<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TELETRAC HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 43-1789886
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
</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 on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
If this Form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SECURITY(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Warrants to Purchase Shares of
Class A Common Stock.......... 105,000 $67.05 $3,784,665 $1,146.87
Class A Common Stock.......... 56,437 (2) -- -- No separate fee
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Shares of Common Stock issuable upon exercise of outstanding Warrants.
Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
Registration Statement also relates to such additional indeterminate number
of shares of Common Stock as may be issued pursuant the antidilution
provisions of the Warrants.
------------------------
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.
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- --------------------------------------------------------------------------------
<PAGE>
TELETRAC HOLDINGS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT CAPTION OR LOCATION
ITEM AND CAPTION IN PROSPECTUS
- -------------------------------------------------------------------- ------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus............................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................. Inside Front and Outside Back Pages
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges....................................... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds.......................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.......................... Outside Front Cover Page; Underwriting
6. Dilution................................................. Dilution
7. Selling Security Holders................................. Not Applicable
8. Plan of Distribution..................................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered............... Description of Capital Stock
10. Interests of Named Experts and Counsel................... Legal Matters; Experts
11. Information with Respect to the Registrant
(a) Description of Business.......................... Prospectus Summary; The Company; Management's
Discussion and Analysis of Results of Operation
and Financial Condition; Business
(b) Description of Property.......................... Business
(c) Legal Proceedings................................ Business
(d) Market Price of and Dividends on Registrant's
Common Equity and Related Stockholder Matters...... Outside Front Cover Page; Dividend Policy;
Capitalization; Description of Capital Stock
(e) Financial Statements Consolidated Financial Statements
(f) Selected Financial Data Selected Consolidated Financial Data
(g) Supplementary Financial Information Supplementary Financial Information
(h) Management's Discussion and Analysis of Financial
Condition and Results of Operations................ Management's Discussion and Analysis of Results
of Operations and Financial Condition
(i) Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Not Applicable
(j) Quantatitive and Qualitative Disclosures about
Market Risk........................................ Not Applicable
(k) Directors, Executive Officers, Promoters and
Control Persons.................................... Management; Principal Stockholders
(l) Executive Compensation........................... Management
(m) Security Ownership of Certain Beneficial Owners
and Management..................................... Management; Principal Stockholders
(n) Certain Relationships and Related Transactions... Management; Principal Stockholders; Certain
Transactions
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................. Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
TELETRAC HOLDINGS, INC.
105,000 WARRANTS TO PURCHASE CLASS A COMMON STOCK
CLASS A COMMON STOCK
ISSUABLE UPON EXERCISE OF WARRANTS
---------------------
This Prospectus relates to (i) the issuance of an aggregate 56,437 shares
(as such number may be adjusted from time to time in accordance with the terms
of the Warrants, the "Warrant Shares") of Class A common stock, $.01 par value
("Common Stock"), of Teletrac Holdings, Inc. ("Holdings"), upon the exercise of
105,000 warrants (the "Warrants") to purchase 0.537495 shares of Common Stock at
a price of $.01 per share, subject to adjustment, (ii) the public offering from
time to time of the Warrants by the selling security holders (the "Selling
Security Holders").
The Warrant Shares being offered by Holdings are issuable upon the exercise
of the Warrants, which were sold in connection with the offering (the "Units
Offering") of 105,000 units (the "Units") consisting of $105,000,000 aggregate
principal amount of 14% Senior Notes due 2007 (the "Notes") of Teletrac, Inc., a
wholly-owned subsidiary of Holdings ("Teletrac" or the "Company"), and 105,000
Warrants. Each Unit consisted of $1,000 principal amount of Notes and one
Warrant.
All of the Warrants being offered hereby will be sold by the Selling
Security Holders. See "Selling Stockholders." Neither Holdings nor Teletrac will
receive any of the proceeds from such sale. The Warrants will become exercisable
on [ ], 1997 (the "Separation Date"). Unless exercised, the Warrants will
automatically expire on August 1, 2007. Holdings will receive the proceeds of
any exercise of the Warrants. Each Warrant, when exercised, will entitle the
holder to receive 0.537495 shares of Common Stock at an exercise price of $.01
per share. The number of shares of Common Stock purchasable upon the exercise of
the Warrants and payment of the exercise price is subject to adjustment upon the
occurrence of certain events. The exercise of the Warrants will be subject to
compliance with applicable Federal and state securities laws and the
Communications Act of 1934, as amended. See "Description of Warrants."
The Selling Security Holders, directly or through agents, dealers or
underwriters to be designated from time to time, may sell the Warrants from time
to time in the over-the-counter market, on a securities exchange on which the
Warrants are then listed, in negotiated transactions or otherwise, at prices and
on terms to be determined at the time of sale. At the time a particular offer of
the Warrants is made, if required, a Prospectus Supplement will be distributed
that will set forth the number of Warrants being offered and the terms of the
offering, including the name or names of any agents, dealers or underwriters,
the purchase price paid by any underwriter, any discounts or commissions and the
proposed public offering price. The aggregate proceeds to the Selling Security
Holders from the sale of the Warrants will be the purchase price of the
securities sold less the aggregate agents' commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne by
Holdings. The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of any Warrants may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commission received by them and any profit on the resale of the securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
All costs (other than commission expenses and brokerage fees, if any)
incurred in connection with the registration and distribution of the Warrant
Shares and the Warrants are being borne by Holdings and the Company. Commission
expenses and brokerage fees in respect of the Warrants are payable by the
Selling Security Holders.
Holdings is filing the Registration Statement of which this Prospectus is a
part to fulfill in part its obligations under the Warrant Agreement (as defined
herein).
<PAGE>
The Warrant Shares and the Warrants are referred to collectively herein as
the "Securities." There is no active market for the Securities, and there can be
no assurance that an active trading market will develop.
------------------------
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE SECURITIES.
---------------------
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 PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Date of this Prospectus is September , 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Additional Information................................................................ 2
Summary of the Prospectus............................................................. 4
Risk Factors.......................................................................... 10
The Company........................................................................... 18
Use of Proceeds....................................................................... 18
Capitalization........................................................................ 19
Selected Financial Data............................................................... 20
Supplemental Financial Data...........................................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 22
Business.............................................................................. 29
Management............................................................................ 47
Securities Ownership.................................................................. 53
Certain Relationships and Related Transactions........................................ 56
Description of Certain Indebtedness................................................... 60
Selling Security Holders.............................................................. 61
Description of the Warrants........................................................... 61
Description of Holdings Capital Stock................................................. 63
Certain Federal Income Tax Considerations............................................. 66
Plan of Distribution.................................................................. 67
Legal Matters......................................................................... 68
Independent Auditors.................................................................. 68
Index to Financial Statements......................................................... F-1
</TABLE>
ADDITIONAL INFORMATION
Holdings has filed with the SEC a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act with respect to the
Securities 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 SEC 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 SEC 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 SEC 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 Holdings, 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 SEC,
Holdings 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 SEC. Holding's obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Securities are held of
record by fewer than 300 holders at the beginning of any fiscal year of
Holdings, other than the fiscal year in which such registration statement or
registered exchange offer for the New Notes becomes effective. However, the
Warrant Agreement dated August 6, 1997 (the "Warrant Agreement") between
Holdings and Norwest Bank Minnesota, National Association, as warrant agent (the
"Warrant Agent"), provides that Holdings must file with the Commission and
provide the holders of Warrants 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 Warrants 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, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOLDINGS OR THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES 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. THE DELIVERY OF THIS PROSPECTUS, AND
ANY SALE MADE HEREUNDER, SHALL NOT 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. Holdings 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
HOLDINGS AND TELETRAC, INC., ITS WHOLLY OWNED SUBSIDIARY, TOGETHER WITH EACH OR
THEIR PREDECESSORS AND SUBSIDIARIES. 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 OFFERING
<TABLE>
<CAPTION>
Securities Subject to the 105,000 Warrants to purchase initially up to 56,437
Offering........................ shares of Common Stock.
<S> <C>
Shares of Common Stock initially issuable upon exercise
of the Warrants plus such indeterminate amount of Common
Stock as may be issued pursuant to the anti-dilution
provisions of the Warrants.
WARRANTS:
Total Number of Warrants.......... 105,000 Warrants, which when exercised would entitle the
holders thereof to acquire an aggregate of 56,437
Warrant Shares, representing 10% of the Class A Common
Stock on a fully diluted basis, as of the consummation
of the Offering. See "Description of Warrants" and
"Description of Holdings Capital Stock." The Warrants
will be issued pursuant to a Warrant Agreement (as
defined herein).
Exercise.......................... Each Warrant will entitle the holder thereof to purchase
.537495 Warrant Shares at an exercise price of $.01 per
share, subject to adjustment under certain
circumstances. The number of shares of Class A Common
Stock for which a Warrant is exercisable is subject to
adjustment upon the occurrence of certain events as
provided in the Warrant Agreement. See "Description of
Warrants."
Duration.......................... The Warrants will be exercisable at any time on or after
the Separation Date and prior to 5:00 p.m., New York
City time, on August 1, 2007. The exercise of the
Warrants will be subject to compliance with applicable
federal and state securities laws and the Communications
Act of 1934, as amended (the "Communications Act"). See
"Description of Warrants" and "Risk
Factors--Requirements for Exercising Warrants."
Warrant Agent..................... Norwest Bank Minnesota, National Association
</TABLE>
RISK FACTORS
Prospective purchasers of the Notes should consider carefully all of the
information contained in this Prospectus before making an investment in the
Notes. In particular, prospective purchasers should consider the factors set
forth under "Risk Factors."
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
Set forth below is selected historical financial and operating data of
Holdings and its predecessors. Certain of such historical financial and
operating data have been derived from the audited consolidated financial
statements of Holdings and its predecessors as of and for the periods noted. The
financial information of Holdings 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 Holdings which include all adjustments management
considers necessary for a fair presentation of Holdings' 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 Holdings' 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(1) 1995(1) 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 $ 64,613
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) (1,128)
</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) Teletrac, Inc. 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
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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 Units Offering and the application of the
estimated net proceeds therefrom, as if the Units Offering had occurred on
June 30, 1997. See "Use of Proceeds" and "Capitalization." A value of $67.05
has been assigned to each Warrant.
(5) Includes the aggregate principal amount of the Pledged Securities, estimated
at approximately $39.9 million. See "Description of Notes--Security."
(6) Holdings received gross proceeds from the Units Offering of $105 million.
The estimated value of the Warrants ($7.0 million) has been reflected as
both a debt discount and an element of additional paid-in capital. 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 BEFORE PURCHASING
THE SECURITIES OFFERED HEREBY.
This Prospectus contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. 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.
SUBSTANTIAL LEVERAGE
As of June 30, 1997, after giving effect to the Units Offering, the
Company's total outstanding long-term indebtedness would have been approximately
$100 million (which excludes the portion of the Units 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. 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.
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The Company's current and future debt service requirements could have
important consequences to holders of the Warrants and the Warrant Shares,
including the following: (i) the Company's ability to obtain additional
financing for 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
relating to the Notes (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 Certain
Indebtedness--Notes."
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 Units 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 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 Units 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
11
<PAGE>
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 Units 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 "Description of Holdings Capital Stock--Series A
Convertible Redeemable Participating Preferred Stock" and "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, it would take some time 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.
FACTORS AFFECTING GRANDFATHERED SYSTEMS
FCC rules regulating LMS, adopted in 1995 and modified in March 1996,
established that LMS licenses would be granted on a Major Trading Area ("MTA")
basis, as defined in the 1993 Rand-McNally Commercial Atlas. 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
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<PAGE>
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."
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
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<PAGE>
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.
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.
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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."
CONTROL BY CURRENT STOCKHOLDERS
Through their ownership of the Common Stock and Preferred Stock of Holdings
and their agreements with other stockholders, the principal stockholders of
Holdings are able to control the election of Holdings' Board of Directors and
generally are able to direct the affairs of Holdings. Pursuant to certain
agreements among them, certain of the principal stockholders of Holdings have
the right to require the other stockholders to elect directors designated by
such principal stockholders to the Board of Directors of Holdings. In addition,
the Certificate of Incorporation of Holdings and certain agreements among
Holdings and its principal stockholders require the approval of a majority or
supermajority, as the case may be, of the holders of Common Stock or Preferred
Stock, voting in some instances as a single class and in some instances as
separate classes, to take certain specified actions. In addition, the principal
stockholders of Holdings have preemptive rights with respect to certain
issuances of securities by Holdings which permit them to purchase securities of
Holdings at the same price and on the same terms as Holdings may offer to third
parties, in an amount sufficient to maintain their respective voting and equity
interests in Holdings. All of the current stockholders entitled to such
preemptive rights have waived such rights with respect to the Warrants offered
hereby and the related Warrant Shares. Holders of the Warrants and the Warrant
Shares will not be entitled to the same voting and preemptive rights. See
"Certain Relationships and Related Transactions" and "Description of Holdings
Capital Stock."
NO DIVIDENDS
Holdings does not expect to pay any cash dividends for the foreseeable
future. Holdings has entered into agreements with the holders of its Preferred
Stock that limit its ability to declare and pay dividends on its Common Stock.
The holders of the Warrants will not have the right to receive any dividends so
long as their Warrants are unexercised. After the exercise of their Warrants,
the holders of the Warrant Shares will have the same right to receive dividends
as the other holders of Common Stock of Holdings. Any future dividends will
depend on the earnings, if any, of the Company, its financial requirements and
other factors. The Indenture contains restrictions against the payment of
dividends and the Credit Facility will contain similar restrictions.
REQUIREMENTS FOR EXERCISING WARRANTS
The exercise of the Warrants will be subject to applicable federal and state
securities laws and to compliance with the Communications Act if the exercise of
the Warrants would result in a change of control or in foreign ownership or
foreign voting rights exceeding the then-approved limits. Holders of Warrants
will be able to exercise their Warrants only if a registration statement
relating to the shares of Class A Common Stock underlying the Warrants is then
in effect, or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act, and such shares of Class A Common Stock are
qualified for sale or exempt from qualification under the applicable securities
laws of the states
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in which the various holders of the Warrants reside. The Company will be unable
to issue shares of Class A Common Stock to those persons desiring to exercise
their Warrants if a registration statement covering the shares of Class A Common
Stock issuable upon the exercise of the Warrants is not effective (unless the
sale and issuance of shares of Class A Common Stock upon the exercise of such
Warrants is exempt from the registration requirements of the Securities Act) or
if such shares of Class A Common Stock are not qualified or exempt from
qualification in the states in which the holders of the Warrants reside. See
"Description of Warrants." If the FCC were to classify multilateration LMS as
commercial mobile radio service at a time when Holdings' level of foreign
ownership or foreign voting rights exceeded 25%, which it currently does, 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. Any exercise of Warrants that would result in foreign
ownership or voting rights exceeding the then-approved limits would require an
additional public interest determination from the FCC. There can be no assurance
that the FCC would find that an increase in such foreign ownership or foreign
voting rights would be in the public interest. The failure to secure a public
interest determination from the FCC may preclude the exercise of some or all of
the Warrants. In the event that multilateration LMS service is classified as
CMRS, the exercise of the Warrants by non-United States citizens in a manner
which would cause the foreign ownership or foreign voting rights to exceed the
then-approved limits is prohibited prior to the receipt of the FCC's approval of
such exercise. See "Business Regulation--Foreign Ownership."
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
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 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
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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
There is currently no market for the Warrants or the Common Stock of
Holdings. Holdings does not currently intend to list the Warrants or its Common
Stock on any national securities exchange or to seek the admission thereof to
trading in the Nasdaq National Market. There can be no assurance that an active
trading market for any of the Securities will develop, or if one does develop,
that it will be sustained. Accordingly, no assurance can be made as to the
liquidity of the trading market for the Securities. If any of the Securities are
traded after their initial issuance, they may trade at a discount from their
initial offering price, depending on prevailing interest rates, the market for
similar securities and other factors, including general economic conditions and
the financial condition and performance of Holdings. Prospective investors in
the Securities should be aware that they may be required to bear the financial
risks of such investment for an indefinite period of time. See "Description of
Notes," "Description of Warrants" and "Notice to Investors."
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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 maximum gross proceeds to Holdings from the exercise of the Warrants and
the issuance of the Common Stock offered hereby (assuming all Warrants are
exercised at the current exercise price of $.01 per share of Common Stock) would
be $564.37. Holdings intends to use the proceeds of any exercise of the Warrants
for working capital and general corporate purposes. Holdings will not receive
any proceeds from the sale of the Warrants offered hereby, and all such proceeds
will be received by or on behalf of the Selling Security Holders. See "Selling
Security Holders."
18
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma consolidated capitalization of
Holdings and its subsidiaries as of June 30, 1997, after giving effect to the
Exchange and as adjusted to give effect to the Units Offering. The table should
be read in conjunction with the audited consolidated financial statements of
Holdings and its predecessors and the related notes included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------
<S> <C> <C>
(UNAUDITED)
----------------------
<CAPTION>
PRO
FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................. $ 4,261 $ 64,613
--------- -----------
--------- -----------
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........................................................................... -- --
Warrants(3)............................................................................... -- 7,039
Additional paid-in capital................................................................ 22,023 22,023
Accumulated deficit....................................................................... (30,192) (30,192)
--------- -----------
Stockholders' deficit................................................................. (8,167) (1,128)
--------- -----------
Total capitalization.................................................................. $ 29,394 $ 134,394
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Includes the aggregate principal amount of the Pledged Securities,
approximately $39.9 million. See "Description of Notes--Security."
(2) Holdings received gross proceeds from the Units Offering of $105 million.
The estimated value of the Warrants ($7.0 million) has been reflected as
both a debt discount and an element of additional paid-in capital. However,
the actual aggregate principal amount of the Notes is $105 million.
(3) Represents the portion of the issue price for the Units attributable to the
fair market value of the Warrants. Such amount has been recognized as a
discount on the Notes and will be amortized over the term of the Notes.
19
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Set forth below are selected historical financial and operating data of
Holdings and its predecessors. Certain of such historical financial and
operating data have been derived from the audited consolidated financial
statements of Holdings and its predecessors as of and for the periods noted. The
financial information of Holdings 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 Holdings which include all adjustments management
considers necessary for a fair presentation of Holdings' 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 Holdings' and
its predecessors' audited consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSORS(1) HOLDINGS
---------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------- ---------------------
<CAPTION>
1992 1993 1994 1995 1996(2) 1996(2) 1997
---------- ---------- ---------- ---------- ---------- --------- ----------
(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>
20
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------------------------------- JUNE 30, 1997
1992 1993 1994 1995 1996 (UNAUDITED)
--------- ---------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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) Teletrac, Inc. 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 Holdings' 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 Holdings 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.
21
<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
22
<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
23
<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.
24
<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.
25
<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
26
<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
The Company has received a commitment letter from Banque Paribas and Fleet
National Bank with respect to a secured revolving credit facility (the "Credit
Facility") providing for up to $30 million of credit. Proceeds from the
revolving credit line may be used to provide funding for capital expenditures
and finance the working capital needs of the Company. Indebtedness under the
Credit Facility would be secured by a pledge of the stock of Teletrac, Inc. and
its subsidiaries, together with a security interest in substantially all of the
assets of Teletrac, Inc. See "Description of Certain Indebtedness."
The Credit Facility will contain 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 would also
provide for events of default customary in facilities of its type.
The exercise of rights pursuant to the Credit Facility will be subject to
applicable provisions of the Communications Act, including, without limitation,
the requirements for prior FCC approval of the transfer of control or the
assignment of FCC licenses.
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<PAGE>
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 Units 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 the foreseeable future. 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."
28
<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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<PAGE>
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
30
<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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<PAGE>
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
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<PAGE>
on sales managers who supervise the sales activities of sales representatives,
contact and negotiate with 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 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."
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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 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
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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.
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
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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
interpretation by the FCC in written decisions and remain subject to further
reconsideration. Several parties, including the Company, have 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. As a result, the application
of these rules in situations that the Company may encounter will present matters
of first impression to the FCC's staff. As a pioneer in this new service, the
Company may operate under rules with significant ambiguities. 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. The February
1995 LMS Order and the March 1996 LMS Reconsideration 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 an MTA basis, as defined in the 1993 Rand-McNally Commercial
Atlas. 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
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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 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. The Company's requests for reconsideration and waivers, and the
requests for reconsideration filed by other parties, remain pending before the
FCC. There is no assurance that the Company's requests for reconsideration for
waivers to use "fill-in" transmitters will be granted, and they have 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 will not be granted in whole or in part by the
FCC.
