, in the name of the
Debtor, which may be necessary or desirable in connection with any sale of
the Pledged Securities by the Agent, including without limitation Form 144
(or any successor form) promulgated by the Securities and Exchange
Commission; provided that the Agent shall give the Debtor not less than
twenty (20) days' prior written notice of the time and place of any sale or
other intended disposition of any of the Collateral. Such appointment as
attorney is irrevocable and coupled with an interest.
SECTION 11. EVENTS OF DEFAULT.
The Debtor shall be in default under this Agreement upon the occurrence of
any "Event of Default" under and as defined in the Credit Agreement (hereinafter
referred to as an "EVENT OF DEFAULT").
SECTION 12. REMEDIES UPON EVENT OF DEFAULT.
(a) Subject to SECTION 17, if an Event of Default shall occur and be
continuing, the Agent, on behalf of the Secured Parties, may exercise all the
rights and remedies of a secured party under the Uniform Commercial Code.
Without limitation of the foregoing, unless the Obligations shall have been paid
in full in cash, the Agent, at the Secured Parties' direction, may, in the
Secured Parties' sole discretion, without further demand, advertisement or
notice, except as expressly provided for in subsection (i) of this Section,
apply the cash, if any, then held by it as Collateral hereunder, for the
purposes and in the manner provided in SECTION 13, and if there shall be no such
cash or the cash so applied shall be insufficient to make payment in full of all
payments provided in SECTION 13,
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(i) Subject to SECTION 17 and applicable law, including, without
limitation, Federal and state securities laws, sell the Collateral, or any
part or component thereof, in one or more sales, at a public or private
sale, conducted by any officer or agent of the Agent, at a place of
business of the Agent or elsewhere, for cash, upon credit or future
delivery, and at such price or prices as the Agent shall determine, and the
Agent or any Secured Party may be the purchaser of any or all of the
Collateral so sold. Upon any such sale, the Agent shall have the right,
subject to SECTION 17, to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser (including the Agent or any
Secured Party) at any such sale shall hold the Collateral so sold,
absolutely free from any claim or right of whatsoever kind, including,
without limitation, any equity or right of redemption of the Debtor which
the Debtor, to the extent it may lawfully do so, hereby specifically
waives. The Agent shall give the Debtor at least ten (10) days' written
notice of any such public or private sale. The Agent shall not be
obligated to make any sale pursuant to any such notice. The Agent may,
without notice or publication, adjourn any public or private sale from time
to time by announcement at the time and place fixed for such sale, or any
adjournment thereof, and any such sale may be made at any time or place to
which the same may be so adjourned without further notice or publication.
In case of any sale of all or any part of the Collateral for credit or for
future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to pay for the
Collateral so sold, and in case of any such failure, such Collateral may
again be sold under and pursuant to the provisions hereof; or
(ii) Proceed by a suit or suits at law or in equity to foreclose upon
this Agreement and, subject to SECTION 17 and any other applicable laws,
including, without limitation, Federal and state securities laws, sell the
Collateral, or any portion or component thereof, under a judgment or decree
of a court or courts of competent jurisdiction.
(b) If at any time when the Agent, at the Secured Parties' direction,
shall determine to exercise its right to sell all or any part of the Pledged
Securities pursuant to subsection (a)(i) of this Section, such Pledged
Securities or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act of 1933, as from time to time
in effect (the "SECURITIES ACT") or the securities laws of any state, the Agent,
at the Secured Parties' direction, in their sole and absolute discretion, is
hereby expressly authorized to sell such Pledged Securities or such part thereof
by private sale in such manner and under such circumstances as the Agent and the
Secured Parties may deem commercially reasonable in order that such sale may
legally be effected without such registration. The Agent and the Secured
Parties shall sell all or any part of the Pledged Securities at a price which
they deem commercially reasonable under the circumstances.
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(c) Subject to SECTION 17 and applicable law, the Agent as attorney-in-
fact pursuant to SECTION 10 may, in the name and stead of the Debtor, make and
execute all conveyances, assignments and transfers of any Collateral sold in
accordance with this Agreement. The Debtor shall, if so reasonably requested by
the Agent, ratify and confirm any sale or sales by executing and delivering to
the Agent, or to such purchaser or purchasers, all such instruments as may, in
the reasonable judgment of the Agent, be advisable for such purpose.
(d) The receipt by the Agent of the purchase money paid at any such sale
made by it shall be a sufficient discharge therefor to any purchaser (other than
the Agent) of the Collateral, or any portion thereof, sold as aforesaid; and no
such purchaser (or his or its representatives or assigns) (other than the
Agent), after paying such purchase money and receiving such receipt, shall be
bound to see to the application of such purchase money or any part thereof or in
any manner whatsoever be answerable for any loss, misapplication or
nonapplication of any such purchase money, or any part thereof, or be bound to
inquire as to the authorization, necessity, expediency or regularity of any such
sale.
SECTION 13. APPLICATION OF COLLATERAL AND PROCEEDS.
The proceeds of any sale of, or other realization upon, all or any part of
the Collateral shall be applied in the following order of priority: (a) first,
to pay the expenses of such sale or other realization, including reasonable
attorneys' fees, and all reasonable expenses, liabilities and advances incurred
or made by the Agent or any of the Secured Parties in connection therewith, and
any other unreimbursed expenses for which the Agent or any of the Secured
Parties are to be reimbursed pursuant to SECTION 14; (b) second, to the payment
of the Obligations in such order of priority as the Secured Parties, in their
sole discretion, shall determine; and (c) finally, to pay to the Debtor, or its
successors and assigns, or as a court of competent jurisdiction may direct, any
surplus then remaining from such proceeds.
SECTION 14. EXPENSES; AGENT'S LIEN.
The Debtor will forthwith upon demand pay to the Agent: (a) the amount the
Agent or any of the Secured Parties have paid (i) in respect of taxes arising by
reason of the Security Interests (including, without limitation, any applicable
transfer, intangible, recordation and personal property taxes but excluding
taxes in respect of the Agent's and the Secured Parties' income and profits) or
(ii) in order to free any of the Collateral from any lien thereon, and (b) the
amount of any and all reasonable costs and expenses (including, without
limitation, the reasonable fees and disbursements of its counsel and of any
agents not regularly in its employ) which the Agent or any of the Secured
Parties may incur in connection with (i) the preparation and interpretation of
this Agreement and any amendments hereto or modifications hereof, (ii) the
collection, sale or other disposition of any of the Collateral, (iii) the
exercise by the Agent or any of the Secured Parties of any of the powers
conferred upon any of them hereunder, (iv) any Event of Default on the Debtor's
part hereunder or (v) any Reorganization.
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SECTION 15. SURVIVAL OF OBLIGATIONS; TERMINATION OF SECURITY INTERESTS;
RELEASE OF COLLATERAL.
This Agreement and the warranties, representations, agreements and
covenants contained herein and in any certificates or instruments delivered
pursuant hereto shall survive the making of the Loans (as defined in the Credit
Agreement) and the execution and delivery of the Notes, regardless of any
investigation made by the Agent or the Secured Parties or any person on behalf
of the Agent or the Secured Parties, and shall continue for so long as any of
the Obligations shall remain outstanding or any of the Secured Parties shall
have any obligation to advance funds to the Debtor. Upon the repayment and
performance in full of all the Obligations and the expiration or termination of
any obligations of any of the Secured Parties to advance funds to the Debtor,
the Security Interests shall terminate and all rights to the Collateral, except
as set forth below, shall revert to the Debtor. Upon such termination of the
Security Interests or release of Collateral, the Agent will, at the Debtor's
expense to the extent permitted by law, promptly execute and deliver to the
Debtor such documents as reasonably necessary or as the Debtor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
SECTION 16. NOTICES.
All notices, requests, demands and other communications provided for
hereunder shall be in writing in the manner set forth in the Credit Agreement.
SECTION 17. FCC APPROVALS AND MUNICIPAL APPROVALS.
The Agent's and the Secured Parties' rights under this Agreement are
subject to all applicable rules and regulations of the FCC. Notwithstanding
anything to the contrary contained herein, neither the Agent nor any of the
Secured Parties will take any action pursuant to this Agreement which would
constitute or result in any assignment of any FCC license or any change of
control of the Debtor or any FCC license, or any government license, permit or
franchise, whether DE JURE or DE FACTO, if such assignment of license, permit or
franchise or of control would require the prior approval of the FCC under the
Communications Act of 1934, as amended (including the written rules and
regulations promulgated by the FCC). The Debtor agrees to take any action which
the Agent may reasonably request in order to obtain and enjoy to the fullest
possible extent the rights and benefits granted to the Agent and the Secured
Parties by this Agreement and each other agreement, instrument and document
delivered to the Agent and the Secured Parties in connection herewith or in any
document evidencing or securing the Collateral, including specifically, at the
Debtor's own cost and expense, the use of its best efforts to assist in
obtaining approval of the FCC or any other agency or government for any action
or transaction contemplated by, and consistent with the terms of, this Agreement
which is then required by law, and specifically, without limitation, upon
request, to prepare, sign and file (or cause to be filed) with the FCC's or any
other agency or government the assignor's or transferor's portion of any
application or applications for consent to the assignment of any license, permit
or franchise or change of control necessary or appropriate under the FCC's or
any agency or government's rules
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or regulations for approval of (a) the assignment of any FCC license or transfer
of control thereof, (b) any sale or sales of property constituting the
Collateral by any of the Secured Parties or the Agent on their behalf, or (c)
any assumption by any of the Secured Parties or the Agent on their behalf of
voting rights or management rights in property constituting the Collateral
effected in accordance with the terms of this Agreement. Furthermore,
notwithstanding anything to the contrary contained in this Agreement, the Agent
and the Secured Parties agree that (aa) voting rights in the Pledged Securities
shall remain with the Debtor even upon an Event of Default unless all required
prior approvals of the FCC to the transfer of such voting rights shall have been
obtained, (bb) upon an Event of Default, and only if so permitted by this
Agreement, the Agent or the Secured Parties may dispose of the Pledged
Securities, but only by private or public sale or other means acceptable to the
FCC, and (cc) prior to the exercise of stockholder rights by a purchaser at such
sale, all necessary FCC consents with respect to such sale shall be timely
obtained.
SECTION 18. RIGHT OF SET-OFF.
In furtherance and not in limitation of any provisions herein contained,
the Debtor hereby agrees that any and all deposits or other sums at any time
claimed by or due from the Agent or any of the Secured Parties to the Debtor
shall at all times constitute security for the Obligations and, upon the
occurrence of an Event of Default, the Agent and each of the Secured Parties may
exercise any right of set-off against such deposits or other sums as may accrue
or exist under applicable law, whether or not the Obligations are otherwise
fully secured.
SECTION 19. MISCELLANEOUS.
(a) No failure on the part of the Agent or the Secured Parties to
exercise, and no delay in exercising, and no course of dealing with respect to,
any right, power or remedy under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of the
Secured Parties of any right, power or remedy under this Agreement preclude any
other right, power or remedy. The remedies in this Agreement are cumulative and
are not exclusive of any other remedies provided by law. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated orally
but only by a statement in writing signed by the party against which enforcement
of the change, waiver, discharge or termination is sought.