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.
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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 MTA basis. The FCC did not issue specific rules and
procedures for the competitive bidding process at the time of adoption of the
LMS Order. Rules and procedures are to be established in a separate proceeding
which has not yet occurred. The FCC has initiated a proceeding to establish
generic rules for the conduct of future spectrum auctions, and public comments
have been filed, but the FCC has not yet issued generic auction rules or the
specific rules for auction of multilateration LMS spectrum. 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 MTA licensees resulting from the auction. To the extent that the
Company does not submit the winning bid for a license in an MTA in which it
operates a grandfathered system, the Company would be permitted to continue
operating its grandfathered facilities in that MTA, but it would be precluded
from expanding its coverage area within such MTA.
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. To date, the
FCC has not further interpreted this provision of its rules. At the least,
however, 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.
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). 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
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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 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.
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. 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.
44
<PAGE>
RECONSIDERATION PROCEEDINGS FOR THE LMS RULES. The FCC is expected to issue
a further order on reconsideration of the March 21, 1996 Reconsideration Order
which would deal with issues related to grandfathered LMS stations. In addition,
the FCC is expected to issue an initial order on reconsideration of the February
3, 1995 LMS Order dealing with issues raised by petitioners other than those
related to grandfathered LMS providers. The FCC may address the two proceedings
in a single 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 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.
45
<PAGE>
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.
46
<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. Mr. Queen previously 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. Prior to joining the Company, 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. Prior to joining the Company, 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. Prior to joining the Company, 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 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.
47
<PAGE>
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. Mr.
Berkman is currently Executive Vice President and a member of the Board of
Directors of The Associated Group, Inc. and has been an employee of the
Associated Group, Inc. or its predecessor for the past fifteen years. 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. Prior to this position, 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, and had
previously been a portfolio manager for Asia at Kingdon Capital Management Corp.
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.
48
<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.
49
<PAGE>
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>
INDIVIDUAL GRANTS POTENTIAL
- ------------------------------------------------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------
NAME GRANTED(1) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ------------------------------ ---------- ------------ ------------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
James A. Queen................ 8,224 57.3% 100 2003 464,000 1,724,000
8,224 125
8,223 150
James E. Seng................. 567 3.9% 100 2003 32,000 119,000
566 125
566 150
Lawrence P. Jennings.......... 1,292 9.0% 100 2003 73,000 271,000
1,292 125
1,292 150
Alan B. Howe.................. 567 3.9% 100 2003 32,000 119,000
566 125
566 150
Steven D. Scheiwe............. 1,481 10.3% 100 2003 84,000 310,000
1,481 125
1,480 150
</TABLE>
- ------------------------
(1) See "--Stock Option Plans."
50
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the number of options exercised and the value
realized upon exercise by the named executive officers during the fiscal year
ended December 31, 1996 and the value of outstanding options held by such
executive officers as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS
NUMBER OF SHARES YEAR AT FISCAL YEAR END
ACQUIRED ON EXERCISE END EXERCISABLE/ EXERCISABLE/
NAME OF OPTIONS VALUE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- -------------------------------- ------------------------- ------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
James A. Queens................. -- -- 0/24,671 0/$ 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
51
<PAGE>
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 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 were 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.
52
<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>
53
<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>
EXECUTIVE OFFICERS AND DIRECTORS:
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).................................................. -- -- -- --
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 (14 323,394.12 76.2 167,388.15 63.6
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. 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. 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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<PAGE>
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 certain investors (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 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.
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<PAGE>
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 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
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<PAGE>
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 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
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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 will also be amended to facilitate the Units
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 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.
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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.
14% SENIOR NOTES DUE 2007
On August 6, 1997, Teletrac issued an aggregate $105,000,000 of its 14%
Senior Notes due 2007 pursuant to the Indenture. The Notes mature on August 1,
2007. Interest on the Notes accrues at the rate of 14% per annum and is payable
semi-annually in arrears on February 1 and August 1 of each year, commencing on
February 1, 1998. The Notes represent senior, unsecured obligations of the
Company, rank pari passu in right of payment with all existing and future senior
indebtedness of the Company and rank senior in right of payment to all existing
and future subordinated indebtedness of the Company.
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. The Pledged Securities will be held by
Norwest Bank Minnesota, National Association as Collateral Agent under a Pledge
Agreement pending disbursement.
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
redemption prices set forth in the Indenture. 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 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 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. Upon the occurrence of a Change of Control (as defined in the Indenture),
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 thereon to the date of purchase.
The Indenture contains certain covenants that limit the ability of the
Company and certain of its subsidiaries to, among other things, incur additional
indebtedness, pay dividends or make other distributions, repurchase equity
interests or subordinated indebtedness, make certain other restricted payments,
create certain liens, enter into certain transactions with affiliates, sell
assets, issue or sell equity interests or enter into certain mergers and
consolidations.
CREDIT FACILITY
The Company has received a commitment letter from Banque Paribas and Fleet
National Bank with respect to a secured revolving credit facility (the "Credit
Facility") providing for up to $30 million of credit. Proceeds from the
revolving credit line may be used to provide funding for capital expenditures
and finance the working capital needs of the Company. Indebtedness under the
Credit Facility would be secured by a pledge of the stock of Teletrac, Inc. and
its subsidiaries, together with a security interest in substantially all of the
assets of Teletrac, Inc. See "Description of Certain Indebtedness."
The Credit Facility will contain 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
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rental payments that can be incurred, and (viii) consolidations and mergers. The
Credit Facility would also provide for events of default customary in facilities
of its type.
The exercise of rights pursuant to the Credit Facility will be subject to
applicable provisions of the Communications Act, including, without limitation,
the requirements for prior FCC approval of the transfer of control or the
assignment of FCC licenses.
SELLING SECURITY HOLDERS
The following table sets forth, as of the date of this Prospectus, certain
information with respect to the Warrants owned by the Selling Security Holders
that are being offered pursuant to this Prospectus.
<TABLE>
<CAPTION>
WARRANTS WARRANTS
BENEFICIALLY PERCENT WARRANTS BENEFICIALLY PERCENT
OWNED PRIOR TO OF BEING OWNED AFTER AFTER
NAME THE OFFERING CLASS OFFERED THE OFFERING OFFERING
- --------------------------------------------------- -------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
* * * * * *
Total.............................................. 105,000 100% 105,000 0
</TABLE>
- ------------------------
* To be filed by amendment.
DESCRIPTION OF WARRANTS
The Warrants have been issued pursuant to a Warrant Agreement, dated August
6, 1997 (the "Warrant Agreement"), between Holdings and Norwest Bank of
Minnesota, N.A., as Warrant Agent (the "Warrant Agent"). The following summary
of certain provisions of the Warrant Agreement does not purport to be complete
and is qualified in its entirety by reference to the provisions of the Warrant
Agreement including the definitions therein of certain terms used below. A copy
of the Warrant Agreement will be made available to Warrantholders and
prospective purchasers of the Warrants upon request.
GENERAL
Each Warrant, when exercised, entitles the registered holder thereof to
receive .537495 fully paid and nonassessable shares of Class A Common Stock at
an exercise price of $.01 per share (the "Exercise Price"). The number of
Warrant Shares is subject to adjustment in the certain cases referred to below.
The Warrants entitle the holders thereof to purchase in the aggregate 56,437
Warrant Shares, or approximately 10% of the Class A Common Stock on a fully
diluted basis, subject to adjustment as described herein. The Warrants will be
exercisable at any time on or after the Separation Date and prior to 5:00 p.m.,
New York City, time on August 1, 2007. The exercise of the Warrants will be
subject to applicable federal and state securities laws and to compliance with
the Communications Act if the exercise of the Warrants would result in a change
of control or in foreign ownership or foreign voting rights exceeding the
then-approved limits. See "Risk Factors--Requirements for Exercising Warrants."
The Warrants may be exercised by surrendering to Holdings the warrant
certificates evidencing the Warrants to be exercised with the accompanying form
of election to purchase properly completed and executed, together with payment
of the Exercise Price. Payment of the Exercise Price may be made in the form of
cash or by certified or official bank check payable to the order of Holdings.
Upon surrender of the warrant certificate and payment of the Exercise Price,
Holdings will deliver or cause to be delivered, to or upon the written order of
such holder, stock certificates representing the number of whole shares of Class
A Common Stock to which the holder is entitled. If less than all of the Warrants
evidenced by a warrant certificate are to be exercised, a new warrant
certificate will be issued for the remaining number of Warrants.
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No fractional shares of Class A Common Stock will be issued upon exercise of
the Warrants. Holdings will arrange to have paid to the holder of the Warrant at
the time of exercise an amount in cash equal to the current market value of any
such fractional shares of Class A Common Stock less a corresponding fraction of
the Exercise Price.
The holders of the Warrants have no right (i) to vote on matters submitted
to the stockholders of Holdings, (ii) to receive notice of any meeting of
stockholders of Holdings and (iii) to receive dividends. The holders of the
Warrants are not entitled to share in the assets of Holdings in the event of
liquidation, dissolution or the winding up of Holdings. In the event a
bankruptcy or reorganization is commenced by or against Holdings, a bankruptcy
court may hold that unexercised Warrants are executory contracts which may be
subject to rejection by Holdings with approval of the bankruptcy court, and the
holders of the Warrants may, even if sufficient funds are available, receive
nothing or a lesser amount as a result of any such bankruptcy case than they
would be entitled to if they had exercised their Warrants prior to the
commencement of any such case.
In the event of a taxable distribution to holders of shares of Class A
Common Stock that results in an adjustment to the number of shares of Class A
Common Stock or other consideration for which a Warrant may be exercised, the
holders of the Warrants may, in certain circumstances, be deemed to have
received a distribution subject to United States federal income tax as a
dividend. See "Certain Tax Considerations-- Tax Consequences to U.S.
Persons--Warrants; Warrant Shares." The number of shares of Class A Common Stock
purchasable upon exercise of the Warrants will be subject to adjustment in
certain events including: (i) the payment by Holdings of dividends and other
distributions on its shares of Class A Common Stock in shares of Class A Common
Stock, (ii) subdivisions, combinations and reclassifications of the shares of
Class A Common Stock, (iii) the issuance to all holders of shares of Class A
Common Stock of rights, options or warrants entitling them to subscribe for
shares of Class A Common Stock or securities convertible into, or exchangeable
or exercisable for, shares of Class A Common Stock within sixty (60) days after
the record date for such issuance of rights, options or warrants at an offering
price (or with an initial conversion, exchange or exercise price) which is less
than the current market price per share (as defined in the Warrant Agreement) of
shares of Class A Common Stock, (iv) the distribution to holders of shares of
Class A Common Stock of any of Holdings's assets (including cash), debt
securities, preferred stock or any rights or warrants to purchase any such
securities (excluding those rights and warrants referred to in clause (iii)
above), (v) the issuance of shares of Class A Common Stock for a consideration
per share less than the then current market price per share (excluding
securities issued in transactions referred to in clauses (i) through (iv)
above), (vi) the issuance of securities convertible into or exchangeable for
shares of Class A Common Stock for a conversion or exchange price plus
consideration received upon issuance less than the then current market price per
share of Common Stock (excluding securities issued in transactions referred to
in clauses (iii) and (iv) above) and (vii) certain other events that could have
the effect of depriving holders of the Warrants of the benefit of all or a
portion of the purchase rights evidenced by the Warrants; provided, however,
that no adjustment will be required upon conversion of the Series A Preferred or
upon issuance of shares pursuant to employee stock option plans. In addition,
Holdings is required under the Warrant Agreement to adjust the number of shares
of Class A Common Stock purchasable upon exercise of the Warrants in the event
of any issuance or any commitment to issue (with respect to such commitment, the
adjustment will occur on the actual date of issuance), at any time within 90
days of the closing of the Units Offering, of Class A Common Stock or rights,
options or warrants to subscribe therefor to any person; any such adjustment
shall be intended to preserve the relative ownership interest in Holdings of the
holders of such Warrants as of the closing of the Units Offering.
In the case of certain consolidations or mergers of Holdings, or the sale of
all or substantially all of the assets of Holdings to another corporation, each
Warrant will thereafter be exercisable for the right to receive the kind and
amount of shares of stock or other securities or property to which such holder
would have been entitled as a result of such consolidation, merger or sale had
the Warrants been exercised immediately prior thereto.
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AMENDMENT
From time to time, Holdings and the Warrant Agent, without the consent of
the holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including curing defects or inconsistencies or making any
change that does not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants will require the written
consent of the holders of a majority of the then outstanding Warrants (excluding
Warrants held by Holdings or any of its Affiliates). The consent of each holder
of the Warrants affected will be required for any amendment pursuant to which
the Exercise Price would be increased or the number of shares of Class A Common
Stock purchasable upon exercise of Warrants would be decreased (other than
pursuant to adjustments provided in the Warrant Agreement).
REGISTRATION RIGHTS
Holdings is required under the Warrant Agreement to file and use its best
efforts to cause one or more shelf registration statements to be filed by
September 5, 1997 and to be effective on or within 90 days thereof (the "Warrant
Shelf Registration Statements") on the appropriate form covering the Warrants
and the issuance of the shares of Class A Common Stock upon the exercise of
Warrants and to keep such registration statements effective until 30 days after
the Expiration Date or, in the case of the registration statement covering the
Warrants, for two years or until such earlier date as Warrants held by
non-affiliates of the Company are tradeable without restriction under Rule
144(k). During any consecutive 365-day period, Holdings shall have the right to
suspend availability of the Warrant Shelf Registration Statements for up to two
30 consecutive day periods, except for the consecutive 30-day period immediately
prior to the Expiration Date, if Holdings's Board of Directors determines in the
exercise of its reasonable judgment that there is a valid business purpose for
such suspension. Holders of Warrants will be able to exercise the Warrants only
if a registration statement relating to the shares of Class A Common Stock
underlying the Warrants is then in effect or if the exercise of such Warrants is
exempt from the registration requirements of the Securities Act and only if such
securities are qualified for sale or exempt from the registration requirements
of the Securities Act and only if such securities are qualified for sale or
exempt from qualifications under the applicable securities laws of the states in
which the various holders of the Warrants reside. Holdings will be unable to
issue shares of Class A Common Stock to those persons desiring to exercise their
Warrants if a registration statement covering the securities issuable upon the
exercise of the Warrants is not effective (unless the sale and issue of shares
upon the exercise of such Warrant is exempt from the registration requirements
of the Securities Act) or if such securities are not qualified or exempt from
qualification in the states in which the holders of the Warrants reside. If
Holdings does not comply with these obligations as set forth in the Warrant
Agreement it will be required to pay liquidated damages to holders of Warrants
or Warrant Shares under certain circumstances.
Each holder of Warrants that sells such Warrants pursuant to a Warrant Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to the
purchaser, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by certain
provisions of the Warrant Agreement which are applicable to such holder
(including certain indemnification obligations). In addition, each holder of
Warrants will be required to deliver information to be used in connection with
such Warrant Shelf Registration Statement in order to have its Warrants included
in such Warrant Shelf Registration Statement.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
The authorized capital stock of Holdings consists of (i) 1,000,000 shares of
Class A Common Stock, of which 249,000 shares will be outstanding, 56,437 will
be reserved for issuance upon exercise of the Warrants, 190,477 will be reserved
for issuance upon conversion of the Preferred Stock, 68,997 shares will be
reserved for issuance upon the exercise of outstanding options under the Stock
Plan, (ii) 70,000 shares
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of Class B Common Stock (together with the Class A Common Stock, the "Common
Stock"), none of which will be outstanding, (iii) 190,477 shares of Series A
Redeemable Convertible Participating Preferred Stock (the "Series A Preferred"),
190,476.19 of which will be outstanding, and (iv) 190,477 shares of one or more
series of undesignated preferred stock (together with the Series A Preferred,
the "Preferred Stock"), all of which will have been reserved for issuance upon
automatic conversion of the Series A Preferred under certain circumstances, as
provided in Holdings' Certificate of Incorporation.
The holders of Holdings' Common Stock and Preferred Stock have certain
voting and other rights, and certain obligations, pursuant to the Preferred
Stock Purchase Agreement, the Stockholders' Agreement, and the Registration
Agreement, as amended and assigned to Holdings pursuant to the Exchange
Agreement. See "Certain Relationships and Related Transactions."
COMMON STOCK
The holders of the Class A Common Stock are entitled to one vote per share
on all matters on which stockholders are entitled to vote. The holders of the
Class B Common Stock have the same rights as the holders of Class A Common
Stock, but are not entitled to vote except in limited situations in which they
are allowed to vote as a separate class. Subject to the rights and preferences
of any holder of Preferred Stock that is or may be issued, the holders of Common
Stock are entitled to receive such dividends as may be declared by the Board of
Directors, and to receive, pro rata, the assets of Holdings upon liquidation
after distribution of such amounts to holders of Preferred Stock as are required
by the terms of such stock. Holdings has entered into agreements with the
holders of its Preferred Stock that limit the ability of Holdings to declare and
pay dividends on its Common Stock. It is anticipated that earnings, if any,
which might be generated from operations of Holdings will be used to finance the
growth of Holdings and that cash dividends will not be paid to holders of Common
Stock for the foreseeable future.
PREFERRED STOCK
The following summary sets forth certain information concerning each series
of the Preferred Stock that is currently outstanding.
SERIES A CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK
Holdings has authorized 190,477 shares of Series A Preferred, of which
190,476.19 shares are issued prior and outstanding.
The holders of Series A Preferred are entitled to receive cumulative,
compounding dividends at a rate per annum of 15%, payable when and as declared
by the Board of Directors and, in any event, upon redemption of the Series A
Preferred Stock or any liquidation of Holdings. In addition, the holders of the
Series A Preferred shall be entitled to receive dividends at the same rate as
dividends paid with respect to the Common Stock, on an as-converted basis. In
the event Holdings declares a special dividend with respect to all or any
portion of the net proceeds received in connection with the spinoff or sale of
assets of Holdings that constitute a separate business unit, such dividend shall
be first paid in the ratio of 1.7325 to 1.00 on each share of the Preferred
Stock and the Common Stock, respectively, until such time as an aggregate of
$173.25 shall have been paid on each share of Preferred Stock, and thereafter
such special dividend shall be paid ratably among the shares of Preferred Stock
and Common Stock, on an as-converted basis.
In the event of any liquidation, dissolution or winding up of Holdings, the
holders of the Series A Preferred will be entitled to receive, pro rata with
holders of any other series of Preferred Stock, the greater of (i) $190.86 (as
adjusted) plus accrued and unpaid dividends (the "Liquidation Amount") and (ii)
an amount equal to the ratable share of the assets and funds available for
distribution to the holders of the Common Stock, on an as-converted basis. For
the purposes of such distributions, a liquidation event is defined to include a
merger or consolidation of Holdings, a sale of all or substantially all of
Holdings'
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assets, or a sale of a majority of the Holdings' outstanding capital stock to a
non-affiliate, unless the holders of 66 2/3% of the outstanding shares of
Preferred Stock elect (on an as-converted basis) to receive, upon such merger,
consolidation or sale, the amount such holders would have received had they
converted their shares of Preferred Stock to Common Stock immediately prior to
such event.
Each share of Series A Preferred may be converted at any time, at the
holder's option, into such number of fully paid and non-assessable shares of
Common Stock as is determined by dividing (i) $173.25 by (ii) $173.25, adjusted
to reflect certain antidilution protections (as so adjusted, the "Conversion
Price"). In addition, each share of Series A Preferred will automatically be
converted on the same basis upon (a) the closing of an underwritten public
offering of Holdings' Common Stock pursuant to an effective registration
statement under the Securities Act at an offering price not less than $354.38
per share (subject to adjustment) and resulting in gross proceeds of at least
$30.0 million or (b) upon any underwritten public offering of Holdings' Common
Stock pursuant to an effective registration statement with the written election
of the holders of not less than 66 2/3% of the outstanding Preferred Stock.
At any time on or after February 1, 2008, at the election of the holders of
a majority of the outstanding Preferred Stock (on an as-converted basis),
Holdings shall redeem each share of Series A Preferred for the greater of (i)
the Liquidation Amount and (ii) the fair market value of a share of Series A
Preferred.
Under the terms of the Certificate of Incorporation, the holders of shares
of Series A Preferred, voting as a class, are entitled to elect one director of
Holdings. In addition to any voting rights provided by law, the holders of
shares of Series A Preferred are entitled to vote on all matters voted on by
holders of the Common Stock, voting together as a single class, at all meetings
of the stockholders of Holdings. With respect to any such vote, each share of
Series A Preferred shall entitle the holder thereof to cast a number of votes
equal to the number of votes which could be cast in such vote by a holder of the
shares of Series A Preferred if such shares had been converted into Common Stock
on the record date of such vote. In addition, 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, is required 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 or
the Credit Facility or 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 may not 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 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.
In the event that Holdings issues new securities and any holder of Series A
Preferred Stock does not exercise such holder's preemptive rights provided for
in the Stockholders' Agreement with respect to such
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new securities, the shares of Series A Preferred Stock held by such person will
not be entitled to antidilution adjustments to the Conversion Price. Instead,
each share of Series A Preferred held by such person shall be converted to a
share of a new series of Preferred Stock as described below under
"--Undesignated Preferred Stock."
UNDESIGNATED PREFERRED STOCK
Holdings has authorized 190,477 shares of Undesignated Preferred Stock, none
of which are currently outstanding. One or more series of Preferred Stock may be
issued from time to time (each such series, "New Preferred") in the event that
Holdings issues new securities and any holder of Series A Preferred Stock does
not exercise such holder's preemptive rights provided for in the Stockholders'
Agreement with respect to such new securities. Each share of Series A Preferred
held by such person shall be converted to a share of New Preferred. The New
Preferred will be identical in all respects to the Series A Preferred except
that (i) the Conversion Price of the New Preferred shall be equal to the
Conversion Price of the Series A Preferred Stock immediately prior to such event
and (ii) the New Preferred will not have the antidilution protections of the
Series A Preferred.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material federal income tax
considerations that may be relevant to persons acquiring, holding or disposing
of the Warrants. This summary is for general informational purposes only and
does not purport to address specific tax consequences that may be relevant to
certain persons (including, for example, foreign persons, financial
institutions, broker-dealers, insurance companies, tax-exempt organizations, S
corporations and persons subject to alternative minimum tax).
The discussion is based on the current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable treasury regulations
(including proposed treasury regulations), judicial authority and administrative
rulings and practice. Any such authorities are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the Warrants.
Further, there can be no assurance that the Internal Revenue Service (the "IRS")
will not take a contrary view, and no rulings from the IRS have been or will be
sought.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE SPECIFIC TO THEM, AS WELL AS
WITH RESPECT TO ANY STATE, LOCAL OR FOREIGN TAX CONSIDERATIONS IN ACQUIRING,
HOLDING OR DISPOSING OF THE WARRANTS.
SALE OF THE WARRANTS
Generally, a holder of the Warrants will recognize gain or loss upon the
sale or exchange of the Warrants in an amount equal to the difference between
the amount realized on the sale and the holder's adjusted tax basis for the
Warrants. The adjusted tax basis of the Warrants for holders will generally be
equal to the purchase price paid for such Warrants (adjusted as described below
under "Adjustments under the Warrants"). Under section 1234 of the Code, gain or
loss attributable to the sale or exchange of an option to buy or sell property
is considered gain from the sale or exchange of property that has the same
character as the property to which the option relates. Because the Warrants
relate to Common Stock, gains or losses attributable to the sale or exchange of
the Warrants will generally constitute capital gains and losses if the Common
Stock would be a capital asset in the hands of the Warrant holder. Such capital
gains and losses will be long term if the Warrants have been held for more than
one year.
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EXERCISE OF THE WARRANTS
The exercise of a Warrant will not result in a taxable event to the holder
of the Warrant (except with respect to cash, if any, paid by the Company in lieu
of the issuance of fractional shares of Common Stock). The holder's basis in the
shares of Common Stock received upon exercise of a Warrant will be equal to the
sum of (a) such holder's basis in the Warrant and (b) the cash paid by the
holder upon exercise of the Warrant. The holding period for capital gain and
loss purposes for the shares of Common Stock acquired upon exercise of a Warrant
will not include the period during which the Warrant was held. If any cash is
received in lieu of fractional shares, the holder will recognize gain or loss,
and the character and amount of gain or loss will be determined as if the holder
had received such fractional shares and then immediately sold such fractional
shares back to the Company for cash.
EXPIRATION OF THE WARRANTS
Upon the expiration of an unexercised Warrant, the holder will recognize a
loss equal to the adjusted tax basis of the Warrant in the hands of the holder.
Under section 1234 of the Code, the character of the loss realized upon the
failure to exercise an option is determined based on the character of the
property to which the option relates. Because the Warrants relate to Common
Stock, a loss realized upon expiration of a Warrant will generally be a capital
loss if the Common Stock would be a capital asset in the hands of the Warrant
holder. Such capital loss will be long term if the Warrant has been held for
more than one year.
ADJUSTMENTS UNDER THE WARRANTS
Pursuant to the terms of the Warrants, the number of shares that may be
purchased upon exercise of the Warrants is subject to adjustment from time to
time upon the occurrence of certain events. Under section 305 of the Code, a
change in conversion ratio or any transaction having a similar effect on the
interest of a Warrant holder may be treated as a distribution with respect to
any Warrant holder whose proportionate interest in the earnings and profits of
the Company is increased by such change or transaction. Thus, under certain
future circumstances which may or may not occur, such an adjustment pursuant to
the terms of the Warrants may be treated as a taxable distribution to the
Warrant holders to the extent of the Company's current or accumulated earnings
and profits, without regard to whether the Warrant holders receive any cash or
other property. If the Warrant holders receive such a taxable distribution their
tax bases in the Warrants will be increased by an amount equal to the taxable
distribution.
THE RULES WITH RESPECT TO ADJUSTMENTS ARE COMPLEX AND WARRANT HOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS IN THE EVENT OF AN ADJUSTMENT.
BACKUP WITHHOLDING
A holder of a Warrant may be subject to backup withholding at the rate of
31% with respect to gross proceeds upon sale or exchange of a Warrant unless
such holder (a) is a corporation or other exempt recipient, and, when required,
demonstrates this fact or (b) provides, when required, a correct taxpayer
identification number, certifies that backup withholding is not in effect and
otherwise complies with applicable requirements of the backup withholding rules.
Furthermore, a holder of a Warrant that does not provide its correct taxpayer
identification number when required may be subject to penalties imposed by the
IRS. Backup withholding is not an additional tax; any amounts so withheld are
creditable against the holder's federal income tax liability, if any.
PLAN OF DISTRIBUTION
The Warrant Shares offered by the Company hereby are issuable upon exercise
of the outstanding Warrants. No underwriter has been or will be engaged in
connection with the offering of the Warrant Shares. The exercise price of the
Warrants was determined through negotiation between the Company and
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the Initial Purchasers under of the Unit offering, and should not be assumed to
bear any relationship to the Company's asset value, net worth or other
established criteria of valuation.
The Warrants may be sold from time to time to purchasers directly by the
Selling Security Holders. Alternatively, the Selling Security Holders may from
time to time offer such securities through underwriters, dealers or agents who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Security Holders and/or the purchasers of the
securities for whom they may act as agents. The Selling Security Holders and any
underwriters, dealers or agents that participate in the distribution of the
Warrants may be deemed to be "underwriters" under the Securities Act, and any
profit on the sale of such securities by them and any discounts, commissions or
concessions received by any such underwriters, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities Act.
At the time a particular offer of the Warrants is made, if required, a
Prospectus Supplement will be distributed which will set forth the number of
Warrants being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for Warrants purchased from the Selling Security Holders, any
discounts, commissions and other items constituting compensation from the
Selling Security Holders and any discounts, commissions or concessions allowed
or reallowed or paid to dealers, and the proposed selling price to the public.
The Warrants offered hereby may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at varying prices
determined at the time of sale, or at negotiated prices. Such prices will be
determined by the Selling Security Holders or by agreement between the Selling
Security Holders and any underwriters or dealers, and the criteria used by them
to establish price are likely to include subjective factors.
In order to comply with the applicable securities laws of certain states, if
any, the Warrant Shares and the Warrants may only be sold through registered or
licensed brokers or dealers in those states. In addition, in certain states such
securities may not be offered or sold unless they have been registered or
qualified for sale in such states or an exemption from such registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of securities may not simultaneously bid for or
purchase securities of the same class for a period of two business days prior to
the commencement of such distribution. In addition and without limiting the
foregoing, the Selling Security Holders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including without
limitation Rules 10b-6 and 10b-7, in connection with transactions in the
Warrants and the Common Stock during the effectiveness of the Registration
Statement of which this Prospectus forms a part. All the foregoing may affect
the marketability of the Warrant Shares and the Warrants.
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 Holdings, 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
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their reports, have been audited by Arthur Andersen LLP, independent auditors,
and are included herein in reliance upon the authority of such firm as experts
in giving said report.
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.
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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
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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.
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.
71
<PAGE>
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
TELETRAC HOLDINGS, 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 HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
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 integral part of these condensed consolidated
financial statements.
F-2
<PAGE>
TELETRAC HOLDINGS, 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)
------------- --------------
------------- --------------
WEIGHTED AVERAGE SHARES OUTSTANDING................................................ 143,200 305,437
------------- --------------
------------- --------------
NET LOSS PER SHARE................................................................. $ (33.29) $ (41.91)
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
F-3
<PAGE>
TELETRAC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------
<S> <C> <C>
1996 1997
------------- --------------
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 HOLDINGS, 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 Holdings, Inc. ("Holdings") and its subsidiaries. To create
the holding company, Holdings, Teletrac, Inc. and all of the stockholders of
Teletrac, Inc. entered into an exchange agreement whereby all of Teletrac, Inc's
stockholders exchanged their shares of common stock and preferred stock of
Teletrac, Inc. for substantially similar shares of the common stock and
preferred stock of Holdings. This transaction was completed August 6, 1997, and
has been accounted for as a combination of interests under common control,
similar to a pooling of interests. 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 Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Teletrac
Holdings, Inc. (a Delaware corporation) and subsidiaries, 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 Holdings, Inc., and
subsidiaries 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,
August 6, 1997
F-6
<PAGE>
TELETRAC HOLDINGS, 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 HOLDINGS, 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)
-----------
-----------
WEIGHTED AVERAGE SHARES OUTSTANDING............................................ 206,549
-----------
-----------
NET LOSS PER SHARE............................................................. $ (66.77)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-8
<PAGE>
TELETRAC HOLDINGS, 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 HOLDINGS, 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 HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND BUSINESS ACTIVITIES:
The accompanying consolidated financial statements include the accounts of
Teletrac Holdings, Inc. ("Holdings") and its subsidiaries (collectively, the
"Company"). To create the holding company, Holdings, Teletrac, Inc. and all of
the stockholders of Teletrac, Inc. entered into an exchange agreement whereby
all of Teletrac, Inc.'s stockholders exchanged their shares of the common stock
and preferred stock of Teletrac, Inc. for substantially similar shares of the
common stock and preferred stock of Holdings. This transaction was completed
August 6, 1997, and has been accounted for as a combination of interests under
common control, similar to a pooling of interests. All significant intercompany
accounts have been eliminated. The Company is 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 marketing 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
F-11
<PAGE>
TELETRAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
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>
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.
F-12
<PAGE>
TELETRAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consist of the following (in
thousands):
<TABLE>
<CAPTION>
ESTIMATED
COST USEFUL 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 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.
EARNINGS (LOSS) PER SHARE
Earnings (Loss) per share are computed on the basis of the weighted average
number of common shares outstanding during the period. Additionally, the
warrants issued in connection with the offering of senior notes due 2007 and
warrants to purchase common shares, completed on August 6, 1997, have been
considered outstanding since January 1, 1996.
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.
F-13
<PAGE>
TELETRAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
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.
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,
F-14
<PAGE>
TELETRAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
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.
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 HOLDINGS, 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
ASSETS
<TABLE>
<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
-----------
-----------
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<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, plant 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
<TABLE>
<S> <C>
ASSETS
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
-----------
-----------
LIABILITIES AND PARTNERS' DEFICIT
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 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All items are estimated
except the SEC registration NASD filing fees.
<TABLE>
<S> <C>
SEC registration fee.......................................... $
Printing and engraving expenses............................... *
Legal fees and expenses....................................... *
Accounting fees and expenses.................................. *
Miscellaneous................................................. *
-----------
Total............................................. $ *
-----------
-----------
</TABLE>
- ------------------------
* To be filed by amendment.
All of the above expenses have or will be filed by Holdings and/or the
Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "GCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation--a
"derivative action"), if they acted in good faith and in a manner they
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 their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement or
otherwise. Article V, Section 1 of the Registrant's By-laws requires the
Registrant to indemnify its officers and directors to the fullest extent
permitted under the GCL.
Article Seventh of the Registrant's Certificate of Incorporation and Article
V, Section 1 of the Registrant's By-laws provide that no director of the company
shall be personally liable to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the GCL (involving certain of unlawful dividends or unlawful stock repurchases
or redemptions) or (iv) for any transaction from which the director derived an
improper personal benefit.
Any amendment to or repeal of such Articles shall not adversely affect any
right or protection of a director of the Registrant for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
The Registrant maintains directors' and officers' liability insurance which
covers the directors and officers of the Company with policy limits of
$10,000,000.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the past three years, the Company sold the following securities in
unregistered offerings pursuant to Section 4(2) of the Securities Act:
1. 244,000 shares of Class A Common Stock for an aggregate consideration of
$24.4 million, pursuant to a Stock Purchase Agreement dated November 14,
1995.
2. 5,000 shares of Class A Common Stock for an aggregate consideration of
$500,000, pursuant to a Subscription Agreement dated March 29, 1996.
3. 190,476.19 shares of Series A Redeemable Convertible Participating
Preferred Stock for an aggregate consideration of $33.0 million, pursuant
to a Stock Purchase Agreement dated December 6, 1996.
4. 105,000 Units for an aggregate consideration of $101.3 million pursuant
to a Securities Purchase Agreement, dated July 31, 1997.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation, dated July 15, 1997.
3.2 Certificate of Amendment of Certificate of Incorporation, dated July 30,
1997.
3.3 By-laws, adopted as of July 30, 1997.
4.1 Warrant Agreement, dated August 6, 1997, between the Registrant and
Norwest Bank Minnesota, National Association, as Warrant Agent.
4.2 Indenture between Teletrac, Inc. and Norwest Bank Minnesota, National
Assocation, as Trustee, dated August 6, 1997.
5 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol.**
10.1 VLU Production Agreement, dated as of September 6, 1996, between Tadiran,
Ltd. and Teletrac, Inc.*
10.2 Amendment to VLU Production Agreement, dated as of May 28, 1997, between
Tadiran, Ltd. and Teletrac, Inc.*
10.3 Mobile Data Terminal Purchase Agreement, dated as of February 8, 1996,
between Micronet, Inc. and Teletrac, Inc.*
10.4 Amendment to Mobile Data Terminal Purchase Agreement, dated September 16,
1996, between Micronet, Inc. and Teletrac, Inc.*
10.5 Value Added Reseller License Agreement, dated June 3, 1997, between Etak,
Inc. and Teletrac, Inc.*
10.6 Pledge Agreement, dated August 6, 1997, between Teletrac, Inc. and Norwest
Bank Minnesota, National Association, as Collateral Agent.
21.1 Subsidiaries of Registrant
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
23.1 Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in their
opinion filed as Exhibit 5)**
23.2 Consent of Arthur Anderson LLP
23.3 Consent of Coopers & Lybrand LLP
24.1 Power of Attorney of the Board of Directors (included in the Signature
Page)
</TABLE>
- ------------------------
* Certain information in this Exhibit is deleted pursuant to a request with
the Securities and Exchange Commission for confidential treatment.
** To be filed by Amendment.
(b) Financial Statement Schedules
All other schedules are omitted because they are inapplicable or the
requested information is shown in the financial statements of the Registrant or
notes thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) 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 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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in New York, New York on September 5,
1997.
TELETRAC HOLDINGS, INC.
/s/ JAMES A. QUEEN
---------------------------------------------
James A. Queen
Chairman of the Board of Directors,
Chief Executive Officer, and Director
The undersigned Directors and Officers of Teletrac Holdings, Inc., hereby
appoint James A. Queen and Steven D. Scheiwe, or either of them individually, as
attorney-in-fact for the undersigned, with full power of substitution for, and
in the name, place and stead of the undersigned, to sign and file with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
any and all amendments (including post-effective amendments) and exhibits to
this Registration Statement on Form S-1 and any and all applications and other
documents to be filed with the Securities and Exchange Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite and necessary
or desirable, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman Of The Board,
/s/ JAMES A. QUEEN Chief Executive Officer
- ------------------------------ and Director (Principal September 5, 1997
James A. Queen Executive Officer)
Vice President of Finance
/s/ ALAN B. HOWE and Corporate Development
- ------------------------------ (Principal Financial September 5, 1997
Alan B. Howe Officer)
/s/ CHARLES SCHEIWE
- ------------------------------ Controller (principal September 5, 1997
Charles Scheiwe Accounting Officer)
- ------------------------------ Director September 5, 1997
Sanford Anstey
/s/ ROBERT BENBOW
- ------------------------------ Director September 5, 1997
Robert Benbow
/s/ DAVID J. BERKMAN
- ------------------------------ Director September 5, 1997
David J. Berkman
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ MICHAEL A. GREELEY
- ------------------------------ Director September 5, 1997
Michael A. Greeley
/s/ MICHAEL MARKBREITER
- ------------------------------ Director September 5, 1997
Michael Markbreiter
/s/ MARC H. MICHEL
- ------------------------------ Director September 5, 1997
Marc H. Michel
- ------------------------------ Director September 5, 1997
Brian A. Rich
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation, dated July 30, 1997.
3.2 Certificate of Amendment of Certificate of Incorporation, dated June 30, 1997.
3.3 By-laws, adopted as of July 30, 1997.
4.1 Warrant Agreement, dated August 6, 1997, between the Registrant and Norwest Bank Minnesota, National
Association, as Warrant Agent.
4.2 Indenture between Teletrac, Inc. and Norwest Bank Minnesota, National Association, as Trustee, dated
August 6, 1997.
5 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol.**
10.1 VLU Production Agreement, dated as of September 6, 1996, between Tadiran, Ltd. and Telectrac, Inc.*
10.2 Amendment to VLU Production Agreement, dated as of May 28, 1997, between Tadiran, Ltd. and Teletrac,
Inc.*
10.3 Mobile Data Terminal Purchase Agreement, dated as of February 8, 1996, between Micronet, Inc. and
Teletrac, Inc.*
10.4 Amendment to Mobile Data Terminal Purchase Agreement, dated September 16, 1996, between Micronet,
Inc. and Teletrac, Inc.*
10.5 Value Added Reseller License Agreement, dated June 3, 1997, between Etak, Inc. and Teletrac, Inc.*
10.6 Pledge Agreement, dated August 6, 1997, between Teletrac, Inc. and Norwest Bank Minnesota, National
Association, as Collateral Agent.
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
23.3 Consent of Coopers & Lyrand LLP
24.1 Power of Attorney of the Board of Directors (included in the Signature Page)
</TABLE>
- ------------------------
* Certain information in this Exhibit is deleted pursuant to a request with the
Securities and Exchange Commission for confidential treatment.
** To be Filed by Amendment.
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
TELETRAC HOLDINGS, INC.
---------------------------------
FIRST: The name of the Corporation is
TELETRAC HOLDINGS, INC.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of the Corporation's registered agent at such address is
Corporation Service Company.
THIRD: The purposes for which the Corporation is formed are to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is nine hundred fifty-eight thousand eight hundred
eighty-eight (958,888) shares, consisting of:
(1) five hundred seven thousand nine hundred and thirty-four
(507,934) shares of Class A Common Stock, one cent par value ($0.01) per
share (the "Class A Common");
(2) seventy thousand (70,000) shares of Class B Common Stock, one
cent par value ($0.01) per share (the "Class B Common");
(3) one hundred ninety thousand four hundred seventy-seven
(190,477) shares of Series A Redeemable Con-
<PAGE>
vertible Participating Preferred Stock, one cent par value ($0.01) per
share, with such designations, rights, preferences and privileges and such
qualifications, limitations and restrictions as the Board of Directors
shall determine from time to time ("Series A Preferred Stock"); and
(4) one hundred ninety thousand four hundred seventy-seven
(190,477) shares of Preferred Stock, one cent par value ($0.01) per share,
with such designations, rights, preferences and privileges and such
qualifications, limitations and restrictions as the Board of Directors
shall determine from time to time pursuant to Subpart IIA hereof
("Undesignated Preferred Stock").