(B) THIS AGREEMENT SHALL BE DEEMED EXECUTED AS A SEALED INSTRUMENT
AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK AS A CONTRACT TO BE EXECUTED AND PERFORMED WITHIN THE STATE OF NEW
YORK.
(C) This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
Agreement.
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SECTION 20. PAYMENT OF EXPENSES.
In the event this Agreement shall be enforced by suit or otherwise, the
Debtor will reimburse the Agent and the holder or holders of the Obligations,
upon demand, for all reasonable expenses incurred in connection therewith,
including, without limitation, reasonable attorneys' fees (including without
limitation all such costs, charges and expenses incurred by the Agent or any of
the Secured Parties in connection with any Reorganization).
SECTION 21. SEVERABILITY.
If any provision hereof is invalid or unenforceable in any jurisdiction,
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent.
SECTION 22. INCONSISTENCIES.
Any inconsistencies between the provisions of this Agreement and the
Credit Agreement shall be governed by reference to the provisions of the Credit
Agreement.
SECTION 23. CONSENT TO JURISDICTION.
THE DEBTOR, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS
OBLIGATIONS ARISING HEREUNDER OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE,
INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH
COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE DEBTOR
CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE DEBTOR AT THE
ADDRESS PROVIDED HEREIN. TO THE EXTENT THE DEBTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE DEBTOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
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<PAGE>
SECTION 24. WAIVER OF JURY TRIAL.
THE DEBTOR HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS
EXECUTED IN CONNECTION HEREWITH.
SECTION 25. AGENCY.
The parties hereto, and any person not a party hereto for whose benefit the
Agent holds the Collateral hereunder, acknowledge that the Agent has been
requested to act as agent for the Secured Parties hereunder pursuant to the
terms of the Credit Agreement, and that the Agent, to the extent it may so act
hereunder, shall exercise all of the rights and remedies hereunder on behalf of,
and as agent for the benefit of, the Secured Parties and each of them. Without
limiting the generality of the foregoing, the Agent is authorized to execute and
deliver, from time to time, on behalf of the Secured Parties, any and all
amendments and modifications to this Agreement and any and all waivers to any
conditions herein or any Event of Default hereunder.
*THE NEXT PAGE IS THE SIGNATURE PAGE*
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
by their duly authorized representatives all as of the day and year first above
written.
DEBTOR:
TELETRAC, INC.
By:__________________________________
Alan Howe, Vice President of
Finance and Corporate Development
AGENT:
FLEET NATIONAL BANK
By:__________________________________
Christopher A. Swindell, Vice President
Media & Communications Group
<PAGE>
EXHIBIT A
PLEDGED SECURITIES ON DATE HEREOF
SECURITIES NO. OF
SHARES
Class A Common Stock , par value $.01, of Teletrac, Inc. 1,000
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<PAGE>
EXHIBIT B
TELETRAC, INC.
ADDITIONAL REPRESENTATIONS AND WARRANTIES
1. The exact name of the Debtor is Teletrac, Inc.
2. The Debtor does business in California, Ohio and Pennsylvania as
Teletrac Location.
3. The Debtor is not qualified to do business in any jurisdiction other
than:
1. Delaware 13. New Jersey
2. Kansas 14. New York
3. Illinois 15. Pennsylvania
4. Texas 16. Virginia
5. California 17. Wisconsin
6. Florida 18. Arizona
7. Michigan 19. Indiana
8. Connecticut 20. Minnesota
9. District of Columbia 21. Missouri
10. Georgia 22. Ohio
11. Maryland 23. Oregon
12. Massachusetts 14. Washington
4. The Debtor's chief executive office and principal place of business is
2323 Grand Street, Suite 1100, Kansas City, Missouri 64108.
5. All of the Debtor's personal property is located at the following
addresses:
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<PAGE>
EXHIBIT 10.14
SECURITIES PLEDGE AGREEMENT
THIS AGREEMENT made as of September 18, 1997 by and between TELETRAC
HOLDINGS, INC., a Delaware corporation (the "PLEDGOR"); and FLEET NATIONAL BANK,
as agent (in such capacity as agent, together with its successors and assigns in
such capacity, the "AGENT") for the benefit of the financial institutions and
other Persons which are or which become Lenders under, and as defined in, the
Credit Agreement referred to below and any Affiliates of such Lenders with whom
the Borrower (as defined below) shall maintain any Rate Hedging Obligations
(collectively with the Lenders, the "SECURED PARTIES").
RECITALS
A. The Pledgor is the owner of 100% of the issued and outstanding shares
of capital stock of Teletrac, Inc. a Delaware corporation (the "BORROWER").
B. The Borrower, the Lenders, the Agent, as Documentation Agent for the
Lenders, and Banque Paribas, as Administrative Agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT") are entering into a Credit Agreement of
even date herewith (as the same may be amended, restated, renewed, replaced,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
pursuant to which the Lenders are extending credit to the Borrower. In
addition, the Borrower, from time to time, may be obligated to one or more of
the Lenders or any Affiliates of such Lenders in respect of Rate Hedging
Obligations. Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
C. The Borrower's obligations to the Agent and the Lenders under the
Credit Agreement are guaranteed by the Pledgor pursuant to the Unlimited
Guaranty of Pledgor in favor of the Agent, for the benefit of the Lenders dated
as of the date hereof (as the same may be amended, restated, renewed, replaced,
supplemented or otherwise modified from time to time, the "GUARANTY").
D. It is a condition to such Secured Parties' willingness to enter into
the Credit Agreement and provide to the Borrower the financing contemplated
thereby and to extend credit to the Borrower that would constitute Rate Hedging
Obligations that the Pledgor shall have pledged to the Secured Parties and the
Agent, for the benefit of the Secured Parties, all of the issued and outstanding
capital stock of the Borrower standing in its name.
E. The Pledgor will benefit materially from the extension of credit to the
Borrower contemplated by the Credit Agreement and, as a material inducement to
the Secured Parties to enter into the Credit Agreement and to extend credit to
the Borrower as contemplated thereby and in respect of Rate Hedging Obligations,
wishes hereby to pledge to the Agent and the Secured Parties all of the capital
stock of the Borrower standing in its name.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereby agree as follows:
SECTION 1. PLEDGE.
<PAGE>
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Pledgor hereby delivers, pledges, grants security
interests in and assigns to the Agent and each of the Secured Parties the
securities, shares of capital stock, warrants and options of the Borrower
standing in the Pledgor's name as more particularly described on EXHIBIT A
attached hereto and all proceeds thereof (all in suitable form for transfer by
delivery or accompanied by duly executed instruments of transfer or assignments
in blank, and any required transfer tax stamps) as collateral security for (i)
the performance of all the covenants and obligations of the Pledgor under the
Guaranty; (ii) the due and punctual payment and performance of all obligations
of the Borrower under the Credit Agreement; (iii) the due and punctual payment
of the Notes, as defined in the Credit Agreement and issued pursuant thereto, to
any of the Secured Parties, including, without limitation, all interest payable
on the Notes at the interest rates provided therein and in the Credit Agreement,
regardless of the extent allowed as a claim in any proceeding in respect of the
bankruptcy, reorganization or insolvency of any Borrower (a "REORGANIZATION");
(iv) the due and punctual payment of the Borrower's notes or instruments as may
hereafter from time to time be issued in addition to, in place of or in
amendment of the Notes under the Credit Agreement, including, without
limitation, all interest payable on such notes or instruments at the interest
rates provided therein, regardless of the extent allowed as a claim in any
Reorganization; (v) the payment and performance of all indebtedness, liabilities
and obligations of the Borrower and the Pledgor under the other Security
Documents contemplated by the Credit Agreement; (vi) the payment and performance
of all obligations, indebtedness and liabilities of the Borrower's affiliates to
any of the Agent, the Administrative Agent or the Secured Parties under the
other Security Documents contemplated by the Credit Agreement; (vii) the
performance of all of the obligations of the Borrower to the Agent, the
Administrative Agent and the Secured Parties contained in any of the Loan
Documents, including without limitations all rate hedging obligations entered
into with any of the Secured Parties; and (viii) the payment of all other future
advances and other obligations of the Borrower to any of the Secured Parties,
including without limitation any future loans and advances made to the Borrower
by any of the Secured Parties prior to, during or following any Reorganization,
and any and all other indebtedness, liabilities and obligations of the Borrower
to any of the Secured Parties, the Agent or the Administrative Agent of every
kind and description, direct, indirect or contingent, now or hereafter existing,
due or to become due (all of the foregoing hereinafter called the
"OBLIGATIONS").
In the case of certificated securities, the Pledgor shall promptly pledge
and deposit hereunder with the Agent, any certificates, stock, securities,
warrants, options or other rights to acquire shares of the capital stock of the
Borrower acquired by the Pledgor in addition to the securities referred to on
EXHIBIT A attached hereto, whether by (i) new purchase or (ii) new issuance or
by declaration of a dividend or distribution with respect to, or a split of, or
conversion of, any securities now or hereafter held in pledge (all in suitable
form for transfer by delivery or accompanied by (a) duly executed instruments of
transfer or assignments in blank, and (b) any required transfer tax stamps).
Such certificates, stock, equity securities, warrants, options, voting or other
rights and all proceeds thereof shall stand pledged and assigned as collateral
security for the Obligations in the same manner as the property described in the
first paragraph hereof and this paragraph. Nothing contained in this SECTION 1
shall be deemed to permit any issuances of debt or equity securities, exercise
of rights, distributions, payments or other actions not otherwise
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<PAGE>
expressly permitted by the Credit Agreement. (All of the property described in
the first paragraph hereof and this paragraph is hereinafter collectively called
the "PLEDGED SECURITIES".)
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Pledgor hereby represents, warrants and covenants as follows:
(a) Except for the security interest and pledge hereunder and
any security interest and pledge permitted under the Credit Agreement,
(i) the Pledgor is the sole legal and beneficial owner of the Pledged
Securities and holds the Pledged Securities free and clear of any
lien, security interest, encumbrance or restriction on transfer, (ii)
there are no restrictions upon the voting rights of any of the Pledged
Securities (other than as may be imposed by any federal, state or
local governmental authorities), (iii) the Pledged Securities are duly
and validly issued, fully paid and non-assessable and (iv) the Pledgor
has the right to pledge said securities to the Agent hereunder free of
any encumbrances.
(b) The Pledgor shall promptly pay any and all taxes,
assessments and governmental charges upon the Pledged Securities
pledged by the Pledgor hereunder when due other than those contested
in good faith by appropriate proceedings for which adequate funds for
the payment thereof shall have been set aside.
(c) The Pledgor shall not sell or otherwise assign, transfer or
dispose of the Pledged Securities or any interest therein during such
time as they shall be pledged to the Secured Parties as contemplated
hereby.
(d) The Pledgor shall keep the Pledged Securities free from any
lien, security interest or encumbrance and shall take such actions
reasonably necessary to protect such Pledged Securities against all
claims and demands of all persons at any time claiming any interest
therein.
(e) The Pledged Securities are duly and validly issued, fully
paid and nonassessable and each certificate or instrument evidencing
the Pledged Securities is issued in the name of the Pledgor as
described on EXHIBIT A.
(f) The Pledged Securities represent, and the Pledgor is the
legal and beneficial holder of, all of the issued and outstanding
shares of capital stock of the Borrower.
(g) SCHEDULE A accurately and completely lists the Pledgor's
correct legal name and principal address and amount of shares of the
Borrower's capital stock held in its name.
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<PAGE>
(h) The Pledgor (a) is a corporation duly formed, validly
existing and in good standing under the laws of its state of
organization or formation, (b) has the power and authority to own its
properties and to carry on its business as now being conducted and as
presently contemplated, and (c) has the power and authority to execute
and deliver, and perform its obligations under, this Agreement.
(i) The execution and delivery of, and performance by the
Pledgor of its obligations under, this Agreement, have been duly
authorized by all requisite corporate action and will not violate any
provisions of law, any order, judgment or decree of any court or other
agency of government, including, without limitation, the FCC, or any
indenture, agreement or other instrument to which the Pledgor is a
party or by which the Pledgor is bound, or constitute (with due notice
or lapse of time or both) a default under, or except as may be
permitted under this Agreement, result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of the Pledgor pursuant to, any such
indenture, agreement or instrument.
(j) This Agreement and the other agreements and instruments
relating hereto constitute the valid and binding obligations of the
Pledgor, enforceable against it in accordance with its terms, subject,
however, to bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights and remedies of creditors generally
or the application of principles of equity, whether in any action in
law or proceeding in equity, and subject to the availability of the
remedy of specific performance or any other equitable remedy or relief
to enforce any right under any such agreement.
SECTION 3. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED SECURITIES.
(a) Unless and until an Event of Default (as defined in SECTION
5) has occurred and is continuing and the Agent, at the Secured Parties'
direction, shall have notified the Pledgor in writing of its election to
exercise the Agent's rights under this SECTION 3, the Pledgor shall be entitled
to receive and retain for its own use any and all dividends, interest and other
payments and distributions made upon or with respect to the Pledged Securities
(subject to any restrictions thereon set forth in the Credit Agreement or any
other Loan Document referred to therein), except
(i) stock dividends or distributions;
(ii) dividends payable in securities or other property (except
cash dividends or distributions);
(iii) dividends or distributions on dissolution or on partial
or total liquidation or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
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<PAGE>
(iv) any other securities issued with respect to or in lieu of
the Pledged Securities in any manner whatsoever (whether upon
conversion of any convertible securities included therein or through a
split, spin-off, split-off, reclassification, merger, consolidation,
sale of assets, combination of securities or otherwise).
All of the foregoing, together with all new, substituted or additional shares of
capital stock, warrants, options, notes or other rights, or other securities
issued in addition to or in respect of all or any of the Pledged Securities
shall be delivered to the Agent hereunder as required by SECTION 1, to be held
as collateral pursuant to the terms hereof in the same manner as the Pledged
Securities delivered to the Agent on the date hereof. The Pledgor shall have
the right to receive and retain all dividends, distributions, principal,
interest and other payments made upon or with respect to the Pledged Securities,
except those which the Agent is specifically authorized to receive as provided
above, and the Agent at the Secured Parties' direction shall take all such
action as may be necessary or appropriate to give effect to such right. From
time to time upon receiving a written request from the Pledgor accompanied by a
certificate signed by the Pledgor stating that no Event of Default has occurred
and is continuing, the Agent shall deliver to the Pledgor suitable assignments
and orders for the payment to the Pledgor or upon its order of all dividends,
distributions, principal, interest and other payments to which the Pledgor is
entitled as aforesaid, upon or with respect to any Pledged Securities which are
registered or standing in the name of the Agent. Nothing in this SECTION 3
shall be deemed to prohibit any issuance of debt or equity securities, exercise
of rights, distributions, payments or other actions not otherwise expressly
prohibited by the Credit Agreement.
(b) Notwithstanding any provision herein to the contrary, if any Event of
Default shall have occurred and be continuing, upon the giving of the written
notice referred to in subsection (a) above, then and whether or not any holder
of the Obligations exercises any available option to declare such Obligations
due and payable or seeks or pursues any other relief or remedy available to such
holder under this Agreement or any instrument or agreement evidencing or
securing any Obligations, all dividends, distributions, or interest or principal
payments, as the case may be, on the Pledged Securities shall be paid directly
to the Agent on behalf of the Secured Parties, and retained by it as part of the
Pledged Securities, subject to the terms of this Agreement, and, if the Agent
shall so request in writing, the Pledgor agrees to execute and deliver to the
Agent appropriate additional distribution and other orders and documents to that
end.
SECTION 4. RIGHT TO VOTE PLEDGED SECURITIES.
(a) Unless and until an Event of Default has occurred and is
continuing, and the Agent at the Secured Parties' direction shall have notified
the Pledgor in writing of its election to exercise the Agent's rights under this
SECTION 4, subject to SECTION 20 and applicalbe law, the Pledgor shall have the
right, from time to time, to vote and to give consents, ratifications and
waivers with respect to the Pledged Securities and to exercise conversion rights
with respect to any convertible securities included therein; PROVIDED, HOWEVER,
that no vote shall be cast, and no consent shall be given or shareholder action
taken, which would have the effect of impairing the position or interest of the
Agent and the Secured Parties with respect to the Pledged Securities or which
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<PAGE>
would authorize or effect any action then prohibited by the Credit Agreement or
any other Transaction Document referred to therein. Subject to SECTION 20 and
applicable law, the Pledgor further agrees to: (a) to the extent consistent
with the rules, regulations and policies of the Federal Communications
Commission ("FCC") and other Federal, state or local authorities, vote its
capital stock or partnership interests in the Borrower at all times in such
manner as may be necessary or appropriate to cause the Borrower to comply in
full with the Transaction Documents; (b) take no action to obstruct, impede or
infringe upon the Agent's and the Lenders' enforcement of their rights, benefits
and remedies under the Transaction Documents; or (c) otherwise cooperate fully
with the Agent and the Secured Parties in taking any action which any of them
may reasonably request in order to cause the Agent and the Secured Parties to
obtain and enjoy the full rights and benefits granted to them under the
Transaction Documents. Subject to SECTION 20 and applicable law, the Agent
shall, upon receiving a written request from the Pledgor, deliver to the Pledgor
or as specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any Pledged Securities which are
registered in the Agent's name, and make such arrangements with respect to the
conversion of convertible securities as shall be specified in the Pledgor's
request.
(b) Notwithstanding any provision herein to the contrary, except SECTION
20, if any Event of Default shall have occurred and be continuing, upon the
giving of the written notice referred to in subsection (a) above, then and
whether or not any holder of the Obligations exercises any available option to
declare such Obligations due and payable or seeks or pursues any other relief or
remedy available to such holder under this Agreement or any instrument or
agreement evidencing or securing any Obligations, the Agent, or its nominee,
shall forthwith, without further action on the part of any person, have the sole
and exclusive right (subject to SECTION 20 and to the extent permitted by law)
to exercise all voting and other powers of ownership pertaining to the Pledged
Securities and shall exercise such powers in such manner as the Agent, at the
Secured Parties' direction, shall determine to be necessary, appropriate or
advisable. The Pledgor hereby agrees to execute and deliver to the Agent such
additional powers, authorizations, proxies, dividends and such other documents
as the Agent may reasonably request to secure to the Agent the rights, powers
and authority intended to be conferred upon the Agent by this subsection (b).
SECTION 5. EVENTS OF DEFAULT.
The Pledgor shall be in default under this Agreement upon the occurrence of
any "Event of Default" under and as defined in the Credit Agreement (hereinafter
referred to as an "EVENT OF DEFAULT").
SECTION 6. REMEDIES UPON EVENT OF DEFAULT.
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<PAGE>
(a) Subject to SECTION 20, if any Event of Default shall occur, the Agent
on behalf of the Secured Parties may exercise all the rights and remedies of a
secured party under the Uniform Commercial Code. Without limitation of the
foregoing, unless the Obligations shall have been paid in full in cash, the
Agent at the Secured Parties' direction, may, in the Secured Parties' sole
discretion, without further demand, advertisement or notice, except as expressly
provided for in subsection (i) below, apply the cash, if any, then held by it as
collateral hereunder, for the purposes and in the manner provided in SECTION 7,
and, if there shall be no such cash or the cash so applied shall be insufficient
to make payment in full of all payments provided in SECTION 7,
(i) Subject to SECTION 20 and applicable law, including, without
limitation, Federal and State securities laws, sell the Pledged Securities,
or any part thereof, in one or more sales, at a public or private sale,
conducted by any officer or agent of the Agent, at a place of business of
the Agent or elsewhere, for cash, upon credit or future delivery, and at
such price or prices as the Agent shall determine, and, to the extent
permitted by law, the Agent or any Secured Party may be the purchaser of
any or all of the Pledged Securities so sold. Upon any such sale, the
Agent shall have the right subject to SECTION 20, to deliver, assign and
transfer to the purchaser thereof the Pledged Securities so sold. Each
purchaser (including the Agent or any Secured Party) at any such sale shall
hold the Pledged Securities so sold, absolutely free from any claim or
right of whatsoever kind, including, without limitation, any equity or
right of redemption of the Pledgor which the Pledgor, to the extent it may
lawfully do so, hereby specifically waives. The Agent shall give the
Pledgor at least thirty (30) days' advance written notice of any such
public or private sale. The Agent shall not be obligated to make any sale
pursuant to any such notice. The Agent may, without notice or publication,
adjourn any public or private sale from time to time by announcement at the
time and place fixed for such sale, or any adjournment thereof, and any
such sale may be made at any time or place to which the same may be so
adjourned without further notice or publication. In case of any sale of
all or any part of the Pledged Securities for credit or for future
delivery, the Pledged Securities so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to pay for the
Pledged Securities so sold, and in case of any such failure, such Pledged
Securities may again be sold under and pursuant to the provisions hereof;
or
(ii) Proceed by a suit or suits at law or in equity to foreclose upon
this Agreement and, subject to SECTION 20 and any other applicable laws,
including, without limitation, Federal and State securities laws, sell the
Pledged Securities, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction.
(b) If at any time when the Agent at the Secured Parties' direction shall
determine to exercise its right to sell all or any part of the Pledged
Securities pursuant to subsection (a)(i) of this Section, such Pledged
Securities or the part thereof to be sold shall not, for any reason
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<PAGE>
whatsoever, be effectively registered under the Securities Act of 1933, as from
time to time in effect (the "SECURITIES ACT") or the securities laws of any
state, the Agent, at the Secured Parties' direction, in their sole and absolute
discretion, is hereby expressly authorized to sell such Pledged Securities or
such part thereof by private sale in such manner and under such circumstances as
the Agent and the Secured Parties may reasonably determine in order that such
sale may be effected legally without such registration. The Agent and the
Secured Parties shall sell all or any part of the Pledged Securities at a price
which is commercially reasonable under the circumstances, in their sole and
absolute discretion.
(c) Subject to SECTION 20 and applicable law, the Agent as attorney-in-
fact pursuant to SECTION 8 may, in the name and stead of the Pledgor, make and
execute all conveyances, assignments and transfers of the Pledged Securities
sold in accordance with this Agreement. The Pledgor shall, if so requested by
the Agent, ratify and confirm any sale or sales by executing and delivering to
the Agent, or to such purchaser or purchasers, all such instruments as may, in
the judgment of the Agent, be advisable for such purpose.