The Class A Common and the Class B Common are hereafter
collectively referred to as the "Common Stock." The Series A Preferred
Stock and the Undesignated Preferred Stock are hereafter collectively
referred to as the "Preferred Stock."
FIFTH: The name and mailing address of the sole incorporator of the
Corporation are as follows:
Gregory R. Salath
45 Rockefeller Plaza
New York, N.Y. 10111
SIXTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors of the
Corporation is expressly authorized and empowered to make, alter or repeal
the By-laws of the
2
<PAGE>
Corporation, subject to the power of the stockholders of the Corporation to
alter or repeal any By-law made by the Board of Directors.
SEVENTH: The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provisions contained in this
Certificate of Incorporation; and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
EIGHTH: (a) The Corporation shall indemnify each of the
Corporation's directors and officers in each and every situation where, under
Section 145 of the General Corporation Law of the State of Delaware, as amended
from time to time ("Section 145"), the Corporation is permitted or empowered to
make such indemnification. The Corporation may, in the sole discretion of the
Board of Directors of the Corporation, indemnify any other person who may be
indemnified pursuant to Section 145 to the extent the Board of Directors deems
advisable, as permitted by Section 145. The Corporation shall promptly make or
cause to be made any determination required to be made
3
<PAGE>
pursuant to Section 145.
(b) No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
PROVIDED, HOWEVER, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is subsequently amended
to further eliminate or limit the liability of a director, then a director of
the Corporation, in addition to the circumstances in which a director is not
personally liable as set forth in the preceding sentence, shall not be liable to
the fullest extent permitted by the amended General Corporation Law of the State
of Delaware. For purposes of this Article EIGHTH, "fiduciary duty as a
director" shall include any fiduciary duty arising out of serving at the
Corporation's request as a director of another corporation, partnership, joint
venture or other enterprise, and "personal liability to the Corporation or its
stockholders" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
Corporation in its capacity as a security
4
<PAGE>
holder, joint venturer, partner, beneficiary, creditor or investor of or in any
such other corporation, partnership, joint venture, trust or other enterprise.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, does make this Certificate,
hereby declaring, certifying and acknowledging under penalties of perjury that
the facts herein stated are true and that this Certificate is his act and deed,
and accordingly has hereunto set his hand, this day of July 1997.
---------------------------------------
Gregory R. Salathe
Incorporator
5
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TELETRAC HOLDINGS, INC.
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
The undersigned, being the elected Vice President and Secretary of
TELETRAC HOLDINGS, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST: that the name of the corporation is Teletrac Holdings, Inc.
SECOND: that Article FOURTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended and restated in its entirety
to read as follows:
"FOURTH.
I. AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation
has authority to issue is one million four hundred fifty thousand nine
hundred fifty-four (1,450,954) shares, consisting of:
(1) one million (1,000,000) shares of Class A Common Stock, one
cent par value ($0.01) per share (the "Class A Common");
(2) seventy thousand (70,000) shares of Class B Common Stock, one
cent par value ($0.01) per share (the "Class B Common");
(3) one hundred ninety thousand four hundred seventy-seven
(190,477) shares of Series A Redeemable Convertible Participating Preferred
Stock, one cent par value ($0.01) per share ("Series A Preferred Stock");
and
(4) one hundred ninety thousand four hundred seventy-seven
(190,477) shares of Preferred Stock, one cent par value ($0.01) per share,
with such designations, rights, preferences and privileges and such
qualifications, limitations and restrictions as the Board of Directors
shall
<PAGE>
determine from time to time pursuant to Subpart IIA hereof ("Undesignated
Preferred Stock").
The Class A Common and the Class B Common are hereafter
collectively referred to as the "Common Stock." The Series A Preferred
Stock and the Undesignated Preferred Stock are hereafter collectively
referred to as the "Preferred Stock."
II. PREFERRED STOCK
A. UNDESIGNATED PREFERRED STOCK. The Undesignated Preferred Stock
may be issued from time to time in one or more series of any number of shares
pursuant to Section 4(k) of Subpart IIB hereof, provided that the aggregate
number of shares issued and not canceled of any and all such series, together
with the aggregate number of shares of Series A Preferred Stock then
outstanding, shall not exceed 190,477 shares. Subject to the foregoing, the
Board of Directors of the Corporation is hereby authorized to determine and
alter all rights, preferences and privileges and qualifications, limitations and
restrictions thereof (including, without limitation, voting rights and the
limitation and exclusion thereof) granted to or imposed upon any wholly unissued
series of Preferred Stock and the number of shares constituting any such series
and the designation thereof, and to increase or decrease (but not below the
number of shares of such series then outstanding) the number of shares of any
series subsequent to the issue of shares of that series then outstanding.
B. SERIES A REDEEMABLE CONVERTIBLE PARTICIPATING PREFERRED STOCK.
The relative rights, preferences, restrictions and other matters relating to the
Series A Preferred Stock are as follows:
1. DIVIDENDS.
(a) The holders of the Series A Preferred Stock shall be
entitled to receive cumulative, compounding dividends ("Cumulative
Dividends") at a rate per annum of fifteen percent (15%). Such dividends
shall accrue on a daily basis, shall be cumulative from the date of
original issue and shall be payable out of funds legally available
therefor, when and as declared by the Board of Directors and, in any event,
upon redemption of the Series A Preferred Stock or any liquidation of the
Corporation. Each such Cumulative Dividend shall be paid to the holders of
record of shares of the Series A Preferred Stock as they appear on the
stock register on the applicable record date, and in the event that
Cumulative Dividends are not paid as of any calendar year end, such
dividends shall thereafter compound and
2
<PAGE>
accrue additional Cumulative Dividends at the applicable dividend rate.
(b) For so long as any shares of Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment on any shares of any other class or classes of stock of the
Corporation or any series thereof (other than the other series of Preferred
Stock, if any), nor shall any shares of capital stock be redeemed,
purchased or otherwise acquired for any consideration (or any moneys to be
paid to or made available for a sinking fund for the redemption of any such
shares) by the Corporation (except (i) by conversion into or exchange for
shares of the Corporation ranking junior to the Preferred Stock as to
dividends and upon liquidation, (ii) for conversion of any series of
Preferred Stock to another series of Preferred Stock and (iii) for
repurchases of shares of Common Stock by the Corporation under employee
stock plans and programs approved by the Board of Directors), provided that
the repurchase price 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).
(c) In addition, the holders of the Series A Preferred Stock
shall be entitled to receive out of funds legally available therefor,
dividends (other than dividends paid in additional shares of Common Stock
or the Special Dividend (as defined below)) at the same rate as dividends
are paid with respect to the Common Stock (treating each share of Series A
Preferred Stock as being equal to the maximum number of shares of Common
Stock into which each such share of Series A Preferred Stock could then be
converted pursuant to the provisions of Section 4 hereof).
(d) In addition to the Cumulative Dividends provided for in this
Section 1 and notwithstanding anything to the contrary set forth in this
Section 1, a dividend may be declared by the Board of Directors of the
Corporation on the Series A Preferred Stock, each other series of Preferred
Stock (if any), and the Common Stock with respect to all or any portions of
the net proceeds received by the Corporation in connection with a spinoff
or sale, in whole or in part, of assets of the Corporation which constitute
a separate business unit or operation (a "Special Dividend"). Such Special
Dividend shall be first paid in the ratio of 1.7325 to 1.00 on each share
of the Preferred Stock (unless otherwise provided under the terms of any
other series of
3
<PAGE>
Preferred Stock) and the Common Stock, respectively, until such time as an
aggregate of $173.25 shall have been paid on each share of Preferred Stock
(unless otherwise provided under the terms of any other series of Preferred
Stock), and thereafter any remaining balance of the proceeds of the Special
Dividend shall be paid ratably to the holders of Common Stock and the holders of
Preferred Stock, treating each share of Series A Preferred Stock as being equal
to the maximum number of shares of Common Stock into which such share of Series
A Preferred Stock could then be converted pursuant to the provisions of Section
4 hereof.
2. PREFERENCE ON LIQUIDATION.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, the holders of the Series A Preferred Stock shall be
entitled to receive in cash, on a PRO RATA basis with the holders of any
other series of Preferred Stock (if any) in accordance with the terms
thereof and prior and in preference to any distribution of any assets,
capital, surplus or earnings of the Corporation to the holders of any other
capital stock of the Corporation junior to the Preferred Stock, an amount
equal to $190.86 per share for each share of Series A Preferred Stock then
held by such holder (adjusted for any stock split, combination,
consolidation, or stock distributions or stock dividends with respect to
such shares), plus a sum equal to all Cumulative Dividends (whether or not
earned or declared) on such shares of the Series A Preferred Stock to the
date of final distribution (the "Liquidation Preference Amount"); PROVIDED,
HOWEVER, that if upon any such liquidation, dissolution or winding up of
the Corporation the holders of the outstanding shares of Series A Preferred
Stock would receive more than the Liquidation Preference Amount if their
shares were converted into Common Stock pursuant to the provisions of
Section 4 hereof immediately prior to the record date for distributions in
connection with such event, then the holders of the Series A Preferred
Stock shall be entitled to receive, in lieu of the Liquidation Preference
Amount, in cash, PRO RATA with the holders of any other series of Preferred
Stock (if any) in accordance with the terms thereof and prior and in
preference to any distribution of any assets, capital, surplus or earnings
of the Corporation to the holders of any other capital stock of the
Corporation, an amount equal to the ratable share of the assets and funds
available for distribution to holders of Common Stock, with such
distributions to be made as if each share of Preferred Stock had been
converted into the maximum number of shares of Common Stock issuable upon
the conversion of such share
4
<PAGE>
of Preferred Stock immediately prior to such event. If the assets and
funds available for distribution among the holders of the Preferred Stock
shall be insufficient to permit the payment to the holders of the Series A
Preferred Stock of the full Liquidation Preference Amount, then the entire
assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Preferred Stock (on
an as-converted basis). The provisions of this Section 2 shall not in any
way limit the right of the holders of Series A Preferred Stock to elect to
convert their shares into Common Stock pursuant to Section 4 prior to or in
connection with any such event.
(b) The following shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2 (with each
such event being referred to herein as a "Corporate Disposition") and the
holders of Series A Preferred Stock shall be entitled to the application of
the provisions of this Section 2 upon the occurrence of such Corporate
Disposition UNLESS the holder or holders of not less than sixty-six and
two-thirds percent (662/3%) of the outstanding shares of Preferred Stock
(with all series of Preferred Stock voting together as a single class, on
an as-converted basis) shall have elected the application of the provisions
of Section 4(j) hereof: (i) a merger or consolidation of the Corporation
with or into another corporation (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 the Corporation immediately prior to such
event); (ii) the sale or transfer of all or substantially all of the
properties and assets of the Corporation and its subsidiaries; or (iii) any
purchase of shares of capital stock of the Corporation (either through a
negotiated stock purchase or a tender for such shares) by a person or
entity not affiliated with the Corporation or any of its stockholders, the
effect of which is that such party beneficially owns at least a majority of
the voting power of the outstanding shares of capital stock of the
Corporation immediately after such purchase. Notwithstanding anything to
the contrary set forth in this Section 2, in the event of a Corporate
Disposition on or before December 4, 1998, the holders of the Series A
Preferred Stock shall be entitled to receive, in lieu of the Liquidation
Preference Amount, in cash, PRO RATA with the holders of any other series
of Preferred Stock (if any) in accordance with the terms thereof and prior
and in preference to any distribution of assets, capital, surplus or
earnings of the Corporation to the holders of any other capital stock of
the Corporation, an amount equal to $259.88 per share of Series A Preferred
5
<PAGE>
Stock (adjusted for any stock split, combination, consolidation, or stock
distributions or stock dividends with respect to such share), UNLESS the
holder or holders of not less than sixty-six and two-thirds percent
(662/3%) of the outstanding shares of Preferred Stock (with all series of
Preferred Stock voting together as a single class, on an as-converted
basis) expressly waive in writing the application of the provisions of this
Section 2 in connection with such Corporate Disposition. The provisions of
this Section 2 shall not in any way limit the rights of the holders of
Series A Preferred Stock to elect the application of the provisions of
Section 4(j) hereof in connection with a Corporate Disposition.
3. VOTING.
(a) GENERAL. Except as otherwise expressly provided herein or
as required by law, the holder of each share of Series A Preferred Stock
shall be entitled to vote on all matters submitted to a stockholder vote or
consent. Each share of Series A Preferred Stock shall entitle the holder
thereof to such number of votes per share as shall equal the maximum number
of shares of Common Stock into which each share of Series A Preferred Stock
is then convertible in accordance with the provisions of Section 4 hereof
at the record date for the determination of stockholders entitled to vote
on such matter or, if no record date is established, at the date such vote
is taken or any written consent of stockholders is solicited. Except as
otherwise expressly provided herein (including without limitation the
provisions of Section 6 hereof) or as required by law, the holders of
shares of Preferred Stock and the Common Stock shall vote together as a
single class on all matters.
(b) BOARD OF DIRECTORS. The holders of the Preferred Stock
shall be entitled to vote as a class (with all series of Preferred Stock
voting together as a single class, on an as-converted basis) for the
election of two (2) directors. The remainder of the directors shall be
elected by the holders of the Preferred Stock and the Common Stock voting
together as a single class. In any vote by the holders of the Preferred
Stock, each share of Series A Preferred Stock shall be entitled to the
number of votes determined as provided in Section 3(a).
4. CONVERSION RIGHTS. The holders of Series A Preferred Stock shall
have conversion rights as follows:
6
<PAGE>
(a) VOLUNTARY CONVERSION. At any time, each holder of shares of
Series A Preferred Stock shall be entitled, without the payment of any
additional consideration, to cause any or all outstanding shares of Series
A Preferred Stock held by such holder to be converted into the number of
fully-paid and nonassessable shares of Class A Common Stock which results
from dividing the Conversion Price (as defined below) then in effect at the
time of conversion into the Conversion Value of the Series A Preferred
Stock, which shall be $173.25 per share. The "Conversion Price" shall be
$173.25 per share of Common Stock, subject to adjustment from time to time
as provided in this Section 4. If a holder of Series A Preferred Stock
elects to convert under this Section 4(a), such holder shall deliver to the
Corporation a written notice of conversion specifying (i) the number of
shares of Series A Preferred Stock to be converted, (ii) the name or names
in which such holder wishes the certificate or certificates for Common
Stock and for any Series A Preferred Stock not to be so converted to be
issued and (iii) the address to which such holder wishes delivery to be
made of such new certificates to be issued upon such conversion.
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted, without the payment of any
additional consideration, into shares of Common Stock on the basis provided
in Section 4(a) above (i) upon the closing of an 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 of the Corporation 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, recapitalizations and the
like) and resulting in gross proceeds of at least
$30,000,000 (a "Qualified Public Offering"), or (ii) upon the written
election of the holder or holders of not less than sixty-six and two-thirds
percent (662/3%) percent of the outstanding Preferred Stock (with all
series of Preferred Stock voting together as a single class, on an
as-converted basis) made in connection with the closing of an underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock of the
Corporation to the public which does not constitute a Qualified Public
Offering (a "Public Offering").
(c) CONVERSION PROCEDURES. Any holder of Series A Preferred
Stock converting such shares into shares of
7
<PAGE>
Common Stock, or whose shares are automatically converted pursuant to
Section 4(b), shall surrender the certificate or certificates representing
the Series A Preferred Stock being converted, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers
relating thereto), at the principal executive office of the Corporation or
the offices of the transfer agent for the Series A Preferred Stock or such
office or offices in the continental United States of an agent for
conversion as may from time to time be designated by notice to the holders
of the Series A Preferred Stock by the Corporation, or shall deliver an
Affidavit of Loss with respect to such certificates. Upon surrender of a
certificate representing Series A Preferred Stock for conversion, the
Corporation shall issue and send by hand delivery, by courier or by first
class mail (postage prepaid) to the holder thereof or to such holder's
designee, at the address designated by such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled upon conversion. In the event that there shall have been
surrendered a certificate or certificates representing Series A Preferred
Stock, only part of which are to be converted, the Corporation shall issue
and send to such holder or such holder's designee, in the manner set forth
in the preceding sentence, a new certificate or certificates representing
the number of shares of Series A Preferred Stock which shall not have been
converted. The issuance and delivery of certificates for Common Stock upon
conversion of Series A Preferred Stock will be made without charge to the
holders of such shares for any issuance tax in respect thereof or other
costs incurred by the Corporation in connection with such conversion and
the related issuance of such stock.
(d) EFFECTIVE DATE OF CONVERSION. The issuance by the
Corporation of shares of Common Stock upon a conversion of Series A
Preferred Stock into shares of Common Stock at the option of the holder(s)
thereof pursuant to Section 4(a) or by operation of Section 4(b) hereof
shall be effective as of the surrender of the certificate or certificates
for the Series A Preferred Stock to be converted, duly assigned or endorsed
for transfer to the Corporation (or accompanied by duly executed stock
powers relating thereto) or delivery of an Affidavit of Loss with respect
to such certificates. The issuance by the Corporation of shares of Common
Stock upon a conversion of Series A Preferred Stock into Common Stock
pursuant to Section 4(b) hereof upon a Qualified Public Offering or a
Public Offering shall be deemed to be effective immediately prior to the
closing of such Qualified Public Offering or Public Offering. On and
8
<PAGE>
after the effective date of conversion, the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common
Stock.
(e) NO IMPAIRMENT. The Corporation shall not, by amendment of
its charter documents or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but shall at all times in good faith assist in the carrying
out of all the provisions of this Section 4 and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion and other rights of the holders of the Series A Preferred Stock
against impairment.
(f) FRACTIONAL SHARES. The Corporation shall not be obligated
to deliver to holders of Series A Preferred Stock any fractional share of
Common Stock issuable upon any conversion of such Series A Preferred Stock,
but in lieu thereof may make a cash payment for fair market value in
respect thereof in any manner permitted by law.
(g) RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion of Series A Preferred Stock
as herein provided, free from any preemptive rights or other obligations,
such number of shares of Class A Common Stock as shall from time to time be
issuable upon the conversion of all the Series A Preferred Stock then
outstanding. The Corporation shall prepare and shall use its best efforts
to obtain and keep in force such governmental or regulatory permits or
other authorizations as may be required by law, excluding permits or
authorizations relating to registration under Federal or state securities
laws, in order to enable the Corporation lawfully to issue and deliver to
each holder of record of Series A Preferred Stock such number of shares of
its Common Stock as shall from time to time be sufficient to effect the
conversion of all Series A Preferred Stock then outstanding and convertible
into shares of Class A Common Stock.
(h) ADJUSTMENTS TO CONVERSION PRICE. The Conversion Price in
effect from time to time shall be subject to adjustment from and after
December 4, 1996 and through the effective date of the conversion of all of
the then out-
9
<PAGE>
standing Series A Preferred Stock and regardless of whether any shares of
Series A Preferred Stock are then issued and outstanding as follows:
(I) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. Upon
the issuance of additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock, the subdivision of
outstanding shares of Common Stock into a greater number of shares of
Common Stock, or the combination of outstanding shares of Common Stock
into a smaller number of shares of Common Stock, the Conversion Price
shall, simultaneously with the happening of such dividend, subdivision
or split, be adjusted by multiplying the then effective Conversion
Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event. An adjustment made pursuant
to this Section 4(h)(I) shall be given effect, upon payment of such a
dividend or distribution, as of the record date for the determination
of stockholders entitled to receive such dividend or distribution (on
a retroactive basis) and in the case of a subdivision or combination
shall become effective immediately as of the effective date thereof.
(II) SALE OF COMMON STOCK. In the event the Corporation
shall at any time, or from time to time, issue, sell or exchange any
shares of Common Stock (including shares held in the Corporation's
treasury but excluding any shares of Common Stock issued (i) upon
conversion of the Preferred Stock, or (ii) upon the exercise of
Excluded Options (as defined in Section 4(h)(III) below)), for a
consideration per share less than the Conversion Price in effect
immediately prior to the issuance, sale or exchange of such shares,
then, and thereafter successively upon each such issuance, sale or
exchange, the Conversion Price in effect immediately prior to the
issuance, sale or exchange of such shares shall forthwith be reduced
to an amount determined by multiplying such Conversion Price by a
fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock of all classes outstanding immediately
prior to the issuance of such additional shares of Common Stock
(exclud-
10
<PAGE>
ing treasury shares but including all shares of Common Stock
issuable upon conversion, exercise or exchange of any outstanding
Preferred Stock, options, warrants, rights or convertible or
exchangeable securities), plus (ii) the number of shares of
Common Stock which the total aggregate consideration received by
the Corporation for the total number of such additional shares of
Common Stock so issued would purchase at the Conversion Price
(prior to adjustment), and
(B) the denominator of which shall be (i) the number
of shares of Common Stock of all classes outstanding immediately
prior to the issuance of such additional shares of Common Stock
(excluding treasury shares but including all shares of Common
Stock issuable upon conversion, exercise or exchange of any
outstanding Preferred Stock, options, warrants, rights or
convertible or exchangeable securities), plus (ii) the number of
such additional shares of Common Stock so issued.