(d) The receipt of the Agent of the purchase money paid at any such
sale made by it shall be a sufficient discharge therefor to any purchaser (other
than the Agent) of the Pledged Securities, or any portion thereof, sold as
aforesaid; and no such purchaser (or his or its representatives or assigns)
(other than the Agent), after paying such purchase money and receiving such
receipt, shall be bound to see to the application of such purchase money or any
part thereof or in any manner whatsoever be answerable for any loss,
misapplication or nonapplication of any such purchase money, or any part
thereof, or be bound to inquire as to the authorization, necessity, expediency
or regularity of any such sale.
(e) The Agent and the Secured Parties shall incur no liability as a
result of the sale of the Pledged Securities, or any part thereof; at any
private sale pursuant to SECTION 6. The Pledgor hereby waives any claims
against the Agent or any of the Secured Parties arising by reason of the fact
that the price at which the Pledged Securities may have been sold at such
private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Agent accepts the first offer received and does not offer the Pledged
Securities to more than one offeree, so long as the terms of the sale were
commercially reasonable.
SECTION 7. APPLICATION OF PROCEEDS.
The proceeds of any sale, or of collection, of all or any part of the
Pledged Securities shall be applied by the Agent, without any marshaling of
assets, in the following order:
(a) first, to the payment of all of the costs and expenses of such sale,
including, without limitation, reasonable legal fees, and all other expenses,
liabilities and advances incurred or made by the Agent or the Secured Parties in
connection therewith (including, without limitation, costs and expenses incurred
in connection with any bankruptcy, reorganization or insolvency proceeding);
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<PAGE>
(b) second, to the payment of the Obligations in such order as the Secured
Parties, in their sole discretion, shall determine, until payment in full
thereof; and
(c) finally, to the Pledgor, its successors and assigns, or to whomsoever
may be lawfully entitled to receive the same.
SECTION 8. THE AGENT APPOINTED ATTORNEY-IN-FACT.
Subject to SECTION 20 and applicable law, the Pledgor hereby appoints the
Agent as the Pledgor's lawful attorney, with full power of substitution, in the
name of the Pledgor, for the sole use and benefit of the Agent on behalf of the
Secured Parties, but at the Pledgor's expense to take any action and execute any
instruments which the Agent may deem necessary or advisable to accomplish the
purposes hereof during the existence of any Event of Default. Such appointment
as attorney is irrevocable and coupled with an interest.
SECTION 9. RECORD OWNERSHIP OF PLEDGED SECURITIES.
Upon the occurrence of an Event of Default that is continuing and subject
to SECTION 20 and the requirements of mandatory law, the Agent may cause, upon
receipt of written notification by the Pledgor, any or all of the Pledged
Securities to be transferred of record into the Agent's name. The Pledgor
shall, upon request, promptly give to the Agent copies of any notices or other
communications received by the Pledgor with respect to the Pledged Securities
registered in the name of Pledgor.
SECTION 10. PERFECTION.
PRIOR TO OR CONCURRENTLY WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT,
THE PLEDGOR SHALL (I) DELIVER THE CERTIFICATES REPRESENTING THE PLEDGED
SECURITIES, IF ANY, HEREUNDER TO THE AGENT, OR REGISTER THE SAME FOR PURPOSES OF
ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE; AND (II) EXECUTE SUCH FINANCING
STATEMENTS AND OTHER DOCUMENTS IN SUCH OFFICES AT THE AGENT MAY REASONABLY
REQUEST TO PERFECT THE SECURITY INTEREST GRANTED BY THE PLEDGOR PURSUANT TO
SECTION 1 OF THIS AGREEMENT AND WILL PERMIT THE SAME TO BE FILED BY THE AGENT.
SECTION 11. NO WAIVER.
No failure on the part of the Agent or the Secured Parties to exercise, and
no delay on the part of the Agent or the Secured Parties in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise by the Agent or the Secured Parties of any right,
power or remedy hereunder preclude any other or further right, power or remedy.
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<PAGE>
SECTION 12. SURVIVAL OF OBLIGATIONS; TERMINATION OF PLEDGE.
This Agreement and the warranties, representations, agreements and
covenants contained herein and in any certificates or instruments delivered
pursuant hereto shall survive the making of the Loans and the execution and
delivery of the Notes, regardless of any investigation made by the Agent or the
Secured Parties or any person on behalf of the Agent or the Secured Parties, and
shall continue for so long as any of the Obligations shall remain outstanding or
any of the Secured Parties shall have any obligation to advance funds to the
Borrower. Upon the repayment and performance in full of all the Obligations and
the expiration or termination of any obligations of the Secured Parties to
advance funds to the Borrower pursuant to the Credit Agreement, the Agent shall
forthwith assign, transfer and deliver to the Pledgor or its assignees, without
representation, warranty or recourse (except as to no prior transfer), against
appropriate receipts, all the Pledged Securities, if any, then held by it in
pledge hereunder and all duly executed instruments of transfer or assignments in
blank relating thereto and any other property held by the Agent pursuant to this
Agreement free and clear of the lien of this Agreement and the liens of the
other Loan Documents, except that such liens shall be reinstated with respect to
any payment made or received by the Secured Parties in respect of the
Obligations that is subsequently voided as a fraudulent conveyance, preference
or otherwise.
SECTION 13. CONSENT TO JURISDICTION.
THE PLEDGOR, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS
OBLIGATIONS ARISING HEREUNDER OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE,
INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH
COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE PLEDGOR
CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE PLEDGOR AT THE
ADDRESS PROVIDED HEREIN. TO THE EXTENT THE PLEDGOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PLEDGOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
-10 -
<PAGE>
SECTION 14. WAIVER OF JURY TRIAL.
THE PLEDGOR HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS
EXECUTED IN CONNECTION HEREWITH.
SECTION 15. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the Pledgor, the Agent and each of the Secured
Parties, and any subsequent holder of any of the Obligations.
SECTION 16. ADDITIONAL INSTRUMENTS AND ASSURANCE.
The Pledgor hereby agrees, at the Pledgor's own expense, (i) to execute and
deliver, from time to time, any and all further, or other, instruments, and to
perform such acts, as shall be reasonably required to effect the purposes of
this Agreement to secure to the Agent and the Secured Parties, and to all
persons who may from time to time be the holder of any of the Obligations in
accordance with the Credit Agreement, the benefits of all right, authorities and
remedies conferred upon Agent and the Secured Parties by the terms of this
Agreement, and (ii) to otherwise cooperate fully with the Agent and the Secured
Parties to obtain and enjoy their full rights and benefits under the Loan
Documents, including, without limitation, using its best efforts to assist the
Agent in obtaining the approval of the FCC or any state municipality or other
governmental authority for any action or transaction contemplated by any of the
Loan Documents which is then required under applicable law.
SECTION 17. NOTICES.
All notices, requests, demands and other communications provided for
hereunder shall be in writing (including telecopied communication) and mailed or
telecopied or delivered to the applicable party at the addresses indicated
below.
If to the Agent or the Secured Parties:
Fleet National Bank
One Federal Street
Mail Stop: MAOFD03D
Boston, Massachusetts 02110
Attention: Christopher A. Swindell
Telecopy No.: (617) 346-4345/6
-11 -
<PAGE>
with a copy (which shall not constitute notice) to:
Elizabeth H. Munnell, Esq.
Edwards & Angell
101 Federal Street
23rd Floor
Boston, Massachusetts 02110
Telecopy No: (6l7) 439-4170
If to the Pledgor:
Teletrac Holdings, Inc.
2323 Grand - Suite 1100
Kansas City, Missouri 64108-2670
Attention: Steve D. Scheiwe, Esq.
Telecopy: (816) 474-3475
with a copy (which shall not constitute notice) to:
Karen Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy No.: (212) 841-5725
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other parties complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communication shall be deemed given upon receipt by the party to whom such
notice is directed.
SECTION 18. SEVERABILITY.
In case any one or more of the provisions of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had not been included.
SECTION 19. CUMULATIVE REMEDIES.
The rights, powers and remedies provided herein in favor of the Agent and
the Secured Parties shall not be deemed exclusive, but shall be cumulative, and
shall be in addition to all other rights and remedies in favor of the Agent and
the Secured Parties existing at law or in equity, including (without limitation)
all of the rights, powers and remedies available to a secured party under any
law or regulation.
-12 -
<PAGE>
SECTION 20. FCC AND MUNICIPAL APPROVALS.
The Agent's and the Securities Parties' rights under this Agreement are
subject to all applicable rules and regulations of the Federal Communications
Commission ("FCC"). Notwithstanding anything to the contrary contained herein,
neither the Agent nor any of the Secured Parties will take any action pursuant
to this Agreement which would constitute or result in any assignment of any FCC
license or any other governmental license, permit or franchise, or any change of
control of the Pledgor or any FCC license or any other governmental license,
permit or franchise, whether DE FACTO or DE JURE, if such assignment of license,
permit or franchise or change of control would require the prior approval of the
FCC under the Communications Act of 1934, as amended (including the written
rules and regulations promulgated by the FCC). The Pledgor agrees to take any
action, at the Pledgor's sole cost and expense, which the Agent may request in
order to obtain and enjoy to the fullest possible extent the rights and benefits
granted to the Agent and the Secured Parties by this Agreement and the other
Loan Documents in connection herewith or in any document evidencing or securing
the Pledged Securities, including specifically, at the Pledgor's own cost and
expense, the use of its best efforts to assist in obtaining approval of the FCC
or any other agency or government for any action or transaction contemplated by,
and consistent with the terms of, this Agreement which is then required by law,
and specifically, without limitation, upon request to prepare, sign and file (or
cause to be filed) with the FCC or any other agency or government the assignor's
or transferor's portion of any application or applications for consent to the
assignment of any license or franchise or any change of control necessary or
appropriate under the FCC's or any agency or government's rules or regulations
for approval of (a) the assignment of any FCC License or transfer of control
thereof, (b) any sale or sales of property constituting the Pledged Securities
by any of the Secured Parties or the Agent on behalf of the Secured Parties, or
(c) any assumption by any of the Secured Parties or the Agent on behalf of the
Secured Parties of voting rights or management rights in property constituting
the Pledged Securities effected in accordance with the terms of this Agreement.
Furthermore, notwithstanding anything to the contrary contained in this
Agreement, the Agent and the Secured Parties agree that (aa) voting rights in
the Pledged Securities shall remain with the Pledgor even upon an Event of
Default unless all required prior approvals of the FCC to the transfer of such
voting rights shall have been obtained, (bb) upon an Event of Default, and only
if so permitted by this Agreement, the Agent or the Secured Parties may dispose
of the Pledged Securities, but only by private or public sale or other means
acceptable to the FCC, and (cc) prior to the exercise of stockholder rights by a
purchaser at such sale, all necessary FCC consents with respect to such sale
shall be timely obtained.
SECTION 21. GOVERNING LAW.
THIS AGREEMENT SHALL BE DEEMED EXECUTED AS A SEALED INSTRUMENT AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
AS A CONTRACT TO BE EXECUTED AND PERFORMED WITHIN THE STATE OF NEW YORK.
-13 -
<PAGE>
SECTION 22. HEADINGS.
The headings of the Sections of this Agreement have been inserted for
convenience of reference only and shall in no way affect the construction or
interpretation of this Agreement.