(III) SALE OF OPTIONS, RIGHTS OR CONVERTIBLE SECURITIES.
In the event the Corporation shall at any time or from time to time,
issue options, warrants or rights to subscribe for shares of Common
Stock (other than (a) any options or warrants to purchase up to 68,457
shares of Common Stock granted to officers, directors, employees,
consultants, advisors or agents of the Corporation granted or issued
pursuant to employee stock option plans and programs approved by the
compensation committee of the Corporation's Board of Directors, (b)
any warrants for shares of Common Stock issued to a bank or other
financial institution in connection with the Corporation's incurrence
of up to $30,000,000 of senior debt on competitive terms approved by
the Board of Directors, or (c) any warrants for shares of Common Stock
issued to third party purchasers of up to $115 million of high yield
debt issued by the Corporation on or before December 4, 1997 on
competitive market terms approved by the Corporation's Board of
Directors (collectively, the "Excluded Options")), or issue any
securities convertible into or exchangeable for shares of Common
Stock, for a consideration per share (determined by dividing the Net
Aggregate Consideration (as determined below) by the aggregate number
of shares of Common Stock that would be issued if all such options,
warrants, rights or convertible or exchangeable securities were
exercised,
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converted or exchanged to the fullest extent permitted by their terms)
less than the Conversion Price in effect immediately prior to the
issuance of such options, warrants, rights or convertible or
exchangeable securities, the Conversion Price in effect immediately
prior to the issuance of such options, warrants, rights or convertible
or exchangeable securities shall forthwith be reduced to an amount
determined by multiplying such Conversion Price by a fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock of all classes outstanding immediately
prior to the issuance of such options, rights or convertible or
exchangeable securities (excluding treasury shares but including
all shares of Common Stock issuable upon conversion, exercise or
exchange of any outstanding Preferred Stock, options, warrants,
rights or convertible securities), plus (ii) the number of shares
of Common Stock which the total amount of consideration received
by the Corporation for the issuance of such options, warrants,
rights or convertible or exchangeable securities plus the minimum
amount set forth in the terms of such security as payable to the
Corporation upon the exercise, conversion or exchange thereof
(the "Net Aggregate Consideration") would purchase at the
Conversion Price prior to adjustment, and
(B) the denominator of which shall be (i) the number
of shares of Common Stock of all classes outstanding immediately
prior to the issuance of such options, warrants, rights or
convertible or exchangeable securities (excluding treasury shares
but including all shares of Common Stock issuable upon
conversion, exercise or exchange of any outstanding Preferred
Stock, options, warrants, rights or convertible or exchangeable
securities), plus (ii) the aggregate number of shares of Common
Stock that would be issued if all such options, warrants, rights
or convertible or exchangeable securities were exercised,
converted or exchanged.
(IV) EXPIRATION OR CHANGE IN PRICE. If the consideration
per share provided for in any options, warrants or rights to subscribe
for shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock changes at any time, the
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Conversion Price in effect at the time of such change shall be
readjusted to the Conversion Price which would have been in effect at
such time had such options, warrants rights or convertible or
exchangeable securities provided for such changed consideration per
share (determined as provided in Section 4(h)(III) hereof), at the
time initially granted, issued or sold; PROVIDED, that such adjustment
of the Conversion Price will be made only as and to the extent that
the Conversion Price effective upon such adjustment remains less than
or equal to the Conversion Price that would be in effect if such
options, warrants, rights or convertible or exchangeable securities
had not been issued. No adjustment of the Conversion Price shall be
made under this Section 4 upon the issuance of any shares of Common
Stock which are issued pursuant to the exercise of any options,
warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any convertible or
exchangeable securities if an adjustment shall previously have been
made upon the issuance of such options, warrants, rights or
convertible or exchangeable securities. Any adjustment of the
Conversion Price shall be disregarded if, as, and when the rights to
acquire shares of Common Stock upon exercise or conversion of the
options, warrants, rights or convertible or exchangeable securities
which gave rise to such adjustment expire or are canceled without
having been exercised, so that the Conversion Price effective
immediately upon such cancellation or expiration shall be equal to the
Conversion Price in effect at the time of the issuance of the expired
or canceled warrants, options, rights or convertible securities, with
such additional adjustments as would have been made to that Conversion
Price had the expired or canceled warrants, options, rights or
convertible securities not been issued.
(i) OTHER ADJUSTMENTS. In the event the Corporation shall make
or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a non-cash dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock,
then and in each such event lawful and adequate provision shall be made so
that the holders of Series A Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the number of securities of the Corporation which they would
have received had their Series A Preferred Stock
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been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including
the Conversion Date (as that term is hereafter defined), retained such
securities receivable by them as aforesaid during such period.
If the Common Stock issuable upon the conversion of the Series A
Preferred Stock shall be changed into the same or different number of
shares of any class or classes of stock, whether by reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 4),
then and in each such event the holder of each share of Series A Preferred
Stock shall have the right thereafter to convert such share into the kind
and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change, by holders of
the number of shares of Common Stock into which such shares of Series A
Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(j) MERGERS AND OTHER REORGANIZATIONS. If (x) at any time or
from time to time there shall be (i) a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Section 4), (ii) a merger or
consolidation of the Corporation with or into another corporation (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 the
Corporation immediately prior to such event) or (iii) the sale of all or
substantially all of the Corporation's properties and assets to any other
person and (y) the holders of sixty-six and two-thirds percent (662/3%) of
the outstanding shares of Preferred Stock (with all series of Preferred
Stock voting together as a single class, on an as-converted basis)
expressly elect in writing to have the provisions of this Section 4(j), and
not the provisions of Section 2, apply to such transaction, then, as a part
of and as a condition to the effectiveness of such reorganization, merger,
consolidation or sale, lawful and adequate provision shall be made so that
the holders of the Series A Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock the number of
shares of stock or other securities or property of the Corporation or of
the successor corporation resulting from such merger or consoli-
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dation or sale, to which such holders would have been entitled upon such
capital reorganization, merger, consolidation or sale had such holders
converted their shares of Series A Preferred Stock into Common Stock
immediately prior to such capital reorganization, merger, consolidation, or
sale. In any such case, appropriate provisions shall be made with respect
to the rights of the holders of the Series A Preferred Stock after the
reorganization, merger, consolidation or sale to the end that the
provisions of this Section 4 (including without limitation provisions for
adjustment of the Conversion Price and the number of shares purchasable
upon conversion of the Series A Preferred Stock) shall thereafter be
applicable, as nearly as may be, with respect to any shares of stock,
securities or assets to be deliverable thereafter upon the conversion of
the Series A Preferred Stock. The provisions of this Section 4(j) shall
not in any way limit the rights of the holders of Series A Preferred Stock
under Section 2 hereof if an election to have this Section 4(j) apply to
such transaction is not made by such holders.
(k) EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE.
Notwithstanding anything herein to the contrary, in the event that (x) the
Corporation completes an issuance of new securities (for purposes of this
paragraph, the "New Securities") that results in an adjustment of the
Conversion Price pursuant to Sections 4(h)(II) or 4(h)(III) and which the
holders of Series A Preferred Stock had a right to purchase pursuant to
Article IV of a certain Stockholders Agreement dated December 4, 1996 by
and among the Corporation and certain of its stockholders (the
"Stockholders Agreement") and (y) any holder of the Series A Preferred
Stock does not purchase its pro rata share (as defined in Article IV of the
Stockholders Agreement) of such New Securities, then such holder (a
"Non-Participating Holder") shall not be entitled to the benefits of
Section 4(h)(II) or Section 4(h)(III), as applicable, with respect to any
adjustment to the Conversion Price resulting from that issuance or any
future issuances of New Securities and all of such Non-Participating
Holder's shares of Series A Preferred Stock shall immediately and
automatically, without further action by such Non-Participating Holder, be
converted on a share-for-share basis to a new series of Preferred Stock,
which shall be identical in all respects to the Series A Preferred Stock
except that (i) the Conversion Price of such new series of Preferred Stock
shall be equal to the Conversion Price of the Series A Preferred Stock in
effect immediately prior to the issuance of such New Securities and (ii)
the terms of such new series of Preferred Stock shall not contain any
provision for adjust-
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ment thereof similar to Sections 4(h)(II) or (III) hereof. Prior to the
issuance of any new series of Preferred Stock (a) the Board of Directors
shall designate the number of shares and the series of Preferred Stock to
be issued in accordance with this Section 4(k) at that time and (b) the
Corporation shall file all certificates and take all actions necessary to
effectuate the foregoing. Any holder of Series A Preferred Stock whose
shares are automatically converted pursuant to this Section 4(k) into
shares of a new series of Preferred Stock shall surrender the certificate
or certificates representing the Series A Preferred Stock so converted,
duly assigned or endorsed for transfer to the Corporation (or accompanied
by duly executed stock powers relating thereto), at the principal executive
office of the Corporation or the offices of the transfer agent for the
Series A Preferred Stock or such office or offices in the continental
United States of an agent for conversion as may from time to time be
designated by notice to the holders of the Series A Preferred Stock by the
Corporation, or shall deliver an Affidavit of Loss with respect to such
certificates. Upon surrender of a certificate representing Series A
Preferred Stock for conversion under this Section 4(k), the Corporation
shall issue and send by hand delivery, by courier or by first class mail
(postage prepaid) to the holder thereof or to such holder's designee, at
the address designated by such holder, a certificate or certificates for
the number of shares of the new series of Preferred Stock to which such
holder shall be entitled upon such automatic conversion. The issuance and
delivery of certificates for a new series of Preferred Stock upon
conversion of Series A Preferred Stock will be made without charge to the
holders of such shares for any issuance tax in respect thereof or other
costs incurred by the Corporation in connection with such conversion and
the related issuance of such stock. Each share of Series A Preferred Stock
converted pursuant to this Section 4(k) shall be canceled and retired as
provided in Section 7 hereof. In the event that any Non-Participating
Holder fails to surrender its certificates as provided hereunder, such
certificate shall nonetheless represent only the right to receive a new
series of Preferred Stock, as provided hereunder.
(l) WAIVER. The holder or holders of not less than sixty-six
and two-thirds percent (662/3%) of the outstanding Preferred Stock (with
all series of Preferred Stock voting together as a single class, on an
as-converted basis) may, by written notice to the Corporation, waive any
adjustment to the Conversion Price required under this Section 4.
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<PAGE>
(m) NOTICES. In each case of an adjustment or readjustment of
the Conversion Price, the Corporation will furnish each holder of Series A
Preferred Stock with a certificate, prepared by the chief financial officer
of the Corporation, showing such adjustment or readjustment, and stating in
detail the facts upon which such adjustment or readjustment is based.
5. REDEMPTION.
(a) At any time on or after February 1, 2008, at the election of
the holders of a majority of the outstanding Preferred Stock (with all
series of Preferred Stock voting together as a single class, on an
as-converted basis), the Corporation shall redeem each share of Series A
Preferred Stock then outstanding for a cash price (the "Redemption Price")
equal to the greater of (i) the Liquidation Preference Amount or (ii) the
fair market value of the Series A Preferred Stock as of the date of
redemption (the "Redemption Date") as determined in accordance with Section
5(d) below, together with each share of all other series of Preferred Stock
(if any) in accordance with the terms thereof.
(b) TERMINATION OF RIGHTS. From and after the Redemption Date,
unless there shall have been a default in payment or tender by the
Corporation of the Redemption Price, all rights of the holders with respect
to such redeemed shares of Series A Preferred Stock (except the right to
receive the Redemption Price in accordance with the terms hereof upon
surrender of their certificate) shall cease and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to
be outstanding for any purpose whatsoever.
(c) INSUFFICIENT FUNDS. If the funds of the Corporation legally
available for redemption of shares of Series A Preferred Stock and all
other series of Preferred Stock (if any) to be redeemed on the Redemption
Date are insufficient to redeem the total number of shares of Series A
Preferred Stock and such other series of Preferred Stock (if any), the
Corporation shall use those funds which are legally available to redeem the
maximum possible number of such shares ratably among the holders of such
shares to be redeemed. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of Series A
Preferred Stock and such other series of Preferred Stock (if any), such
funds will immediately be used to redeem the balance of the shares which
the Corpora-
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tion has become obligated to redeem on the Redemption Date but which it has
not redeemed at the Redemption Price together with any accrued interest
thereon as provided below. If any shares of Series A Preferred Stock are
not redeemed because the Corporation failed to pay or tender to pay the
aggregate Redemption Price on all outstanding shares of Preferred Stock,
(i) all shares which have not been redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein, and the
Corporation shall pay interest on the unpaid portion of the Redemption
Price for the unredeemed portion at a per annum rate equal to twenty
percent (20%) or the maximum rate of interest permitted under applicable
law, whichever is less and (ii) if such Redemption Price shall remain
unpaid for a period of nine (9) months, then the Board of Directors shall
take all actions that it deems necessary to fund the Redemption Price,
including, without limitation, the sale or liquidation of the Corporation.
(d) FAIR MARKET VALUE DETERMINATION.
(i) If the Corporation's Common Stock is publicly traded at
the Redemption Date, the Fair Market Value of each share of Series A
Preferred Stock shall equal the product of the number of shares of
Common Stock into which each share of the Series A Preferred Stock may
then be converted MULTIPLIED by the average closing price for the
Corporation's Common Stock for the thirty (30) trading days
immediately preceding the Redemption Date.
(ii) If the Corporation's Common Stock is not publicly
traded on the Redemption Date, the Fair Market Value shall be
determined in accordance with the following provisions. Within
fifteen (15) days after the redemption election by the holders of
Preferred Stock pursuant to Section 5(a), the Corporation shall
deliver to each holder of Series A Preferred Stock its estimate of the
Fair Market Value of the Series A Preferred Stock and an estimate of
the fair market value of all other shares of Preferred Stock (if any)
to be redeemed. If the holders of sixty-six and two-thirds percent
(66 2/3%) of the outstanding shares of the Preferred Stock (with all
series of Preferred Stock voting together as a single class, on an
as-converted basis) do not object in writing to the Corporation's
estimate of the Fair Market Value of any series of Preferred Stock
within fifteen (15) days after receipt of the Corporation's written
notice thereof, such estimate
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shall be the Fair Market Value for purposes of determining the
Redemption Price of the Series A Preferred Stock. If the holders of
sixty-six and two-thirds percent (662/3%) of the outstanding shares of
the Preferred Stock (with all series of Preferred Stock voting
together as a single class, on an as-converted basis) do timely object
to the Corporation's estimate of Fair Market Value, the Corporation
and such holders shall seek for a ten-day period thereafter to
negotiate the Fair Market Value in good faith. If the Corporation and
the holders of sixty-six and two-thirds percent (662/3%) of the
outstanding shares of the Preferred Stock (with all series of
Preferred Stock voting together as a single class, on an as-converted
basis) are unable to agree upon such Fair Market Value by the end of
such period, each of the Corporation and the holders (acting at the
direction of a majority of the outstanding shares of Preferred Stock
(with all series of Preferred Stock voting together as a single class,
on an as-converted basis)) shall, within ten (10) days thereafter,
select an unaffiliated investment banking firm of nationally
recognized standing in the telecommunications industry to appraise the
Fair Market Value of the Series A Preferred Stock. Each such firm
will deliver its appraisal of the Fair Market Value within fifteen
(15) days thereafter, and if the lower appraisal is at least ninety
percent (90%) of the higher appraisal, the arithmetic mean of the two
shall be the Fair Market Value. If the two appraisals vary by more
than ten percent (10%), the two firms shall promptly select a third
investment banking firm of nationally recognized standing in the
telecommunications industry. Such third firm shall, within ten (10)
days thereafter, deliver its appraisal of the Fair Market Value of the
Series A Preferred Stock, the two appraisals which are closest
together in value shall be averaged and such amount shall be the Fair
Market Value for purposes of determining the Redemption Price.
(iii) When determining the Fair Market Value of the
Series A Preferred Stock, the appraisers shall consider, among other
factors, book value, replacement value, comparable public company
valuations, earnings, the value of future cash flows of the
Corporation and its subsidiaries as an on-going enterprise and the
sale of various combinations of the individual assets of the
Corporation and its subsidiaries as well as a sale of the Corporation
and its subsidiaries as a whole, choosing the manner of sale which
maximizes the
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aggregate value of the assets being sold, and shall make no deduction,
discount or other subtraction whatsoever for the possible minority
status of any such holder or for any lack of marketability of any
shares of stock held by such holder or any restrictions on transfer
thereof. All costs of the appraisals under this Section 5(d) shall be
borne by the Corporation.
6. RESTRICTIONS AND LIMITATIONS. So long as the Series A Preferred
Stock remains outstanding, the Corporation shall not without the affirmative
vote or written consent of the holders of a majority of the then outstanding
shares of the Preferred Stock (with all series of Preferred Stock voting
together as a single class, on an as-converted basis), or such higher percentage
as is set forth below (adjusted appropriately for stock splits, stock dividends
and the like):
(i) Authorize or issue, or obligate itself to issue, any
other equity security senior to or on a parity with the Series A
Preferred Stock as to liquidation preferences, redemptions or dividend
rights or with any special voting rights (other than with respect to
issuances of any other series of 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 to the extent expressly permitted
under the Stock Purchase Agreement dated as of December 4, 1996 among
Teletrac, Inc. and the other parties identified on the signature pages
thereto, as amended and assigned to the Corporation pursuant to the
Exchange Agreement dated as of July 31, 1997);
(iii) 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
Corporation or any of the Corporation's outstanding options, warrants
or convertible or exchangeable securities, except for repurchases of
shares of Common Stock at cost by the Corporation under employee stock
plans and programs approved by the Board of Directors;
(iv) Enter into any transaction or agreement with any
officer, director or stockholder of the Corporation or any wholly- or
partially-owned subsidiary of the Corporation, or any entity that
controls, is controlled by or under common control with, the Corpora-
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tion, except for any transaction or agreement on terms no less
favorable to the Corporation 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 Corporation;
(v) Authorize any merger or consolidation of the Corporation
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
the Corporation 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);
(vi) Authorize or permit the voluntary bankruptcy,
reorganization, liquidation, dissolution or winding up of the
Corporation 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 (with all series of Preferred Stock voting together
as a single class, on an as-converted basis);
(vii) Amend the charter documents of the Corporation so as
to adversely effect the rights of the holders of Series A Preferred
Stock with respect to dividends, liquidation preferences or redemption
without the vote or affirmative written consent of holders of eighty
percent (80%) of the outstanding shares of Preferred Stock (with all
series of Preferred Stock voting together as a single class, on an
as-converted basis) or, amend the charter documents or by-laws of the
Corporation in any manner that adversely affects any other
preferences, powers, rights or privileges of the holders of Series A
Preferred Stock 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 (with all series of Preferred
Stock voting together as a single class, on an as-converted basis); or
(viii) Increase or decrease (other than by conversion as
permitted hereby) the total number of authorized shares of Preferred
Stock.
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7. NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or shares of
the Series A Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion (including, without limitation, conversion of
Series A Preferred Stock into Undesignated Preferred Stock under Section 4(k)
hereof) or otherwise shall be reissued, and all such shares shall be canceled,
retired and eliminated from the shares which the Corporation shall be authorized
to issue. The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Series A Preferred Stock accordingly.
8. NOTICES OF RECORD DATE. In the event (i) the Corporation
establishes a record date to determine the holders of any class of securities
who are entitled to receive any dividend or other distribution, or (ii) there
occurs any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or substantially all
of the assets of the Corporation to any other corporation, or any other entity
or person, or any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, the Corporation shall mail to each holder of Series A
Preferred Stock at least twenty (20) days prior to the record date specified
therein, a notice specifying (a) the date of such record date for the purpose of
such dividend or distribution and a description of such dividend or
distribution, (b) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (c) the time, if any, that is to be fixed, as
to when the holders of record of Preferred Stock and Common Stock (or other
securities) shall be entitled to exchange their shares of Preferred Stock and
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.
Section 9. OTHER RIGHTS. Except as otherwise provided in the charter
documents of the Corporation, as amended, shares of Series A Preferred Stock and
shares of Common Stock shall be identical in all respects (each share of Series
A Preferred Stock having equivalent rights to the maximum number of shares of
Common Stock into which it is then convertible), shall have the same powers,
preferences and rights, without preference of any such class or share over any
other such class or share, and shall be treated as a single class of stock for
all purposes.
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Section 10. MISCELLANEOUS.
(a) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of
delivery thereof by hand delivery, by courier, or by standard form of
telecommunication, addressed: (i) if to the Corporation, to its principal
executive office (Attention: President) and to the transfer agent, if any,
for the Series A Preferred Stock or other agent of the Corporation
designated as permitted hereby, (ii) if to any holder of the Preferred
Stock or Common Stock, as the case may be, to such holder at the address of
such holder as listed in the stock record books of the Corporation (which
may include the records of any transfer agent for the Preferred Stock or
Common Stock, as the case may be) or (iii) to such other address as the
Corporation or any such holder, as the case may be, shall have designated
by notice similarly given.
(b) The Corporation may appoint, and from time to time discharge and
change, a transfer agent of the Series A Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send
notice thereof by hand delivery, by courier, by standard form of
telecommunication or by first class mail (postage prepaid), to each holder
of record of Series A Preferred Stock.
C. ADDITIONAL SERIES OF CONVERTIBLE REDEEMABLE PARTICIPATING
PREFERRED STOCK. The Board of Directors is hereby authorized to designate and
issue additional series of Preferred Stock in accordance with Section 4(k) of
Subpart IIB above. The terms of such additional series of Preferred Stock shall
be identical to the terms of the Series A Preferred Stock at the time of such
designation, except that (i) each additional series of Preferred Stock shall not
have provisions similar to Section 4(h)(2) of Subpart IIB above and (ii) the
Board of Directors shall designate the conversion price for such additional
series of Preferred Stock.
III. COMMON STOCK
Except as otherwise provided in this Part III or as otherwise required
by applicable law, all shares of Class A Common and Class B Common shall be
identical in all respects and shall entitle the holders thereof to the same
rights, preferences and privileges, subject to the same qualifications,
limitations and restrictions, as set forth herein.
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Section 1. VOTING RIGHTS.
Except as otherwise provided in this Part III or as otherwise required
by applicable law, the holders of Class A Common shall be entitled to one vote
per share on all matters to be voted on by the Corporation's stockholders, and
the holders of Class B Common shall have no right to vote on any matters to be
voted on by the Corporation's stockholders; provided that the holders of the
Class B Common shall have the right to vote as a separate class on any merger or
consolidation of the Corporation with or into another entity or entities, or any
recapitalization or reorganization, in which shares of Class B Common would
receive 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 or would otherwise be treated differently from shares of Class A Common,
except that shares of Class B Common may, without such a separate class vote,
receive or be exchanged for non-voting securities (except as otherwise required
by law) which are otherwise identical on a per share basis in amount and form to
the voting securities received with respect to or in exchange for the Class A
Common so long as (i) such non-voting securities are convertible into voting
securities on the same terms as the Class B Common is convertible into Class A
Common and (ii) all other consideration is equal on a per share basis.
Section 2. DIVIDENDS.
As and when dividends are declared or paid with respect to shares of
Common Stock, whether in cash, property or securities of the Corporation, the
holders of Class A Common and the holders of Class B Common shall be entitled to
receive such dividends pro rata at the same rate per share of each class of
Common Stock; provided that (i) if dividends are declared or paid in shares of
Class A Common or Class B Common, the dividends payable in shares of Class A
Common shall be payable to holders of Class A Common and the dividends payable
in shares of Class B common shall be payable to holders of Class A Common and
(ii) if the dividends consist of other voting securities of the Corporation, the
Corporation shall make available to each holder of Class B Common, at such
holder's request, dividends consisting of non-voting securities (except as
otherwise required by law) of the Corporation which are otherwise identical to
the voting securities and which are convertible into such voting securities on
the same terms as the Class B Common is convertible into the Class A Common.
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Section 3. LIQUIDATION.
The holders of the Class A Common and the holders of the Class B
Common shall be entitled to participate pro rata at the same rate per share of
each class of Common Stock in all distributions to the holders of the Common
Stock in any liquidation, dissolution or winding up of the Corporation.
Section 4. CONVERSION.
4A. CONVERSION OF CLASS B COMMON
(i) In connection with the occurrence (or the expected occurrence an
described in (iii) below) of any Conversion Event, each holder of Class B Common
shall be entitled to convert into an equal number of shares of Class A Common
any or all of the shares of such holders Class B Common being (or expected to
be) distributed, disposed of or sold in connection with such Conversion Event.
(ii) For purposes of this paragraph 4A, a "Conversion Event" shall
mean (a) any public offering or public sale of securities of the Corporation
(including a public offering registered under the Securities Act of 1933 and a
public sale pursuant to Rule 144 of the Securities and Exchange Commission or
any similar rule then in force), (b) any sale of securities of the Corporation
to a person or group of persons (within the meaning of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), if, after such sale, such person or
group of persons in the aggregate would own or control securities which possess
in the aggregate the ordinary voting power to elect a majority of the
Corporation's directors (provided that such sale has been approved by the
corporation's Board of Directors or a committee thereof), (c) any sale of
securities of the Corporation to a person or group of persons (within the
meaning of the 1934 Act) if, after such sale, such person or group of persons in
the aggregate would own or control securities of the Corporation (excluding any
Class B Common being converted and disposed of in connection with such
Conversion Event) which possess in the aggregate the ordinary voting power to
elect a majority of the corporation's directors, (d) any sale of securities of
the Corporation to a person or group of persons (within the meaning of the 1934
Act) if, after such sale, such person or group of persons would not, in the
aggregate, own, control or have the right to acquire more than two percent (2%)
of the outstanding securities of any class of voting securities of the
Corporation, and (e) a merger, consolidation or similar transaction involving
the Corporation if, after such transaction, a person or group of persons (within
the meaning of the 1934 Act) in the aggregate
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would own or control securities which possess in the aggregate the ordinary
voting power to elect a majority of the surviving Corporation's directors
(provided that the transaction has been approved by the Corporation's Board of
Directors or a committee thereof). For purposes of this paragraph 4A, a
"person" shall include any natural person and any Corporation, partnership,
joint venture, trust, unincorporated organization and any other entity or
organization.
(iii) Each holder of Class B Common shall be entitled to convert
shares of Class B Common in connection with any conversion Event if such holder
reasonably believes that such Conversion Event shall be consummated, and a
written request for conversion from any holder of Class B Common to the
Corporation stating such holder's reasonable belief that a Conversion Event
shall occur shall be conclusive and shall obligate the Corporation to effect
such conversion in a timely manner so as to enable each such holder to
participate in such Conversion Event. The Corporation shall not cancel the
shares of Class B Common so converted before the tenth day following such
Conversion Event and shall reserve such shares until such tenth day for
reissuance in compliance with the next sentence. If any shares of Class B
Common are converted into shares of Class A Common in connection with a
Conversion Event and such shares of Class A Common are not actually distributed,
disposed of or sold pursuant to such Conversion Event, such shares of Class A
Common shall be promptly exchanged back into the same number of shares of Class
B Common.
(iv) Notwithstanding any other provision hereof, in the event that the
initial holder of the Class B Common is licensed by the U.S. Small Business
Administration as a Small Business Investment Company (an "SBIC") on or before
September 1, 1996, then such initial holder shall be entitled to convert the
Class B Common held by such holder into Class A Common within 3 months after the
date such license is effective, and in the event that any entity controlling,
controlled by or under common control with such initial holder is licensed as an
SBIC on or before September 1, 1996, then any Class B Common held by such
affiliate of the initial holder will be convertible into Class A Common within 3
months after the date such license is effective.
4B. CONVERSION PROCEDURE.
(i) Unless otherwise provided in connection with a Conversion Event,
each conversion of shares of Class B Common into shares of Class A Common shall
be effected by the surrender of the certificate or certificates representing the
shares to be converted at the principal office of the Corporation at any time
during normal business hours, together with a written notice by
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the holder of such Class B Common stating that such holder desires to convert
the shares, or a stated number of the shares, of Class B Common represented by
such certificate or certificates into Class A Common. Unless otherwise provided
in connection with a Conversion Event, each conversion shall be deemed to have
been effected as of the close of business on the date on which such certificate
or certificates have been surrendered and such notice has been received, and at
such time the rights of the holder of the converted Class B Common as such
holder shall cease and the person or persons in whose name or names the
certificate or certificates for shares of Class A Common are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Class A Common represented thereby.
(ii) Promptly after the surrender of certificates and the receipt of
such written notice, the Corporation shall issue and deliver in accordance with
the surrendering holder's instructions (a) the certificate or certificates for
the Class A Common issuable upon such conversion and (b) a certificate
representing any Class B Common which was represented by the certificate or
certificates delivered to the Corporation in connection with such conversion but
which was not converted.
(iii) The issuance of certificates for Class A Common upon conversion
of Class B Common shall be made without charge to the holders of such shares for
any issuance tax in respect thereof or other cost incurred by the in connection
with such conversion and the related issuance of Class A Common.
(iv) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Class A Common, solely for the purpose
of issuance upon the conversion of the Class B Common, such number of shares of
Class A Common issuable upon the conversion of all outstanding Class B Common.
All shares of Class A Common which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Class A Common may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Class A Common may be listed
(except for official notice of issuance which shall be immediately transmitted
by the Corporation upon issuance).
(v) The Corporation shall not close its books against the transfer of
Class B Common or of Class A Common issued or issuable upon conversion of Class
B Common in any manner which
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would interfere with the timely conversion of Class B Common. The Corporation
shall assist and cooperate with any holder of Class B Common required to make
any governmental filings or obtain any governmental approval prior to or in
connection with any conversion of Class B Common hereunder (including, without
limitation, making any filings required to be made by the Corporation).
4C. STOCK SPLITS. If the Corporation in any manner subdivides or
combines the outstanding shares of one Class of Common Stock, the outstanding
shares of the other class of Common Stock shall be proportionately subdivided or
combined in a similar manner.
Section 5. AMENDMENT AND WAIVER.
No amendment or waiver of any provision of this Part III shall be
effective without the prior approval of (i) the holders of a majority of the
then outstanding shares of Class B Common voting as a separate class and (ii)
the holders of a majority of the then outstanding shares of Class A Common
voting as a separate class."
THIRD: that the Board of Directors of the Corporation has declared
that such amendment is advisable and that the capital of the Corporation will
not be reduced under, or by reason of, the foregoing amendment.
FOURTH: that by unanimous written consent of the Board of Directors of
the Corporation, resolutions were duly adopted proposing and recommending the
adoption of the foregoing amendment to the Restated Certificate of
Incorporation. Thereafter, by written consent of a majority of the holders of
the outstanding Common Stock of the Corporation, said amendment was approved and
adopted.
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IN WITNESS WHEREOF, TELETRAC HOLDINGS, INC. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Steven D.
Scheiwe, its Secretary, who hereby acknowledges under penalties of perjury that
the facts herein stated are true and that this certificate is his act and deed,
this day of July, 1997.
TELETRAC HOLDINGS, INC.
By Steven D. Schiewe
----------------------
Secretary
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Exhibit 3.3
BYLAWS
OF
TELETRAC HOLDINGS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be located at 1013 Centre
Street, in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware and the United States as the Board
of Directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings of the stockholders for the election
of directors shall be held at such place and time as may be fixed from time to
time by the Board of Directors, or at such other place either within or without
the State of Delaware or the United States, as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting or in a
duly executed waiver of the notice thereof. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State of
Delaware or the United States, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of the stockholders shall be held on such
date and at such time as shall be designated from time to time by the Board of
Directors. At the annual meeting, the stockholders shall elect the Board of
Directors and shall transact such other business as may properly be brought
before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and time of the meeting shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting.
Section 4. Special meetings of the stockholders for any purpose or
purposes, unless otherwise provided by statute, the Certificate of Incorporation
or these Bylaws, may be called by the Chief Executive Officer and shall be
called by the Chief
<PAGE>
Executive Officer or Secretary at the request in writing of a majority of the
Board of Directors or at the request in writing of stockholders owning a
majority of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such requests shall state the purpose or purposes of the
proposed meeting.
Section 5. Written notice of a special meeting shall state the place,
date and time of the meeting and the purpose or purposes for which the meeting
is called and shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 6. Business transacted at any special meeting of the
stockholders shall be limited to the purpose or purposes stated in the notice,
unless the holders of a majority of the issued and outstanding shares entitled
to vote otherwise consent thereto either at the special meeting or in writing
executed subsequent to the meeting.
Section 7. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every annual
or special meeting of the stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to examination by any stockholder for
any purpose germane to the meeting during ordinary business hours, and for a
period of at least ten (10) days prior to the meeting either at a place within
the city where the meeting is to be held (which place shall be specified in the
notice of the meeting) or (if not so specified) at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present at the meeting.
Section 8. The holders of a majority of the issued and outstanding
shares entitled to vote thereat, who are present in person or represented by
proxy at the meeting, shall constitute a quorum at all annual and special
meetings of the stockholders for the transaction of business, unless otherwise
provided by statute, the Certificate of Incorporation or these Bylaws. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting, at
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which a quorum shall be present or represented, any business may be transacted
that might have been transacted at the meeting as originally described in the
notice to the stockholders. If the adjournment is for more than thirty (30)
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 9. When a quorum is present at any annual or special meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy at the meeting shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of statute, the Certificate of Incorporation or these Bylaws a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 10. Unless otherwise provided by statute, the certificate of
Incorporation or these Bylaws, each stockholder shall at every annual or special
meeting of the stockholders be entitled to one vote in person or by proxy for
each share of the capital stock having voting power held by such stockholder,
but no proxy shall be voted or acted upon after a period of three years from its
date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided by statute, the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
of the corporation having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Such consent shall be filed
with the Secretary of the corporation. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors that constitutes the Board of
Directors shall be at least one (1) and not more than nine (9). The first Board
of Directors shall initially consist of the number of directors as shall be
specified at the organizational meeting of the corporation. Thereafter, within
the limits above specified, the number of directors shall be
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<PAGE>
determined by resolution of the Board of Directors or by the stockholders of
the Common Stock at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of
this Article. Each director shall hold office until his successor is elected
and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director. The directors so chosen shall hold office until the next
annual election and until their successors are duly elected and qualified,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute.
Section 3. The business of the corporation shall be managed by its
Board of Directors, which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute, the Certificate of
Incorporation or these Bylaws directed or required to be exercised or done by
the stockholders.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware or the United States.
Section 2. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting. No notice of such meeting to the newly
elected directors shall be necessary in order legally to constitute the meeting,
provided a quorum shall be present. If the stockholders fail to fix the time or
place of the first meeting of the newly elected Board of Directors or if this
meeting is not held at the time and place so fixed by the stockholders, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors or
as shall be specified in a written waiver signed by all of the directors.
Section 3. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board of Directors.
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Section 4. Special meetings of the Board of Directors may be called
by the Chief Executive Officer on three (3) days notice to each director, either
personally, by mail or by telegram. Such meetings shall be called by the Chief
Executive Officer or Secretary in like manner and on like notice on the written
request of a majority of the directors.
Section 5. At all regular and special meetings of the Board of
Directors, a simple majority of the directors shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, unless otherwise specifically provided by statute, the Certificate of
Incorporation or these Bylaws. If a quorum in not present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than an announcement at the meeting, until a
quorum shall be present.
Section 6. Unless otherwise provided by statute, the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or the committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of the Board of Directors.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 1. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each consisting
of two or more directors of the corporation. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Section 2. Except as provided below, any committee, to the extent
provided in the resolutions of the Board of Directors and in these Bylaws, shall
have and may exercise all of the powers and authority of the Board of Directors
in the management of the business and affairs of the corporation, and may
authorize
5
<PAGE>
the seal of the corporation to be affixed to all papers that may require it. No
committee, however, shall have the power or authority to amend the Certificate
of Incorporation; to adopt an agreement of merger or consolidation; to recommend
to the stockholders the sale, lease, exchange or other disposition of all or
substantially all of the corporation's property and assets; to recommend to the
stockholders a dissolution of the corporation or a revocation of a dissolution;
or to amend these Bylaws; further, unless a resolution of the Board of
Directors, these Bylaws, or the Certificate of Incorporation expressly so
provides, no committee shall have the power or authority to declare a dividend,
to authorize the issuance of stock, or to adopt a certificate of ownership and
merger.
Section 3. A committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
Section 4. Each committee shall keep regular minutes of its meetings
and shall file them with the minutes of the proceedings of the Board of
Directors when required.
ARTICLE VI
COMPENSATION OF DIRECTORS
Section 1. Unless otherwise provided by statute, the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of the directors.
Section 2. The directors may be paid their expenses, if any, of
attending meetings of the Board of Directors. Such payments may take the form
of a fixed sum for attendance at each meeting or a stated salary as a director.
Members of committees may be allowed like compensation for attending committee
meetings.
Section 3. No payment permitted under this Article VI shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE VII
OFFICERS
Section 1. The officers of the corporation shall be designated by the
Board of Directors, by election, and, unless otherwise required by the General
Corporation Law of the State of Delaware, may include a Chief Executive Officer,
a Chairman, a
6
<PAGE>
President, a Vice President, a Secretary and a Treasurer. The Board of
Directors may also elect such other officers and agents as it deems necessary,
including Vice Presidents and one or more Assistant Secretaries and Assistant
Treasurers. Any number of offices may be held by the same person, unless
otherwise provided by statute, the Certificate of Incorporation or these Bylaws.
Section 2. The officers of the corporation shall be elected by the
Board of Directors at the Board's first meeting after each annual meeting of
stockholders.
Section 3. The officers of the corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors whenever in its judgment the best interests
of the corporation will be served thereby. Any vacancy occurring in any office
of the corporation shall be filled by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The Chief Executive Officer shall preside at all meetings
of the stockholders, and shall see that all orders and resolutions of the Board
of Directors are carried into affect. The Chief Executive Officer shall execute
under the seal of the corporation bonds, mortgages and other contracts requiring
a seal, except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof is expressly
delegated by the Board of Directors to some other officer or agent of the
corporation.
Section 6. In the absence of the Chief Executive Officer or in the
event of his inability or refusal to act, the Vice President (or in the event
there are more than one, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the Chief Executive Officer and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the Chief Executive
Officer. The Vice President shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 7. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all of the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for any committees when
required. The Secretary shall give, or cause to be given, notice
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<PAGE>
of all meetings of the stockholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the Board
of Directors or the Chief Executive Officer, under whose supervision he shall
be. The Secretary shall have custody of the corporate seal of the corporation,
and he, or an Assistant Secretary, shall have the authority to affix the same to
any instrument requiring it, and (when so affixed) it may be attested by his
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 8. The Assistant Secretary, or if there are more than one,
the Assistant Secretaries in the order determined by the Board of Directors (or
if there is no such determination, then in the order of their election), shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 9. The Treasurer shall have custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 10. The Treasurer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer, and the Board of
Directors at the Board's regular meetings or when the Board so requires, an
account of all his transactions as Treasurer and of the financial condition of
the corporation.
Section 11. If required by the Board of Directors, the Treasurer
shall give the corporation a bond (which shall be renewed every six years) in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
Section 12. The Assistant Treasurer, or if there are more than one,
the Assistant Treasurers in the order determined by the Board of Directors (or
if there is no such determination, then in the order of their election), shall,
in the absence of
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<PAGE>
the Treasurer or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statute, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean solely personal
notice, but such notice may be given in writing by mail addressed to such
director or stockholder at his address as it appears on the records of the
corporation with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same is deposited in the United States mail. Notice
to directors may also be given by telegram, facsimile or telecopy or via courier
and, in such instances, shall be deemed given when received.
Section 2. Whenever any notice is required to be given under the
provisions of statute, the Certificate of Incorporation or these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE IX
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate signed by the Chairman or Vice-Chairman of the Board of
Directors, or the Chief Executive Officer or a Vice-President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by the stockholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile if the certificate is manually signed on behalf of a transfer agent or
a registrar (other than the corporation itself or an employee of the
corporation). In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, the certificate may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
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Section 3. The Board of Directors may direct that a new certificate
or certificates be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates or his legal
representative to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by the
proper evidence of succession, assignment or authority to transfer, the
corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date that shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new date for
the adjourned meeting.