-14 -
<PAGE>
SECTION 23. PAYMENT OF EXPENSES.
In the event this Agreement shall be enforced by suit or otherwise, the
Pledgor will reimburse the Agent and the holder or holders of the Obligations,
upon demand, for all expenses incurred in connection therewith, including
without limitation, reasonable attorneys' fees (including, without limitation,
all such costs, charges and expenses incurred by the Agent or any of the Secured
Parties in connection with any Reorganization).
SECTION 24. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall
be an original and all of which shall constitute but one and the same Agreement.
SECTION 25. AGENT.
The parties hereto, and any Person not a party hereto for whose benefit the
Agent holds the Pledged Securities hereunder, acknowledge that the Agent has
been requested to act as agent for the Secured Parties hereunder pursuant to the
terms of the Credit Agreement, and that the Agent, to the extent it may so act
hereunder, shall exercise all of the rights and remedies hereunder on behalf of,
and as agent for the benefit of, the Secured Parties and each of them. Without
limiting the generality of the foregoing, the Agent is authorized to execute and
deliver, from time to time, on behalf of the Secured Parties, any and all
amendments and modifications to this Agreement and any and all waivers to any
conditions herein or any Event of Default hereunder.
SECTION 26. INCONSISTENCIES. Any inconsistencies between the provisions
of this Agreement and the Credit Agreement shall be governed by reference to the
provisions of the Credit Agreement.
-15 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the parties hereto by their duly authorized representatives all as of the day
and year first above written.
PLEDGOR:
TELETRAC HOLDINGS, INC.
By:__________________________
Alan Howe, Vice President of
Finance and Corporate Development
AGENT:
FLEET NATIONAL BANK
By:__________________________
Christopher A. Swindell,
Vice President
Media & Communications Group
<PAGE>
EXHIBIT A
PLEDGED SECURITIES
NAME AND ADDRESS
OF PLEDGOR NO. AND TYPE OF SHARES OWNED
Teletrac, Inc. 1,000 shares Common Stock,
2323 Grand Street, Suite 1100 par value $.01 of Teletrac
Kansas City, Missouri 64108 License, Inc.
<PAGE>
EXHIBIT 10.15
EQUITY HOLDER AGREEMENT
EQUITY HOLDER AGREEMENT dated as of September 18, 1997, between BANQUE
PARIBAS ("Paribas") and FLEET NATIONAL BANK ("Fleet" and together with Paribas,
the "Banks") and TELETRAC HOLDINGS, INC. (the "Company").
WHEREAS Teletrac, Inc. ("Teletrac"), a wholly-owned subsidiary of the
Company, has entered into a Credit Agreement dated as of the date hereof with
the Lenders named therein, Paribas as Administrative Agent and Fleet as
Documentation Agent; and
WHEREAS, as an inducement to the Banks to enter into the Credit
Agreement and to consummate the transactions contemplated thereby, the Company
has agreed to issue to the Banks warrants (the "Warrants") to purchase up to an
aggregate 11,414 shares of Class A Common Stock, $.01 par value, of the Company
(subject to adjustment as provided in the Warrants, collectively, the "Warrant
Shares"); and
WHEREAS the parties desire to provide for certain rights and
restrictions in respect of the Warrants and the Warrant Shares;
NOW THEREFORE, the parties hereby agree as follows:
1. JOINDER TO THE STOCKHOLDERS AGREEMENT; CERTAIN WAIVERS. (a)
Each of the Banks hereby agrees, effective as of the date hereof, to become a
party to that certain Stockholders Agreement (the "Stockholders Agreement")
dated as of December 6, 1997 by and among Teletrac and the parties named
therein, as amended and assigned to the Company effective July 31, 1997. For
all purposes of the Agreement, except as provided below, each of the Banks shall
be included within the term "Common Investor" and "Stockholder" (each as defined
in the Agreement). As of the date hereof, each of the Banks, as to itself,
severally and not jointly, makes each of the representations and warranties set
forth in Section 2.1 of the Stockholders Agreement.
(a) In addition, the Company and the Banks agree that each of the
Banks shall have the same rights with respect to the Warrant Shares as are
provided in Section 3.1(f) and Section 3.7 of the Stockholders Agreement to
Toronto Dominion Capital
<PAGE>
(U.S.A.), Inc., EOS Partners SBIC, L.P, and BancBoston Ventures, Inc. with
respect to shares of the Company's Common Stock as if each of the Banks were
also named in said Sections.
(b) Notwithstanding the foregoing (but without limitation of the
Banks' rights under Section 3 hereof), each of the Banks and the Company
understand and agree that the Banks hereby irrevocably waive all rights under
Articles IV and VI of the Stockholders Agreement, and that neither of the Banks
shall be considered a "Stockholder" for purposes of said Articles.
2. REGISTRATION RIGHTS. For purposes of this Section 2, the term
"Bank" shall mean and include any Bank and any subsequent holder of Warrants or
Warrant Shares that agrees in writing to bound by the provisions of this Section
2.
2.1 NOTICE OF REGISTRATION TO BANK. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans on Form S-8 (or any
successor form) or (ii) a registration relating solely to a Commission Rule 145
transaction on Form S-4 (or any successor form), the Company will:
(a) promptly give to each Bank written notice thereof; and
(b) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Warrant Shares specified in a written request or requests, made
within 15 days after receipt of such written notice from the Company described
in Section 2.1(a), by any Bank or Banks.
2.2 UNDERWRITING. (a) If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Banks as a part of the written notice given pursuant
to Section 2.1(a). In such event, the right of any Bank to registration
pursuant to this Section 2 shall be conditioned upon such Bank's participation
in such underwriting and the inclusion of such Bank's Warrant Shares in the
underwriting to the extent provided herein. All Banks proposing to distribute
their securities through such underwriting shall (together with the Company)
enter into an
<PAGE>
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company.
(b) Notwithstanding any other provision of this Section 2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may exclude some or all
Warrant Shares from such registration and underwriting. The Company shall so
advise all Banks requesting registration, and the number of shares of Common
Stock to be included in such registration shall be allocated as follows: first,
for the account of the Company, all shares of Common Stock proposed to be sold
by the Company; second, for the account of "Holders" as defined in the Amended
and Restated Registration Rights Agreement dated as of December 6, 1996, among
Teletrac and such Holders, as assigned to the Company effective July 31, 1997
and as amended from time to time (the "Registration Rights Agreement"), the
number of shares of Common Stock requested to be included in the registration by
such Holders as provided in the Registration Rights Agreement; and third, for
the account of the Banks, the number of Warrant Shares requested to be included
in the registration by such Banks in proportion, as nearly as practicable, to
the respective amounts of Warrant Shares that are proposed to be offered and
sold by such Banks at the time of filing the registration statement. No Warrant
Shares excluded from the underwriting by reason of the underwriters' marketing
limitation shall be included in such registration.
2.3 EXPENSES. All Registration Expenses incurred in connection with
any registration, qualification of compliance pursuant to this Section 2 shall
be borne by the Company. All Selling Expenses relating to Warrant Shares
registered by the Banks shall be borne by the Banks pro rata on the basis of the
number of Warrant Shares so registered. For purposes of this Section 2:
(a) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 2, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of legal counsel for the Company, fees and
disbursements for one legal counsel for the selling stockholders, blue sky
fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of
regular employees of
<PAGE>
the Company which shall be paid in any event by the Company); and
(b) "Selling Expenses" shall mean all underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to the Warrant
Shares registered by the Banks.
2.4 OTHER MATTERS RELATING TO REGISTRATION. The provisions of
Articles 6, 7, 8, 9, 10, 11 and 12 of the Registration Rights Agreement shall be
deemed, MUTATIS MUTANDIS, to apply to and govern all other rights and
obligations of the parties under this Section 2, with references therein to
"Holders" being deemed to be references to the Banks and references to
"Registrable Securities" being deemed to be references to the Warrant Shares;
PROVIDED, that the provisions of Article 8 shall apply to the Banks only with
respect to registrations in which (notwithstanding the provisions of Section 2.2
above) the Banks shall have been afforded the opportunity to include Warrant
Shares PRO RATA with the Holders, as if the Warrant Shares were included in the
definition of "Registrable Securities" and the Banks were included in the
definition of "Holders" for purposes of Section 4.2 of the Registration Rights
Agreement.
2.5 REGISTRATION RIGHTS AMENDMENT. The Company covenants to use
commercially diligent efforts to cause the Banks to be added as parties to the
Registration Rights Agreement in accordance with Article 13 thereof with respect
to the Warrant Shares (such that the Warrant Shares shall be included in the
definition of "Registrable Securities" and the Banks shall be included in the
definition of "Holders" for purposes thereof) on or prior to the earliest of (i)
the first anniversary of the date hereof, (ii) the consummation of the Equity
Round (as hereafter defined), if any, and (iii) the Company's entering into any
underwriting agreement with respect to the distribution of "Registrable
Securities" (within the meaning of the Registration Rights Agreement). Upon the
execution and delivery of such amendment by all necessary parties, the Banks and
the Company agree that this Section 2 will expire and terminate, and that all
matters relating to registration rights in the Warrant Shares will be governed
by the Registration Rights Agreement, as so amended.
3. COINVESTMENT. The Company agrees that, at the time of closing
of the Company's first sale of equity securities for cash to third party
investors following the date hereof (the
<PAGE>
"Equity Round"), the Banks shall have the right, at their option, to purchase in
the aggregate up to $5,000,000 of the equity securities sold in the Equity Round
(such aggregate $5,000,000 of equity securities to be allocated between the
Banks in a manner to be agreed between them). In connection with the foregoing,
the Company shall provide the Banks with reasonable prior notice of any
prospective Equity Round, together with a copy of the term sheet or draft
documentation prepared in connection therewith. Any purchase of equity
securities by the Banks as provided herein shall be on the same terms and
conditions as apply in the Equity Round to investors purchasing a similar amount
of securities. The option provided in this Section 3 (i) shall not be
exercisable unless and until there shall be a closing under the Equity Round,
the terms and conditions of which are acceptable to the Company in its sole
discretion, and (ii) shall expire upon the closing of the Equity Round, whether
or not the Banks fully exercise the option provided herein.
4. REPRESENTATIONS OF THE COMPANY. The Company hereby represents
and warrants to each of the Banks that the execution and delivery of, and
performance by the Company of its obligations under, this Agreement have been
duly authorized by all requisite corporate action and do not violate any
provision of law, any order, judgment or decree of any court or other agency of
government, the Certificate of Incorporation of By-Laws of the Company or any
indenture, agreement or other instrument to which the Company is a party or by
which it is bound, or conflict with, result in a breach of, or constitute (with
notice or lapse of time or both) a default under, any such agreement, indenture
or other instrument. This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (subject to bankruptcy, insolvency, moratorium, and other similar laws
from time to time in effect and to the discretion of the courts in granting
equitable remedies). The Company has the power and authority to afford the
Banks the rights set forth herein and such rights are enforceable by the Banks
in accordance with the terms hereof (subject to bankruptcy, insolvency,
moratorium, and other similar laws from time to time in effect and to the
discretion of courts in granting equitable remedies).
4.
5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed entirely within the state without giving
effect to any choice or
<PAGE>
conflicts of law principles that would cause the application of domestic
substantive laws of any other jurisdiction.
6. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto.