Section 6. The corporation shall be entitled to recognize the
exclusive rights of a person registered on its books as the owner of shares to
receive dividends and to vote as such owner. The corporation shall be entitled
to hold liable for calls and assessments a person registered on its books as the
owner of shares. The corporation shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, regardless of whether the corporation shall have express or other notice
thereof, unless otherwise provided by statute, the Certificate of Incorporation
or these Bylaws.
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ARTICLE X
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, unless otherwise provided by statute, the Certificate of
Incorporation or these Bylaws, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash,
property, or in shares of stock, unless otherwise provided by statute, the
Certificate of Incorporation or these Bylaws. Before payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the Board of Directors from time to time, in their
absolute discretion, may think proper as a reserve or reserves for
contingencies, equalizing dividends, repairing or maintaining any property of
the corporation, or for such other purpose or purposes as the Board of Directors
shall think conducive to the interests of the corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. ANNUAL STATEMENTS. The Board of Directors shall present
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
Section 3. CHECKS. All Checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
designated by resolution of the Board of Directors.
Section 5. INDEMNIFICATION. The corporation shall have the power to
indemnify its officers, directors, employees and agents of the corporation, and
such other persons as designated by the Board of Directors, to the full extent
as permitted under the laws of the State of Delaware. Subject to applicable
provisions of the Delaware General Corporation Law, the corporation shall
indemnify, defend, and hold harmless each employee, officer, or other agent of
the corporation, each member of the Board of Directors, any person or entity
that has designated a member of the Board of Directors (but only to the extent
such person or entity suffers any liability, loss, or damage as a result of the
actions of such member of the Board of Directors) (all indemnified persons being
referred to as "Indemnified Persons" for purposes of this Section 5), from any
liability,
11
<PAGE>
loss, or damage incurred by the Indemnified Person by reason of any act
performed or omitted to be performed by the Indemnified Person in connection
with the business of the corporation, including costs and attorneys' fees (which
attorneys' fees may be paid as incurred) and any amounts expended in the
settlement of any claims of liability, loss, or damage; provided, however, that,
if the liability, loss, damage, or claim arises out of any action or inaction of
an Indemnified Person, indemnification under this Section 5 shall be available
only if (1) either (A) the Indemnified Person, at the time of such action or
inaction, determined, in good faith, that its or his course of conduct was in,
or not opposed to, the best interests of the corporation, or (B) in the case of
inaction by the Indemnified Person, the Indemnified Person did not intend its or
his inaction to be harmful or opposed to the best interests of the corporation,
and (2) the action or inaction did not constitute fraud, gross negligence,
breach of fiduciary duty (which shall not be construed to encompass mistakes in
judgment or any breach of any Indemnified Person's duty of care that did not
constitute gross negligence), or willful misconduct by the Indemnified Person.
Section 6. SEAL. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization, and the name of the State
of Delaware. The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
Section 7. AMENDMENTS. Unless such power is reserved to the
stockholders by statute, the Certificate of Incorporation or these Bylaws, these
Bylaws may be altered, amended or repealed or new Bylaws adopted either by the
stockholders or the Board of Directors (when such power is conferred upon the
Board of Directors by the Certificate of Incorporation, and subject to repeal or
change by action of the stockholders) at any annual meeting of the stockholders
or regular meeting of the Board of Directors, or at any special meeting of the
stockholders or the Board of Directors (if notice of such alteration, amendment,
repeal or adoption of new Bylaws is contained in the notice of such special
meeting), by a vote of a majority of the holders of stock having voting power
present in person or represented by proxy at such meeting at which there is a
quorum, or by a vote of a majority of the directors present at such meeting at
which there is a quorum (whichever is applicable).
* * *
12
<PAGE>
EXHIBIT 4.1
WARRANT AGREEMENT
Dated as of
August 6, 1997
between
TELETRAC HOLDINGS, INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Warrant Agent
___________________________________________
Warrants for
Class A Common Stock of
Teletrac Holdings, Inc.
___________________________________________
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 Definitions................................................... 1
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitions........................................ 5
SECTION 1.03. Rules of Construction.................................... 5
ARTICLE 2 Warrant Certificates.......................................... 6
SECTION 2.01. Form and Dating.......................................... 6
SECTION 2.02. Legends.................................................. 7
SECTION 2.03. Execution and Countersignature........................... 11
SECTION 2.04. Certificate Register..................................... 11
SECTION 2.05. Separation of Warrants and Notes......................... 11
SECTION 2.06. Restricted Warrants...................................... 12
SECTION 2.07. Global Warrants.......................................... 12
SECTION 2.08. Transfer and Exchange.................................... 13
SECTION 2.09. Replacement Certificates................................. 21
SECTION 2.10. Temporary Certificates................................... 21
SECTION 2.11. Cancellation............................................. 21
ARTICLE 3 Exercise Terms................................................ 21
SECTION 3.01. Exercise Price........................................... 21
SECTION 3.02. Exercise Periods......................................... 22
SECTION 3.03. Expiration............................................... 22
SECTION 3.04. Manner of Exercise....................................... 22
SECTION 3.05. Issuance of Warrant Shares............................... 22
SECTION 3.06. Fractional Warrant Shares................................ 23
SECTION 3.07. Reservation of Warrant Shares............................ 23
SECTION 3.08. Compliance with Law...................................... 23
SECTION 3.09. Regulation S............................................. 24
ARTICLE 4 Antidilution Provisions....................................... 24
SECTION 4.01. Changes in Common Stock.................................. 24
SECTION 4.02. Cash Dividends and Other Distributions................... 24
SECTION 4.03. Rights Issue To All Holders of Common Stock.............. 25
SECTION 4.04. Other Issuances of Common Stock or Rights................ 26
SECTION 4.05. Combination; Liquidation................................. 27
SECTION 4.06. Other Events............................................. 27
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PAGE
SECTION 4.07. Superseding Adjustment................................... 27
SECTION 4.08. Minimum Adjustment....................................... 28
SECTION 4.09. Notice of Adjustment..................................... 28
SECTION 4.10. Notice of Certain Transactions........................... 29
SECTION 4.11. Adjustment to Warrant Certificate........................ 29
SECTION 4.12. Exercise Price Equal to Par Value........................ 30
ARTICLE 5 Registration Rights........................................... 30
SECTION 5.01. Effectiveness of Registration Statement.................. 30
SECTION 5.02. Suspension............................................... 31
SECTION 5.03. Blue Sky................................................. 32
SECTION 5.04. Accuracy of Disclosure................................... 32
SECTION 5.05. Indemnification.......................................... 32
SECTION 5.06. Additional Acts.......................................... 35
SECTION 5.07. Expenses................................................. 36
SECTION 5.08. Liquidated Damages....................................... 36
ARTICLE 6 Warrant Agent................................................. 37
SECTION 6.01. Appointment of Warrant Agent............................. 37
SECTION 6.02. Rights and Duties of Warrant Agent....................... 37
SECTION 6.03. Individual Rights of Warrant Agent....................... 38
SECTION 6.04. Warrant Agent's Disclaimer............................... 38
SECTION 6.05. Compensation and Indemnity............................... 38
SECTION 6.06. Successor Warrant Agent.................................. 39
ARTICLE 7 Miscellaneous................................................. 41
SECTION 7.01. SEC Reports and Other Information........................ 41
SECTION 7.02. Persons Benefitting...................................... 41
SECTION 7.03. Restrictions on Rights of Holders........................ 41
SECTION 7.04. Amendment................................................ 41
SECTION 7.05. Notices.................................................. 42
SECTION 7.06. Governing Law............................................ 43
SECTION 7.07. Successors............................................... 43
SECTION 7.08. Counterparts............................................. 43
SECTION 7.09. Table of Contents; Headings.............................. 43
SECTION 7.10. Severability............................................. 43
<PAGE>
WARRANT AGREEMENT dated as of August 6, 1997 (this "AGREEMENT"),
between TELETRAC HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), and
Norwest Bank Minnesota, National Association, as Warrant Agent (the "WARRANT
AGENT").
Holdings desires to issue the warrants (the "WARRANTS") described
herein. The Warrants will initially entitle the holders thereof (the "HOLDERS")
to purchase in the aggregate 56,437 shares of Class A Common Stock, par value
$0.01 per share, of Holdings (the "COMMON STOCK") in connection with an offering
by Holdings and Teletrac, Inc., a Delaware corporation ("TELETRAC"), (the "UNITS
OFFERING") of 105,000 units (the "UNITS"). Each Unit will consist of (i) $1,000
aggregate principal amount of 14% Senior Notes due 2007 (the "NOTES") issued by
Teletrac, and (ii) one Warrant issued by Holdings. Each Warrant will entitle
the Holder to purchase 0.537495 shares of Common Stock, subject to adjustment as
provided herein. In connection with the sale of the Units, 105,000 Warrants
will be issued to the purchasers of the Units.
The Warrants will not trade separately from the Notes until the
earliest of (i) the date that is 180 days following the Closing Date; (ii) the
commencement of the Exchange Offer (as defined in the Indenture); (iii) the date
on which a shelf registration statement with respect to the Notes is declared
effective; (iv) such earlier date as Donaldson, Lufkin & Jenrette Securities
Corporation shall determine in its sole discretion, and (v) in the event of a
Change in Control (as defined in the Indenture), the date Teletrac mails the
required notice thereof to the holders of the Notes (the earliest of any such
date being referred to as the "SEPARATION DATE").
Holdings further desires the Warrant Agent to act on behalf of
Holdings in connection with the issuance of the Warrants as provided herein and
the Warrant Agent is willing to so act.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of Warrants:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS.
"AFFILIATE" of any Person means any other Person, directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly,
<PAGE>
whether through the ownership of voting securities, by contract or otherwise;
PROVIDED, HOWEVER, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control. The terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"AGENT MEMBERS" has the meaning set forth in Section 2.07(e).
"APPLICABLE PROCEDURES" has the meaning set forth in Section
2.08(c)(iii).
"BOARD" means the Board of Directors of Holdings or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"BUSINESS DAY" means each day that is not a Saturday, a Sunday or a
day on which banking institutions are required to be closed in the State of New
York.
"CEDEL" means Cedel Bank, societe anonyme.
"COMBINATION" means an event in which Holdings consolidates with,
merges with or into, or sells all or substantially all of its assets to another
Person.
"CURRENT MARKET VALUE" per share of Common Stock or any other security
at any date means: (i) if the security is not registered under the Exchange
Act, (a) the value of the security, determined in good faith by the Board and
certified in a board resolution, based on the most recently completed
arm's-length transaction between Holdings and a Person other than an Affiliate
of Holdings, the closing of which occurred on such date or within the six-month
period preceding such date, or (b) if no such transaction shall have occurred on
such date or within such six-month period, the value of the security as
determined by an independent financial expert; or (ii) if the security is
registered under the Exchange Act, the average of the last reported sale price
of the Common Stock (or the equivalent in an over-the-counter market) for each
Business Day during the period commencing 15 Business Days before such date and
ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 15 consecutive Business Days
before such date, the average of the daily closing bid prices (or such
equivalent) for all of the Business Days before such date for which daily
closing bid prices are available (PROVIDED, HOWEVER, that if the closing bid
price is not determinable for at least ten Business Days in such period, the
"Current Market Value" of the security shall be determined as if the security
were not registered under the Exchange Act) amended.
"CUSTODIAN" means Norwest Bank Minnesota, National Association, and
any successor custodian, as custodian of the Global Warrants for DTC under
custody agreements, or any similar successor agreement or agreements.
"DAMAGES PAYMENT DATE" means February 1 and August 1].
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"DEPOSITARY" means, with respect to the Global Warrants, DTC or such
other Person as shall be designated as Depositary by the Company pursuant to
this Indenture.
"DTC" means the Depository Trust Company, a New York corporation.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE DATE" means, for a given Warrant, the day on which such
Warrant is exercised pursuant to Section 3.04.
"FCC" means the Federal Communications Commission.
"GLOBAL WARRANT" means any Regulation S Temporary Global Warrant, any
Restricted Global Warrant or any Unrestricted Global Warrant, as the case may
be.
"INDENTURE" means the Indenture dated as of August 6, 1997, among
Teletrac and the Trustee, with respect to the Notes, as it may be amended or
supplemented from time to time.
"INDEMNIFIED PARTIES" means either Holder Indemnified Parties or
Issuer Indemnified Parties, as such items are set forth in Section 5.05.
"INDEMNIFYING PARTIES" means the party indemnifying Holder Indemnified
Parties or Issuer Indemnified Parties, as the case may be.
"INITIAL PURCHASERS" means Donaldson, Lufkin & Jenrette Securities
Corporation, a [Delaware] corporation, and TD Securities (USA) Inc., a
[Delaware] corporation.
"ISSUE DATE" means the date on which Warrants are initially issued.
"OFFICER" means the Chairman of the Board, the Chief Executive
Officer, any Vice President, the Treasurer, or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of Holdings.
"OWNER SECURITIES CERTIFICATION" has the meaning specified in Section
2.01(b)(ii).
"PERSON" means any individual, corporation, limited liability company,
partnership (general or limited), joint venture, association, joint stock
company, trust,
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<PAGE>
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated July 31,
1997, among Teletrac Inc., Holdings, and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" within the meaning of
Rule 144A.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S TEMPORARY GLOBAL WARRANT" has the meaning set forth in
Section 2.01(b)(i).
"RESTRICTED GLOBAL WARRANT" has the meaning set forth in Section
2.01(c).
"RESTRICTED PERIOD" means the period (a) beginning on and including
the later of (i) the Offering Date (as defined in the Offering Memorandum) and
(ii) the Issue Date and (b) ending on the first anniversary thereof.
"SEC" means the Securities and Exchange Commission, or any successor
agency or body performing substantially similar functions.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEPARATION DATE" means the date on which the Notes and Warrants will
be separately transferable, which date shall be the earliest of (i) the date
that is 180 days following the Closing Date, (ii) the Commencement of the
Exchange Offer (as defined in the Offering Memorandum), (iii) the date a shelf
registration statement with respect to the Notes is declared effective, (iv)
such date as Donaldson, Lufkin & Jenrette Securities Corporation shall determine
in its sole discretion, and (v) in the event a Change of Control occurs (as
defined in the Indenture relating to the Notes), the date the Company mails the
required notice thereof to the Holders.
"TRUSTEE" means Norwest Bank Minnesota, National Association or any
successor trustee under the Indenture.
"UNRESTRICTED GLOBAL WARRANT" has the meaning set forth in Section
2.01(b)(i).
"WARRANT CERTIFICATES" mean the registered certificates (including
without limitation, the global certificates) issued by Holdings under this
Agreement representing the Warrants.
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"WARRANT SHARES" mean the shares of Common Stock (and any other
securities) for which the Warrants are exercisable.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
TERM SECTION
"Agreement".............................................................Recitals
"Certificate Register"..................................................... 2.04
"Common Shelf Registration Statement"...................................... 5.01
"Common Stock"......................................................... Recitals
"Exercise Price"........................................................... 3.01
"Expiration Date"....................................................... 3.02(b)
"Holders".............................................................. Recitals
"Holdings"............................................................. Recitals
"Notes"................................................................ Recitals
"Registrar"................................................................ 3.07
"Separability Legend"................................................... 2.02(b)
"Separation Date"...................................................... Recitals
"Successor Company"..................................................... 4.05(a)
"Transfer Agent"........................................................... 3.05
"Units"................................................................ Recitals
"Units Offering"........................................................Recitals
"Warrant Agent"........................................................ Recitals
"Warrants"............................................................. Recitals
"Warrant Shelf Registration Statement"..................................... 5.01
SECTION 1.03. RULES OF CONSTRUCTION. Unless the text otherwise
requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted
accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
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<PAGE>
ARTICLE 2
WARRANT CERTIFICATES
SECTION 2.01. FORM AND DATING. (a) Each Warrant Certificate shall
be substantially in the form of Exhibit A-1 through A-3, as applicable, which
are hereby incorporated in and expressly made a part of this Agreement. The
Warrant Certificates may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which Holdings is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to Holdings) and shall bear the legends required by Section 2.02.
Each Warrant Certificate shall be dated the date of its countersignature. The
terms of the Warrant Certificate set forth in A-1 through A-3, as applicable,
are part of the terms of this Agreement.
(b)(i) Warrants that are to be offered and resold by the Initial
Purchasers in reliance on Regulation S shall be issued initially in the form of
a single temporary Global Warrant (a "REGULATION S TEMPORARY GLOBAL WARRANT") in
fully registered form, substantially in the form of EXHIBIT A-1 hereto, with
such applicable legends as are provided for in Section 2.02 hereof. Any
Regulation S Temporary Global Warrant shall be duly executed by Holdings, and
shall be registered in the name of the Depositary or its nominee and deposited
with the Warrant Agent, at its New York office, as custodian for the Depositary,
for credit to the respective accounts of beneficial owners of such Warrant (or
to such other accounts as they may direct) at Euroclear or CEDEL. On or after
the termination of the Restricted Period, interests in the Regulation S
Temporary Global Warrant will be exchangeable for an unrestricted Global Warrant
(an "UNRESTRICTED GLOBAL WARRANT"), in definitive, fully registered form,
substantially in the form of EXHIBIT A-2 hereto, with such applicable legends as
are provided for in Section 2.02 and in accordance with clause (ii) below. The
aggregate number of shares of Common Stock issuable upon exercise of a
Regulation S Temporary Global Warrant and an Unrestricted Global Warrant may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depositary, as hereinafter provided.
(ii) Upon (I) the expiration of the Restricted Period, (II) receipt by
Euroclear or CEDEL, as the case may be, and the Paying Agent of a written
certification (an "Owner Securities Certification") substantially in the form of
Exhibit B-1 hereto, and upon delivery by Euroclear or CEDEL, as the case may be,
to the Paying Agent of a Certification or certifications (each, a "Depositary
Securities Certification") substantially in the form of Exhibit B-2 hereto,
(III) receipt by the Depositary of (1) written instructions given in accordance
with the Applicable Procedures from an Agent Member directing the Depositary to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in the Unrestricted Global Warrant in an amount equal to
that of the beneficial interest in
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<PAGE>
such Regulation S Temporary Global Warrant and (2) a written order given in
accordance with the Applicable Procedures regarding the account of the Agent
Member, and the Euroclear or CEDEL account for which such Agent Member's account
is held, to be credited with, and the account of the Agent Member to be debited
for, such beneficial interest and (IV) receipt by the Trustee of notification
from the Depositary of the transactions described in (III) above, the Trustee,
as Registrar, shall instruct the Depositary to reduce the number of shares of
Common Stock issuable upon the exercise of such Regulation S Temporary Global
Warrant and to increase the number of shares of Common Stock issuable upon the
exercise of such Unrestricted Global Warrant, by the amount of the beneficial
interest in such Regulation S Temporary Global Warrant to be so transferred, and
to credit or cause to be credited to the account of the person specified in such
instructions a beneficial interest in such Unrestricted Global Warrant equal to
the amount by which the number of shares of Common Stock issuable upon the
exercise of such Regulation S Temporary Global Note was reduced upon such
transfer.
(c) Warrants that are to be offered and resold by the Initial
Purchasers in accordance with Rule 144A shall be issued in definitive, fully
registered form, substantially in the form of Exhibit A-3 hereto, with such
applicable legends as are provided for in Section 2.02 below. Such Warrants may
be issued in the form of a single Global Warrant (the "RESTRICTED GLOBAL
WARRANTS"). Restricted Global Warrants shall be duly executed by Holdings and
shall be registered in the name of a nominee of the Depositary and deposited
with the Warrant Agent, at its New York office, as custodian for the Depositary,
for credit to the respective account of beneficial owners of such Restricted
Global Warrants. The aggregate number of shares of Common Stock issuable upon
exercise of a Restricted Global Warrant may from time to time be increased or
decreased by adjustments made on the records of the Warrant Agent, as custodian
for the Depositary, as hereinafter provided.