7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
full and entire understanding and agreement among the parties hereto with regard
to the subject matter hereof, and may only be amended by an instrument in
writing signed by the parties hereto.
8. NOTICES. Notices hereunder shall be given in the same manner
as provided in Section 14.03 of the Credit Agreement.
9. SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
10. TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Equity Holder
Agreement as of the day and year first above written.
TELETRAC HOLDINGS, INC.
By
-------------------------------
Alan Howe, Vice President of
Finance and Corporate Development
BANQUE PARIBAS
By
-------------------------------
Darlynn Ernst, Assistant Vice
President, Media-Entertainment
Finance Group
By
-------------------------------
Stanley P. Berkman
Managing Director, Western Region
FLEET NATIONAL BANK
By
------------------------------
Christopher A. Swindell, Vice President,
Media & Communications Group
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our firm included in or made a part of this
Registration Statement (File No. 333-35021) on Form S-4.
/s/ ARTHUR ANDERSEN LLP
Kansas City, Missouri,
October 13, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Teletrac Holdings,
Inc. on Form S-4 (File No. 333-35021) of our report dated February 3, 1995,
except for Note 11, as to which the date is September 8, 1995, on our audit of
the financial statements of AirTouch Teletrac General Partnership as of and for
the year ended December 31, 1994. We also consent to the reference to our firm
under the caption "Experts".
/s/ Coopers & Lybrand LLC
Newport Beach, California
October 13, 1997
<PAGE>
EXHIBIT 25
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
_____________________________
TELETRAC, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 48-1172403
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2323 GRANT STREET, SUITE 1100
KANSAS CITY, MO. 64108
(Address of principal executive offices) (Zip code)
_____________________________
14% SENIOR NOTES DUE 2007
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this
Statement of Eligibility.
Norwest Bank incorporates by reference into this
Form T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of
Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National
Bank of Minneapolis to Norwest Bank Minneapolis,
National Association.*
e. A copy of the letter dated January 4, 1988 from
the Administrator of National Banks for the
Comptroller of the Currency certifying approval of
consolidation and merger effective January 1, 1988
of Norwest Bank Minneapolis, National Association
with various other banks under the title of
"Norwest Bank Minnesota, National Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section
321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with registration
statement number 333-25301.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 1st day of October, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Raymond S. Haverstock
-----------------------------
Raymond S. Haverstock
Vice President
<PAGE>
EXHIBIT 6
October 1, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Raymond s. Haverstock
---------------------------
Raymond S Haverstock
Vice President
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
14% SENIOR NOTES DUE 2007
OF
TELETRAC, INC.
CUSIP NO. 87951CAA7
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997 (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
THE EXCHANGE AGENT IS:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
BY HAND: BY FACSIMILE:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated 1997 (the
"Prospectus"), of Teletrac, Inc., a Delaware corporation (the "Company"), and
this Letter of Transmittal (the "Letter of Transmittal"), which together with
the Prospectus constitutes the Company's offer (the "Exchange Offer") to
exchange $1,000 principal amount of its 14% Senior Notes due 2007
<PAGE>
(the "Exchange Notes") for each $1,000 principal amount of its outstanding 14%
Senior Notes due 2007 (the "Private Notes"). Recipients of the Prospectus
should read the requirements described in such Prospectus with respect to
eligibility to participate in the Exchange Offer. Capitalized terms used but
not defined herein have the meaning given to them in the Prospectus.
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Private Notes and the undersigned
represents that it has received from each beneficial owner of Private Notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder from Beneficiary Owner" accompanying this Letter of
Transmittal, instructing the undersigned to take the action described in this
Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Private Notes (i)
if certificates representing Private Notes are to be forwarded herewith, (ii) if
delivery of Private Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer -- Procedures for Tendering," or (iii) if a tender is made pursuant to the
guaranteed delivery procedures in the section of the Prospectus entitled "The
Exchange Offer -- Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the information
received from the beneficial owners is accurately reflected in the boxes
entitled "Beneficial Owner(s) -- Purchaser Status" and "Beneficial Owner(s)
Residence."
Any beneficial owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Private Notes promptly and
instruct such registered holder of Private Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a holder of
Private Notes must (i) complete the box entitled "Description of Private Notes,"
(ii) complete the boxes entitled
2
<PAGE>
"Beneficial owner(s) -- Purchaser Status" and "Beneficial Owner(s) --
Residence," (iii) if appropriate, check and complete the boxes relating to
book-entry transfer, guaranteed delivery, Special Issuance Instructions and
Special Delivery Instructions, (iv) sign the Letter of Transmittal by completing
the box entitled "Sign Here" and (v) complete the Substitute Form W-9. Each
holder of Private Notes should carefully read the detailed instructions below
prior to completing the Letter of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available or (ii) who
cannot deliver their Private Notes, this Letter of Transmittal and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date, must tender the Private Notes pursuant to the guaranteed delivery
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes for
exchange must complete columns (1) through (3) in the box below entitled
"Description of Private Notes," complete the boxes entitled and sign the box
below entitled "Sign Here." If only those columns are completed, such holder of
Private Notes will have tendered for exchange all Private Notes listed in column
(3) below. If the holder of Private Notes wishes to tender for exchange less
than all of such Private Notes, column (4) must be completed in full. In such
case, such holder of Private Notes should refer to Instruction 5.
DESCRIPTION OF PRIVATE NOTES
- -------------------------------------------------------------------------
(1) (2) (3) (4)
PRINCIPAL
AMOUNT
NAME(S) AND ADDRESS(ES) TENDERED
OF REGISTERED HOLDER(S) PRIVATE FOR
OF PRIVATE NOTE(S), NOTE AGGREGATE EXCHANGE
EXACTLY AS NAME(S) NUMBER(S) PRINCIPAL (MUST
APPEAR(S) ON PRIVATE (ATTACH AMOUNT BE IN
NOTE CERTIFICATE(S) SIGNED LIST REPRESENTED INTEGRAL
(PLEASE FILL IN, IF BY CERTIFI- MULTIPLES
IF BLANK) NECESSARY) CATE(S)(1) OF $1,000)(2)
- -------------------------------------------------------------------------
------------------------------
3
<PAGE>
------------------------------
------------------------------
------------------------------
TOTAL PRINCIPAL
AMOUNT OF
NOTES TENDERED:
- --------------------------------------------------------------------------------
1. Unless indicated in the column "Principal Amount Tendered For Exchange,"
any tendering Holder of 14% Senior Notes due 2007 will be deemed to have
tendered the entire aggregate principal amount represented by the column
labelled "Aggregate Principal Amount Represented by Certificate(s)."
2. The minimum permitted tender is $1,000 in principal amount of 14% Senior
Notes due 2007. All other tenders must be in integral multiples of $1,000.
- --------------------------------------------------------------------------------
{ } CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
{ } CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution:
Account Number:
Transaction Code Number:
{ } CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s):
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if available):
Name of Institution which Guaranteed Delivery:
Account Number (if delivered by book-entry transfer):
4
<PAGE>
{ } CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the Exchange Notes issued in exchange for
Private Notes, certificates for Private Notes in a principal amount not
exchanged for Exchange Notes, or Private Notes (if any) not tendered for
exchange, are to be issued in the name of someone other than the undersigned or
(ii) if Private Notes tendered by book-entry transfer which are not exchanged
are to be returned by credit to an account maintained at DTC.
Issue to:
Name
(PLEASE TYPE OR PRINT)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
Credit Private Notes not exchanged and delivered by book-entry transfer to
DTC account set forth below:
- --------------------------------------------------------------------------------
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the Exchange Notes issued in exchange for Private
Notes, certificates for Private Notes in a principal amount not exchanged for
Exchange Notes, or Private Notes (if any) not tendered for exchange, are to be
mailed or delivered (i) to someone other than the undersigned or (ii) to the
undersigned at an address other than the address shown below the undersigned's
signature.
5
<PAGE>
Mail or deliver to:
Name
(PLEASE TYPE OR PRINT)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
BENEFICIAL OWNER(S) -- RESIDENCE
- --------------------------------------------------------------------------------
STATE OF DOMICILE/PRINCIPAL PLACE OF PRINCIPAL AMOUNT OF PRIVATE
BUSINESS OF EACH BENEFICIAL OWNER NOTES HELD FOR ACCOUNT OF
OF PRIVATE NOTES BENEFICIAL OWNER(S)
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S) -- PURCHASER STATUS
- --------------------------------------------------------------------------------
The beneficial owner of each of the Private Notes described herein is
(check the box that applies):
{ } A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
{ } An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act)
{ } A non "U.S. person" (as defined in Regulation S of the Securities Act) that
purchased the Private Notes outside the
6
<PAGE>
United States in accordance with Rule 904 of the Securities Act
{ } Other (describe)
- --------------------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by Teletrac, Inc., a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated 1997 (the "Prospectus") and this Letter of Transmittal (the
"Letter of Transmittal"), which together with the Prospectus constitutes the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 14% Senior Notes due 2007 (the "Exchange Notes") for each $1,000 principal
amount of its outstanding 14% Senior Notes due 2007 (the "Private Notes"), the
undersigned hereby tenders to the Company for exchange the Private Notes
indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Private Notes tendered for exchange herewith, the
undersigned will have irrevocably sold, assigned, transferred an exchanged, to
the Company, all right, title and interest in, to and under all of the Private
Notes tendered for exchange hereby, and hereby will have appointed the Exchange
Agent as the true and lawful agent and attorney-in-fact (with full knowledge
that the Exchange Agent also acts as agent of the Company) of such holder of
Private Notes with respect to such Private Notes, with full power of
substitution to (i) deliver certificates representing such Private Notes, or
transfer ownership of such Private Notes on the account books maintained by DTC
(together, in any such case, with all accompanying evidences of transfer and
authenticity), to the Company, (ii) present and deliver such Private Notes for
transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights and incidents of beneficial ownership with respect
to such Private Notes, in accordance with the terms of the Exchange offer. The
power of attorney granted in this paragraph shall be deemed to be irrevocable
and complete with an interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner; (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act as amended ("Rule 14e-4") equal to or greater than
the principal amount of Private Notes tendered hereby; (iii) the tender of such
Private Notes complies with Rule 14e-4 (to the extent that Rule
7
<PAGE>
14e-4 is applicable to such exchange); (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Private Notes and (v)
that when such Private Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Private Notes
tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the Company that
(i) the Exchange Notes to be acquired by the undersigned in exchange for the
Private Notes tendered hereby and any beneficial owner(s) of such Private Notes
in connection with the Exchange Offer will be acquired by the undersigned and
such beneficial owner(s) in the ordinary course of business of the undersigned,
(ii) the undersigned have no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iii) the undersigned and
each beneficial owner acknowledge and agree that any person who is a
broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the undersigned and each beneficial
owner understand that a secondary resale transaction described in clause (iii)
above and any resales of Exchange Notes obtained by the undersigned in exchange
for the Private Notes acquired by the undersigned directly from the Company
should be covered by an effective registration statement Containing the selling
securityholder information, required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (vi) neither the undersigned nor any
beneficial owner is an "affiliate," as defined under Rule 405 under the
Securities Act, of the Company. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Private Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Company gives oral or written notice thereof to the Exchange
Agent. Tenders of
8
<PAGE>
Private Notes for exchange may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The Exchange Offer -- Withdrawal
- -- of Tenders" in the Prospectus. Any Private Notes tendered by the undersigned
and not accepted for exchange will be returned to the undersigned at the address
set forth above unless otherwise indicated in the box above entitled "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
The undersigned acknowledges that the Company's acceptance of Private Notes
validly tendered for exchange pursuant to any one of the procedures described in
the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not entered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Private Notes from the name of the holder of Private Note(s) thereof if the
Company does not accept for exchange any of the Private Notes so tendered for
exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Private Note(s).
IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE
NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death, incapacity, or dissolution of
the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Private Notes is irrevocable.
9
<PAGE>
- --------------------------------------------------------------------------------
TENDERING HOLDERS SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated: _____________, 1997
Must be signed by the registered holder(s) of Private Notes exactly as name(s)
appear(s) on certificates) representing the Private Notes or on a security
position listing or by person(s) authorized to become registered Private Note
holder(s) by certificates and documents transmitted herewith. If signature is
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
please provide the following information. (See Instruction 6).
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Principal place of business (if different from address listed above):
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.: (____) _____________________________
Tax Identification or Social Security Nos.:
- --------------------------------------------------------------------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9
GUARANTEE OF SIGNATURE(S)
10
<PAGE>
(Signature(s) must be guaranteed if required by instruction 1)
Authorized Signature:
------------------------------------------
Dated:
---------------------------------------------------------
Name and Title:
------------------------------------------------
(PLEASE PRINT)
Name and Title:
------------------------------------------------
11
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the United States, or (3) an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Private Notes
tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Private Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders
of Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered Private
Notes or any timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and an other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date. Holders of Private Notes who elect
to tender Private Notes and (i) whose Private Notes are not immediately
available or (ii) who cannot deliver the Private Notes, this Letter of
Transmittal or other required documents to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date, must tender
12
<PAGE>
their Private Notes according to the guaranteed delivery of procedures set forth
in the Prospectus. Holders may have such tender elected if: (a) such tender is
made through an Eligible Institution; (b) prior to 5:00 p.m., New York City
time, on the Expiration Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, setting forth the name and address of the holder of such Private
Notes, the certificate numbers(s) of such Private Notes and the principal amount
of Private Notes tendered for exchange, stating that tender is being made
thereby and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, this Letter of Transmittal (or a facsimile thereof,
together with the certificates) representing such Private Notes (or a Book-Entry
Confirmation), in proper form for transfer, and any other documents required by
this Letter of Transmittal, will be deposited by such Eligible Institution with
the Exchange Agent; and (c) a properly executed Letter of Transmittal (or a
facsimile hereof), as well as the certificates) for all tendered Private Notes
in proper form for transfer or a Book-Entry Confirmation, together with any
other documents required by this Letter of Transmittal, are received by the
Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Private Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Private Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Private Notes" above is inadequate, the certificate numbers and
principal amounts of the Private Notes being tendered should be listed on a
separate signed schedule affixed hereto.
13
<PAGE>
4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a notice
of withdrawal of Private Notes must (i) specify the name of the person who
tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the
Private Notes to be withdrawn (including the certificate number or numbers and
aggregate principal amount of such Private Notes), and (iii) be signed by the
holder of Private Notes in the same manner as the original signature on the
Letter of Transmittal by which such Private Notes were tendered (including any
required signature Guarantees). All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Private Notes so withdrawn will thereafter be
deemed not validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Private Notes so withdrawn
are validly retendered. Properly withdrawn Private Notes may be retendered by
following one of the procedures described in the section of the Prospectus
entitled "The Exchange Offer -- Procedures for Tendering" at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of an Private
Notes, fill in the principal amount of Private Notes which are tendered for
exchange in column (4) of the box entitled "Description of Private Notes," as
more fully described in the footnotes thereto. In case of a partial tender for
exchange, a new certificate, in fully registered form, for the remainder of the
principal amount of the Private Notes, will be sent to the holders of Private
Notes unless otherwise indicated in the appropriate box on this Letter of
Transmittal as promptly as practicable after the expiration or termination of
the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, ASSIGNMENT AND ENDORSEMENTS.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alteration, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
14
<PAGE>
(c) if any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Private
Notes listed and transmitted hereby, no endorsements of Private Notes or bond
powers are required. If, however, Private Notes not tendered or not accepted
are to be issued or returned in the name of a person other than the holder of
Private Notes, then the Private Notes transmitted hereby must be endorsed or
accompanied by a properly completed bond power, in a form satisfactory to the
Company, in either case signed exactly as the name(s) of the holder of Private
Notes appear(s) on the Private Notes. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
(e) If this Letter of Transmittal or Private Notes or bond powers are
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 unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Private Notes listed, the Private Notes must be endorsed or
accompanied by a properly completed bond power, in either case signed by such
registered holder exactly as the name(s) of the registered holder of Private
Notes appear(s) on the certificates. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the
Company will pay all transfer taxes, if any, applicable to the exchange of
Private Notes pursuant to the Exchange offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemptions
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are
to be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address other
than that
15
<PAGE>
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Holders of Private Notes tendering Private Notes by book-entry
transfer may request that Private Notes not accepted be credited to such account
maintained at DTC as such holder of Private Notes may designate.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Private Notes will be determined by the Company in its
sole discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Private Notes not properly
tendered or any Private Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Private Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
amend or modify certain of the specified conditions as described under "The
Exchange Offer -- Conditions" in the Prospectus in the case of any Private Notes
tendered (except as otherwise provided in the Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering
Holder whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further instructions:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-0113
(612) 667-4927
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for
information or for additional copies of the Prospectus
16
<PAGE>
and this Letter of Transmittal may be directed to the Exchange Agent at the
address or telephone number set forth on the cover of this Letter of
Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private Notes
is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Private Notes that he or
she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Private Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Private Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Private Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Private Notes should indicate their
exempt status on Substitute Form W-9. A foreign individual may qualify as an
exempt recipient by submitting to the Exchange Agent a properly completed
Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon
request) signed under penalty of perjury, attesting to the holder's exempt
status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold 31% of
amy payment made to the holder of Private Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
17
<PAGE>
The holder of Private Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Private Notes. If the Private Notes are held in more than one name
or are not held in the name of the actual owner, consult the enclosed Guidelines
for additional guidance regarding which number to report.
18
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF 14 SENIOR NOTES DUE 2007 OF TELETRAC, INC.
The undersigned hereby acknowledges receipt of the Prospectus dated
_____________________, 1997 (the "Prospectus") of Teletrac, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 14% Senior Notes due
2007 (the "Private Notes") held by you for the account of the undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$______________ of the Private Notes.
With respect to the Exchange offer, the undersigned hereby instructs you
(check appropriate box):
{ } To TENDER the following Private Notes held by you for the account of
the undersigned (insert principal amount of Private Notes to be tendered, if
any):
$______________ of the Private Notes.
{ } NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) (ii) the undersigned is
acquiring the Exchange Notes in the ordinary course of business of the
undersigned, (iii) the undersigned has no arrangement or understanding with any
person to participate in the distribution of Exchange Notes, (iv) the
undersigned acknowledges that any person who is a broker-dealer registered under
the Exchange Act or is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act of
19
<PAGE>
1933, as amended, in connection with a secondary resale transaction of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission set forth in certain no-action
letters (See the section of the Prospectus entitled "The Exchange Offer --
Resale of the Exchange Notes"), (v) the undersigned understands that a secondary
resale transaction described in clause (iv) above and any resales of Exchange
Notes obtained be the undersigned in exchange for the Private Notes acquired by
the undersigned directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, if applicable, of Regulation S-K of the
Commission, (vi) the undersigned is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Company, and (vii) if the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Private Notes that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act; (b) to agree, on behalf
of the undersigned, as set forth in the Letter of Transmittal; and (c) to take
such other action as necessary under the Prospectus or the Letter of Transmittal
to effect the valid tender of Private Notes.
The purchaser status of the undersigned is (check the box that applies):
{ } A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
{ } An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act)
{ } A non "U.S. person" (as defined in Regulation S of the Securities Act) that
purchased the Private Notes outside the United States in accordance with
Rule 904 of the Securities Act
{ } Other (describe)
SIGN HERE
Name of Beneficial Owner(s):
Signature (s):
Name(s) (please print):
20
<PAGE>
Address:
Principal place of business (if different from address listed above):
Telephone Number(s):
Taxpayer Identification or Social Security Number(s):
Date:
21
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PAYER'S NAME:
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE
Social Security Number
FORM W-9
PART I - PLEASE PROVIDE YOUR ----------------------
DEPARTMENT OF THE TREASURY TIN IN THE BOX AT RIGHT AND OR
INTERNAL REVENUE SERVICE CERTIFY BY SIGNING AND DAT-
ING BELOW. Employer Identification Number
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) ----------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
PART II -- CERTIFICATIONS -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my current taxpayer identification number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTION -- You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified y the IRS that you are subject to backup withholding you receive
another notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
PART III -- Awaiting TIN { }
- --------------------------------------------------------------------------------
22
<PAGE>
Name____________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
_________________________________________________________________________
(Including Zip Code)
Signature______________________________________________ Date ___________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW
THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-91" FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
23
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do
not provide a Taxpayer Identification Number with sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide such
a number.
SIGNATURE____________________________________________ DATE ____________________
24
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
14% SENIOR NOTES DUE 2007
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY HOLDER OF
14% SENIOR NOTES DUE 2007 (THE "PRIVATE NOTES") OF TELETRAC, INC., A DELAWARE
CORPORATION (THE "COMPANY"), WHO WISHES TO TENDER PRIVATE NOTES PURSUANT TO THE
COMPANY'S EXCHANGE OFFER, AS DEFINED IN THE PROSPECTUS DATED , 1997
(THE "PROSPECTUS") AND (I) WHOSE PRIVATE NOTES ARE NOT IMMEDIATELY AVAILABLE OR
(II) WHO CANNOT DELIVER SUCH PRIVATE NOTES OR ANY OTHER DOCUMENTS REQUIRED BY
THE LETTER OF TRANSMITTAL ON OR BEFORE THE EXPIRATION DATE (AS DEFINED IN THE
PROSPECTUS) OR (III) WHO CANNOT COMPLY WITH THE BOOK-ENTRY TRANSFER PROCEDURE ON
A TIMELY BASIS. SUCH FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR
HAND DELIVERY TO THE EXCHANGE AGENT. SEE "THE EXCHANGE OFFER -- GUARANTEED
DELIVERY PROCEDURES" IN THE PROSPECTUS.
TELETRAC, INC.
NOTICE OF GUARANTEED DELIVERY
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
BY HAND: BY FACSIMILE:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Private Notes specified below pursuant to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer -- Guaranteed Delivery Procedures"
in the Prospectus. By so tendering, the undersigned does hereby make, at and as
of the date hereof, the representations and warranties of a tendering Holder of
Private Notes set forth in the Letter or Transmittal. The undersigned hereby
tenders the Private Notes listed below:
- --------------------------------------------------------------------------------
CERTIFICATE NUMBERS
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
If Private Notes will be tendered by SIGN HERE
book-entry transfer:
-----------------------------------
Name of Tendering Institution: (SIGNATURE(S)
- ------------------------------------ -----------------------------------
-----------------------------------
The Depository Trust Company NAME(S) (PLEASE PRINT)
Account No.:
-----------------------------------
- ----------------------------------
-----------------------------------
ADDRESS
-----------------------------------
ZIP CODE
-----------------------------------
AREA CODE AND TELEPHONE NO.
DATE:
-----------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Private Notes tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer
of such Private Notes into the Exchange Agent's account at the Depository Trust
Company, pursuant to the procedure for book-entry transfer set forth in the
Prospectus, and any other required documents, all by 5:00 p.m., New York City
time, on the fifth New York Stock Exchange trading day following the Expiration
Date (as defined in the Prospectus).
SIGN HERE
-----------------------------------
NAME OF FIRM
-----------------------------------
AUTHORIZED SIGNATURE
-----------------------------------
NAME (PLEASE PRINT)
-----------------------------------
ADDRESS
-----------------------------------
ZIP CODE
-----------------------------------
AREA CODE AND TELEPHONE NO.
DATE:
-----------------------------
2
<PAGE>
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL
SURRENDER OF CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service, properly insured. If such delivery is by mail, it is
recommended that the Holder use properly insured, registered mail with return
receipt requested. For a full description of the guaranteed delivery
procedures, see the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures." In all cases, sufficient time should be
allowed to assure timely delivery. No Notice of Guaranteed Delivery should be
sent to the Company.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
Holder(s) of the Private Notes referred to herein , then the signature must
correspond with the name(s) as written on the face of the Private Notes without
alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered Holder(s) of any Private Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered Holder(s) appear(s) on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and, unless waived by the Company, evidence satisfactory
to the Company of their authority so to act must be submitted with this Notice
of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the Letter
of Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
3
<PAGE>
EXHIBIT 99.3
EXCHANGE AGENT AGREEMENT
Dated as of October , 1994
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Ladies and Gentlemen:
Pursuant to the provisions of the offer (the "Exchange Offer") for
all outstanding 14% Senior Notes Due 2007 (the "Old Notes") in exchange for
new 14% Senior Notes Due 2007 (the "New Notes"), pursuant to a Prospectus
dated , 1997 of Teletrac, Inc. (the "Company"), all of the
Company's issued and outstanding Old Notes accepted for tender of exchange
(the "Exchange") prior to 5:00 p.m. New York time on , 1997,
for the Company's New Notes will be exchanged pursuant to the terms and
conditions of the Exchange Offer. The term "Expiration Date" shall have the
meaning set forth in the Prospectus. Upon receipt and execution of this
letter and confirmation of the arrangements herein set forth, Norwest Bank
Minnesota, National Association agrees to act as the Exchange Agent for the
Exchange (the "Exchange Agent"). References hereinafter to "you" shall refer
to Norwest Bank Minnesota, National Association. A copy of the Prospectus is
attached hereto as Exhibit A.
A copy of the form of the letter of transmittal (the "Letter of
Transmittal") to be used by the holders of the Old Notes (the "Holders") to
surrender their Old Notes in order to receive the New Notes pursuant to the
Exchange is attached hereto as Exhibit B.
The Company hereby appoints you to act as Exchange Agent in
connection with the Exchange. In carrying out your duties as Exchange Agent,
you are to act in accordance with the following:
1. You are to examine the Letters of Transmittal and the Old Notes
and other documents delivered or mailed to you, by or for the Holders, prior
to the Expiration Date, to ascertain whether (i) the Letters of Transmittal
are properly executed and completed in accordance with the instructions set
forth therein, (ii) the Old Notes are in proper form for transfer, and (iii)
all other documents submitted to you are in proper form. In each case where
a Letter of Transmittal or other document has been
<PAGE>
improperly executed or completed or, for any other reason, is not in proper
form, or some other irregularity exists, you are, if the time so permits,
authorized to endeavor to take such action as you consider best suited to
notify the tenderer of such irregularity and as to the appropriate means of
revolving the same. Determination of questions as to the proper completion
or execution of the Letters of Transmittal, or as to the proper form for
transfer of the Old Notes or as to any other irregularity in connection with
the submission of Letters of Transmittal and/or Old Notes in connection with
the Exchange, shall be made by representatives of the Company at their
written instructions, or oral direction confirmed by facsimile. Any
determination made by the Company on such questions shall be final and
binding.
2. Tender of the Old Notes may be made only as set forth in the
Letter of Transmittal. Notwithstanding the foregoing, tenders which the
Company shall approve in writing as having been properly tendered shall be
considered to be properly tendered. Letters of Transmittal shall be recorded
by you as to the date and time of receipt and shall be preserved and retained
by you. New Notes are to be issued in exchange for Old Notes pursuant to the
Exchange only against deposit with you of Old Notes, together with executed
Letters of Transmittal and any other documents required by the Exchange Offer
on each business day from the execution hereof up to the Expiration Date.
3. Upon the oral or written request of the Company (with written
confirmation of such oral request thereafter), you will transmit by
telephone, and promptly thereafter confirm in writing to James A. Queen,
Steven D. Scheiwe or Alan B. Howe (telephone 816-474-0055) or such other
persons as the Company may reasonably request with a copy to Karen C.
Wiedemann, Esq. (telephone 212-841-5781), the aggregate number of Old Notes
tendered to you and the number of Old Notes properly tendered on any
particular day. In addition, you will also inform the aforementioned person
or persons, upon oral request made from time to time (with written
confirmation of such request thereafter) prior to the Expiration Date, of
such information as they or any of them may reasonably request.
4. Upon the terms and subject to the conditions of the Exchange
Offer, delivery of New Notes to be issued in exchange for accepted Old Notes
will be made by you promptly after acceptance of tendered Old Notes.
5. If any Holder shall report to you that his/her failure to
surrender Old Notes registered in his/her name is due to the loss,
misplacement or destruction of a certificate or certificates, you shall
request such Holder (i) to furnish to the Exchange Agent an affidavit of loss
and, if required by the Company, a corporate bond or indemnity in an amount
and evidenced by such certificate or certificates of a surety, as may be
<PAGE>
satisfactory to the Company, and (ii) to execute and deliver an agreement to
indemnify the Company in such form as is acceptable to the Company. The
obligees to be named in each such indemnity bond shall include the Company
and you. You shall report in writing to the Company the names of all Holders
who claim that their Old Notes have been lost, misplaced or destroyed and the
principal amount of such Old Notes.
6. As soon as practicable after you mail or deliver to a Holder
the New Notes that such Holder may be entitled to receive, you shall forward
the Old Notes submitted to you to Norwest Bank Minnesota, National
Association, as trustee (the "Trustee") under the Indenture dated as of
August 6, 1997 governing the Old Notes and the New Notes, for cancellation
and retirement as are instructed by the Company (or a representative
designated by the Company).
7. For your services as the Exchange Agent hereunder, the Company
shall pay you in accordance with the schedule of fees attached hereto as
Exhibit C. The Company will also reimburse you for your reasonable
out-of-pocket expenses (including reasonable counsel's fees) in connection
with your services promptly after submission to the Company or itemized
statements.
8. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or in the Exhibits attached hereto or as
may subsequently be requested in writing of you by the Company and
agreed to by you with respect to the Exchange;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness
of any of the Company's Holder record information, any Old Notes
deposited with you hereunder or any New Notes, and will not be required
to and will make no representations as to the validity, value or
genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your judgement involve any expenses or liability unless
you shall have been furnished with an indemnity reasonably satisfactory
to you;
(d) may rely on and shall be fully protected and indemnified as
provided in paragraph 9 hereof in acting in reliance upon any
certificate, instrument, opinion, notice, letter, telegram or other
document or security delivered to you and reasonably believed by you
to be genuine and to have been signed by the proper party or parties;
3
<PAGE>
(e) may rely on and shall be fully protected and indemnified as
provided in paragraph 9 hereof in acting upon the written or oral
instructions with respect to any matter relating to your acting as
Exchange Agent specifically covered by this Agreement or supplementing
or qualifying any such action of such officer or agent or such other
person or persons as may be designated or whom you reasonably believe
have been designated by the Company;
(f) may consult with counsel satisfactory to you, including
counsel for the Company, and the opinion of such counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by you hereunder in good faith and in
accordance with the opinion of such counsel; and
(g) shall not at any time advise any person as to the wisdom of
the Exchange or as to the market value or decline or appreciation in
market value of any Old Notes or New Notes.
9. The Company covenants and agrees to indemnify you and hold you
harmless against any loss, claim, damage, liability or expense (including
reasonable legal and other fees and expenses) incurred in connection with
your entering into this Agreement and the performance of your duties
hereunder; PROVIDED, HOWEVER, that you shall not be indemnified against any
such loss, liability or expense arising out of your negligence, misconduct or
bad faith. You agree to notify the Company by letter, or by cable or telex
confirmed by letter, or the written assertion of a claim against you, or of
any action commenced against you in connection with this Agreement, promptly
after you shall have received any such written assertion of a claim or shall
have been served with a summons, or other legal process, giving information
as to the nature and basis of the claim, but failure so to notify the Company
shall not relieve the Company of any liability which it may otherwise have,
except to the extent that the Company is materially adversely affected
thereby. You shall engage your own counsel to defend any such claim, who
shall be reasonably satisfactory to the Company, at the expense of the
Company except as provided below. The Company shall be entitled to
participate at its own expense in the defense against any such claim or legal
action and, if the Company so elects at any time after receipt of such
notice, or you so direct in such notice, the Company shall assume the defense
of any suit brought to enforce any such claim. In the event the Company
assumes the defense, you shall be liable for any fees and expenses thereafter
incurred by your counsel. The Company's obligations under this paragraph 9
shall survive the termination of this Agreement and the discharge of your
obligations hereunder and any other termination of this Agreement under any
federal or state bankruptcy law.
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10. This Agreement and your appointment as the Exchange Agent
shall be construed and enforced in accordance with the laws of the State of
New York and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of the parties
hereto. This Agreement may not be modified, amended or supplemented without
an express written agreement executed by the parties hereto. Any
inconsistency between this Agreement and the Letter of Transmittal, as they
may from time to time be supplemented or amended, shall be resolved in favor
of the latter, except with respect to the duties, liabilities and
indemnification of you as Exchange Agent.
11. The relationship between you and the Company described in this
Agreement is that of agent and principal and nothing herein shall be deemed
to constitute you a trustee for or cause you to owe any fiduciary duty to the
Holders or to impose any obligation on you other than as stated herein.
12. Unless otherwise provided herein, all notices, requests and
other communications hereunder shall be in writing (including telecopy or
similar writing) and shall be given to such party, addressed to it at its
address and telecopy number set forth below:
If to the Company: Teletrac, Inc.
2424 Grand Street, Suite 1100
Kansas City, Missouri 64108
Facsimile: (816) 474-3485
Attn: Chief Financial Officer
If to the Exchange Agent: Norwest Bank Minnesota,
National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Facsimile: (612) 667-9825
Attn: Ms. Jane Schweiger
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This Agreement shall be binding and effective as of the date
hereof. Please acknowledge receipt of this letter and confirm the
arrangements herein provided by signing and returning the enclosed copy.
Very truly yours,
TELETRAC, INC.
By:_____________________________
Name:
Title:
Accepted and agreed to as of
the date first above written
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Exchange Agent
By:_____________________________
Name:
Title:
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