SECTION 2.02. LEGENDS. (a) Each Warrant Certificate shall bear the
following legend:
THE CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF TELETRAC
HOLDINGS, INC. ("HOLDINGS") FOR WHICH THIS WARRANT IS EXERCISABLE MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS. ACCORDINGLY, NO HOLDER SHALL BE ENTITLED
TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF
EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAS BEEN FILED WITH, AND DECLARED
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<PAGE>
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND
NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION
STATEMENT HAS BEEN ISSUED BY THE SEC, OR (II) THE ISSUANCE OF SUCH
SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
(b) Each Warrant Certificate issued prior to the Separation Date
shall bear the following legend (the "SEPARABILITY LEGEND"):
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000
AGGREGATE PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2007 OF TELETRAC,
INC. (THE "NOTES") AND A WARRANT. THE WARRANTS AND THE NOTES WILL NOT
TRADE SEPARATELY UNTIL THE EARLIEST OF (I) 180 DAYS AFTER THE CLOSING
DATE OF THE SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE
OFFER WITH RESPECT TO THE NOTES OR THE EFFECTIVENESS OF A SHELF
REGISTRATION STATEMENT FOR THE NOTES, (III) SUCH DATE AS DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION MAY
DETERMINE, OR (IV) IN THE EVENT OF A "CHANGE IN CONTROL" (AS DEFINED
IN THE INDENTURE GOVERNING THE NOTES), THE DATE TELETRAC, INC. MAILS
THE REQUIRED NOTICE THEREOF TO THE HOLDERS OF THE NOTES.
(c) Each Restricted Warrant, unless otherwise agreed by Holdings and
the Holder thereof, shall bear the following legend:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE
HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR
(B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON AND IT IS ACQUIRING THIS SECURITY
IN AN
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OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(D) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUER OF SUCH SECURITY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION." THE "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902
OF REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT
CONTAINS A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER
ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS. EXERCISE OF THIS WARRANT IS SUBJECT TO COMPLIANCE WITH
THE COMMUNICATIONS ACT OF 1934, AS AMENDED, WHICH COMPLIANCE MAY
REQUIRE APPROVAL BY THE FEDERAL COMMUNICATIONS COMMISSION OF SUCH
EXERCISE. THE COMMUNICATIONS ACT OF 1934, AS AMENDED MAY PROHIBIT THE
EXERCISE OF SOME OR ALL OF THE WARRANTS BY ITS ACQUISITION HEREOF OR
OF A BENEFICIAL INTEREST HEREIN. THE HOLDER AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR
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AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY SIMILAR TO
THE EFFECT OF THIS LEGEND."
(d) Each Warrant Certificate issued in global form and deposited with
DTC shall bear the following legend:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), A NEW
YORK CORPORATION, TO HOLDINGS OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO HEREIN."
(e) Each Regulation S Temporary Global Warrant shall bear a legend
substantially in the following form:
THIS WARRANT IS A REGULATION S TEMPORARY GLOBAL WARRANT WITHIN THE
MEANING OF THE WARRANT AGREEMENT REFERRED TO HEREINAFTER. INTERESTS
IN THIS REGULATION S TEMPORARY GLOBAL WARRANT MAY NOT BE OFFERED OR
SOLD TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE
WARRANT AGREEMENT), AND NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS
REGULATION S TEMPORARY GLOBAL WARRANT MAY BE MADE FOR AN INTEREST IN A
RESTRICTED GLOBAL WARRANT OR IN AN UNRESTRICTED GLOBAL WARRANT UNTIL
AFTER THE LATER OF THE DATE ON WHICH
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THE OWNER SECURITIES CERTIFICATION AND THE DEPOSITARY SECURITIES
CERTIFICATION RELATING TO SUCH INTEREST HAVE BEEN PROVIDED IN
ACCORDANCE WITH THE TERMS OF THE WARRANT AGREEMENT, TO THE EFFECT THAT
THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
SECTION 2.03. EXECUTION AND COUNTERSIGNATURE. Two Officers shall
sign the Warrant Certificates for Holdings by manual or facsimile signature. If
an Officer whose signature is on a Warrant Certificate no longer holds that
office at the time the Warrant Agent countersigns the Warrant Certificate, the
Warrant Certificate shall nevertheless be valid. A Warrant Certificate shall
not be valid until an authorized signatory of the Warrant Agent manually
countersigns the Warrant Certificate. Such authorized signature shall be
conclusive evidence that the Warrant Certificate has been countersigned under
this Agreement.
The Warrant Agent shall initially countersign and deliver Warrant
Certificates entitling the Holders thereof to purchase in the aggregate not more
than 56,437 Warrant Shares upon a written order of Holdings signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of Holdings.
The Warrant Agent may appoint an agent reasonably acceptable to
Holdings to countersign the Warrant Certificates. Unless limited by the terms
of such appointment, such agent may countersign Warrant Certificates whenever
the Warrant Agent may do so. Each reference in this Agreement to
countersignature by the Warrant Agent includes countersignature by such agent.
Such agent will have the same rights as the Warrant Agent for service of notices
and demands.
SECTION 2.04. CERTIFICATE REGISTER. The Warrant Agent shall keep a
register ("CERTIFICATE REGISTER") of the Warrant Certificates and of their
transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
represented on the face of each Warrant Certificate. Holdings and the Warrant
Agent may deem and treat the Person in whose name a Warrant Certificate is
registered as the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither Holdings nor the Warrant Agent shall be affected by
notice to the contrary.
SECTION 2.05. SEPARATION OF WARRANTS AND NOTES. (a) Prior to the
Separation Date, no Warrant may be sold, assigned or otherwise transferred to
any Person unless, simultaneously with such transfer, the Warrant Agent receives
confirmation from the Trustee for the Notes that the Holder thereof has
requested a transfer of the related Notes to the same transferee.
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(b) On or after the Separation Date, the Holder of a Warrant
Certificate containing a Separability Legend may surrender such Warrant
Certificate accompanied by a written application to the Warrant Agent, duly
executed by the Holder thereof, for a new Warrant Certificate or certificates
not containing the Separability Legend.
SECTION 2.06. RESTRICTED WARRANTS.
During the period beginning on the Issue Date and ending on the date
two years from the Closing Date, all Warrants offered and sold to QIBs in
reliance on Rule 144A shall be deemed "Restricted Warrants" and shall bear on
their face, and be subject to the restrictions on transfer provided in, the
legend set forth therefor in Section 2.02; PROVIDED, HOWEVER, that the term
"Restricted Warrants" shall not include Warrants as to which restrictions have
been terminated in accordance with Section 2.08(b).
SECTION 2.07. GLOBAL WARRANTS.
(a) Notwithstanding any other provision of this Warrant Agreement, a
Global Warrant shall not be exchanged in whole or in part for a Warrant
registered in the name of any person other than the Depositary or one or more of
its nominees thereof, unless (1) the Depositary (A) notifies Holdings that it is
unwilling or unable to continue as Depositary for such Global Warrant and the
Company thereupon fails to appoint a successor Depositary within 90 days or (B)
ceases to be a clearing agency registered under the Exchange Act, (2) there
shall have occurred and be continuing an Event of Default with respect to the
Notes under the Indenture relating thereto, or an event which with notice or
lapse of time or both would become such an Event of Default with respect to the
Notes, or (3) Holdings, at its sole option, notifies the Warrant Agent in
writing that it elects to cause the issuance of certificated Warrants; PROVIDED,
HOWEVER, that no exchange may be made pursuant to this clause (3) in respect of
any interest in a Regulation S Temporary Global Warrant unless and until the
Restricted Period shall have expired and the certifications required by Section
2.01(b)(ii) shall have been provided in respect of such interest. Any Global
Warrant shall be so exchanged from time to time in whole and not in part as
directed by the Depositary. Any Warrant issued in exchange for a Global Warrant
or any portion thereof shall be a Global Warrant, PROVIDED, HOWEVER, that any
such Warrant so issued that is registered in the name of a Person other than the
Depositary or a nominee thereof shall not be a Global Warrant.
(b) Warrants issued in exchange for a Global Warrant or any portion
thereof shall be issued in definitive, fully registered form, shall be
exercisable for an aggregate number of shares of Common Stock equal to that of
such Global Warrant or portion thereof to be so exchanged, shall be registered
in such names and be in such authorized denominations as the Depositary shall
designate and shall bear the applicable legends provided for herein. Any Global
Warrant to be exchanged in whole shall be surrendered by the Depositary to the
Warrant Agent located in the Borough of Manhattan,
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The City of New York, to be so exchanged. With regard to any Global Warrant to
be exchanged in part, either such Global Warrant shall be so surrendered or
exchanged or, if the Warrant Agent is acting as custodian for the Depositary or
its nominee with respect to such Global Warrant, the number of shares of Common
Stock issuable upon the exercise thereof shall be reduced, by an amount equal to
the portion thereof to be so exchanged, by means of an appropriate adjustment
made on the records of the Warrant Agent. Upon any such surrender or
adjustment, the Warrant Agent shall authenticate and deliver the Warrant
issuable on such exchange to or upon the order of the Depositary or an
authorized representative thereof. Any Warrant delivered in exchange for the
Global Warrant or any portion thereof shall, except as otherwise provided by
Section 2.08, bear the legend regarding transfer restrictions required by
Section 2.02.
(c) Subject to the provisions in the legends required by Section 2.02
above, the registered Holder may grant proxies and otherwise authorize any
Person, including Agent Members and Persons who may hold interests in Agent
Members, to take any action that such Holder is entitled to take under this
Warrant Agreement.
(d) In the event of the occurrence of any of the events specified in
paragraph (a) of this Section 2.07, Holdings will promptly make available to the
Warrant Agreement a reasonable supply of certificated Warrants in definitive,
fully registered form.
(e) Neither members of, participants in, the Depositary ("AGENT
MEMBERS") nor any other Person on whose behalf Agent Members may act shall have
any rights under this Indenture with respect to any Global Warrant held on their
behalf by the Depositary or under the Global Warrant, and the Depositary may be
treated by Holdings, the Warrant Agent and any agent of Holdings or the Warrant
Agent as the absolute owner of such Global Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent Holdings, the
Warrant Agent or any agent of Holdings or the Warrant Agent from giving effect
to any written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Warrant. With respect to any Global Warrant deposited on behalf
of the subscribers for the Warrants represented thereby with the Trustee as
custodian for the Depositary for credit to their respective accounts (or to such
other accounts as they may direct) at Euroclear or CEDEL, the provisions of the
"Operating Procedures of the Euroclear System" and the "Terms and Conditions
Governing Use of Euroclear" and the "Management Regulations" and "Instructions
to Participants" of CEDEL, respectively, shall be applicable to Global Warrants.
SECTION 2.08. TRANSFER AND EXCHANGE.
(a) GENERAL. At the option of each Holder but subject to the
provisions of this Section 2.08, Warrants may be exchanged for other Warrants of
any authorized
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denomination or denominations and of the same aggregate amount, upon surrender
of the Warrants to be exchanged at the office or agency of the Warrant Agent in
the City of New York. Subject to the terms of this Section 2.08, upon surrender
for registration of transfer of any Warrant at any such office or agency of the
Warrant Agent, Holdings shall prepare and execute, and the Warrant Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Warrants of any authorized denomination or
denominations and exercisable for the same aggregate number of shares of Common
Stock.
All Warrants issued upon any registration of transfer or exchange of
Warrants shall be the valid obligations of Holdings, and entitled to the same
benefits under this Warrant Agreement, as the Warrants surrendered upon such
registration of transfer or exchange.
Every Warrant presented or surrendered for registration of transfer or
for exchange shall (if so required by Holdings or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the company and the Registrar (it being understood that, until
notice to the contrary is given to Holders of Warrants, Holdings and the
Registrar shall each be deemed to have approved the form of instrument of
transfer, if any, printed on any definitive Warrant), duly executed by the
Holder or such Holder's attorney duly authorized in writing.
No service charge shall be made for any registration, registration of
transfer or exchange of Warrants, but Holdings and the Warrant Agent shall have
the right to require payment from the Holder requesting any such registration of
transfer or exchange of an amount in United States Dollars sufficient to pay or
discharge any stamp duty, tax or other governmental charge or insurance charge
that may be imposed in connection with such registration of transfer or
exchange.
Holdings shall not be required to register the transfer of, or
exchange, any Warrant called for redemption in whole or in part, except the
unredeemed portion of any Warrant being redeemed in part.
(b) RESTRICTED WARRANTS. Every Restricted Warrant, including any
Warrant issued upon transfer or exchange thereof, shall be subject to the
restrictions on transfer provided in the legend required to be set forth on the
face of such Restricted Warrant pursuant to Section 2.02, unless such
restrictions on transfer shall be waived by the written consent of Holdings, and
the Holder of each Restricted Warrant, by such Holder's acceptance thereof,
agrees to be bound by such restrictions on transfer. Whenever any Restricted
Warrant is presented or surrendered for registration of transfer or for exchange
for a Warrant registered in a name other than that of the Holder, such
Restricted Warrant must be accompanied by a transferor's certificate in
substantially the form set forth in EXHIBIT B-4 and, in the case of transfers of
Restricted Warrants pursuant to Rule 144A, a transferee's
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certificate substantially in the form set forth in EXHIBIT B-8. The Registrar
shall not be required to accept for such registration of transfer or exchange
any Restricted Warrant unless such Registrar is satisfied that the restrictions
on transfer as set forth in this Warrant Agreement have been complied with.
The restrictions imposed by this Section 2.08(b) and Section 2.06 upon
the transferability of any particular Restricted Warrant shall cease and
terminate when such Restricted Warrant (i) has been sold pursuant to an
effective registration statement, (ii) may be transferred pursuant to Rule 144
(or any successor provision thereto), unless the Holder thereof is an affiliate
of the Issuer within the meaning of Rule 144 (or such successor provision), or
(iii) has been transferred pursuant to Regulation S. Any Restricted Warrant as
to which such restrictions on transfer shall have expired in accordance with
their terms or shall have terminated may, upon surrender of such Restricted
Warrant for exchange to the Registrar in accordance with the provisions of this
Section 2.08 (accompanied, in the event that such restrictions on transfer have
terminated by reason of a transfer pursuant to Rule 144 or any successor
provision, by an opinion of counsel having substantial experience in practice
under the Securities Act and otherwise reasonably acceptable to the Issuer,
addressed to the Issuer and in form acceptable to the Issuer, to the effect that
the transfer of such Restricted Warrant has been made in compliance with Rule
144 or such successor provision) be exchanged for a new Warrant, exercisable for
the same number of shares of Common Stock, which shall not bear the restrictive
legend required by Section 2.01(d). Holdings shall inform the Warrant Agent of
the effective date of any registration statement registering the Warrants under
the Securities Act. The Warrant Agent shall not be liable for any action taken
or omitted to be taken by it in good faith in accordance with the aforementioned
opinion of counsel or registration statement.
As used in the preceding two paragraphs of this Section 2.08(c), the
term "transfer" encompasses any sale, pledge, transfer or other disposition of
any Restricted Warrant.
(c) TRANSFER OF GLOBAL WARRANTS AND INTERESTS THEREIN.
Notwithstanding any other provision of this Warrant Agreement or the Warrants,
transfers of a Global Warrant, in whole or in part, and transfers of interests
therein of the kind described in clauses (iii), (iv) or (v) below, shall be made
only in accordance with this Section 2.08(c), and all transfers of an interest
in a Regulation S Temporary Global Warrant shall comply with
Sections 2.08(c)(ii), (v) and (vi) below.
(i) GENERAL. A Global Warrant may not be transferred, in whole or
in part, to any person other than the Depositary or a nominee thereof, and
no such transfer to any such other person may be registered; PROVIDED,
HOWEVER, that this clause (i) shall not prohibit any transfer of a Warrant
that is issued in exchange for a Global Warrant but is not itself a Global
Warrant. No transfer of a Warrant to any person shall be effective under
this Warrant Agreement or the Warrants unless and
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until such Warrant has been registered in the name of such person. Nothing
in this Section 2.08(c)(i) shall prohibit or render ineffective any
transfer of a beneficial interest in a Global Warrant effected in
accordance with the other provisions of this Section 2.08(c).
(ii) REGULATION S TEMPORARY GLOBAL WARRANT. If the holder of a
beneficial interest in a Regulation S Temporary Global Warrant wishes at
any time to transfer such interest to a person who wishes to take delivery
thereof in the form of a beneficial interest in such Regulation S Temporary
Global Warrant, such transfer may be effected, subject to Applicable
Procedures (as defined below), only in accordance with this Section
2.08(c)(ii). Upon delivery (i) by a beneficial owner of an interest in a
Regulation S Temporary Global Warrant to Euroclear or CEDEL, as the case
may be, of an Owner Securities Certification, (ii) by the transferee of
such beneficial interest in the Regulation S Temporary Global Warrant to
Euroclear or CEDEL, as the case may be, of a written certification
(a "TRANSFEREE SECURITIES CERTIFICATION") substantially in the form of
EXHIBIT B-3 hereto and (iii) by Euroclear or CEDEL, as the case may be, to
the Warrant Agent of a Depositary Securities Certification, the Warrant
Agent may direct either Euroclear or CEDEL, as the case may be, to reflect
on its records the transfer of a beneficial interest in the Regulation S
Temporary Global Warrant from the beneficial owner providing the Owner
Securities Certification to the Person providing the Transferee Securities
Certification.
(iii) RESTRICTED GLOBAL WARRANT TO REGULATION S TEMPORARY GLOBAL
WARRANT. If the holder of a beneficial interest in a Restricted Global
Warrant wishes at any time to transfer such interest to a person who wishes
to take delivery thereof in the form of a beneficial interest in a
Regulation S Temporary Global Warrant, such transfer may be effected,
subject to the rules and procedures of the Depositary, Euroclear and CEDEL,
in each case to the extent applicable (the "APPLICABLE PROCEDURES"), only
in accordance with the provisions of this Section 2.08(c)(iii). Upon
receipt by (1) the Depositary of (A) written instructions given in
accordance with the Applicable Procedures from an Agent Member directing
the Depositary to credit or cause to be credited to a specified Agent
Member's account a beneficial interest in a Regulation S Temporary Global
Warrant exercisable for a number of shares of Common Stock equal to that of
the beneficial interest in such Restricted Global Warrant, (B) a written
order given in accordance with the Applicable Procedures containing
information regarding the account of the Agent Member (and the Euroclear or
CEDEL account, as the case may be) to be credited with, and the account of
the Agent Member to be debited for, such beneficial interest and (C) a
certificate in substantially the form of EXHIBIT B-5 attached hereto given
by the holder of such beneficial interest and (2) the Warrant Agent, as
Registrar, at its office in The City of New York of (A) notification from
the Depositary of the transaction described in (1) above and (B) the
certificate described in (1)(C) above, the Warrant Agent, as Registrar,
shall instruct the Depositary to reduce the number of shares of
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Common Stock issuable upon the exercise of a Restricted Global Warrant, and
to increase the number of shares of Common Stock issuable upon the exercise
of a Regulation S Temporary Global Warrant by the amount of such reduction,
and to credit or cause to be credited to the account of the person
specified in such instructions (which shall be the Agent Member for
Euroclear or CEDEL or both, as the case may be) a beneficial interest in
such Regulation S Temporary Global Warrant exercisable for a number of
shares of Common Stock equal to the amount by which the number of shares of
Common Stock issuable upon the exercise of the Restricted Global Warrant
was reduced upon such transfer.
(iv) RESTRICTED GLOBAL WARRANT TO UNRESTRICTED GLOBAL WARRANT. If
the holder of a beneficial interest in a Restricted Global Warrant wishes
at any time to transfer such interest to a person who wishes to take
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Warrant, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with this Section 2.08(c)(iv). Upon receipt
by (1) the Depositary of (A) written instructions given in accordance with
the Applicable Procedures from an Agent Member directing the Depositary to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in an Unrestricted Global Warrant exercisable for a
number of shares of Common Stock equal to that of the beneficial interest
in such Restricted Global Warrant, (B) a written order given in accordance
with the Applicable Procedures containing information regarding the account
of the Agent Member (and, in the case of any such transfer pursuant to
Regulation S, the Euroclear or CEDEL account for which such Agent Member's
account is held) to be credited with, and the account of the Agent Member
to be debited for, such beneficial interest and (C) a certificate in
substantially the form of EXHIBIT B-6 attached hereto given by the holder
of such beneficial interest and (2) the Warrant Agent, as Registrar, at its
office in The City of New York of (A) notification from the Depositary of
the transaction described in (1) above and (B) the certificate described in
(1)(C) above, the Warrant Agent, as Registrar, shall instruct the
Depositary to reduce the number of shares of Common Stock issuable upon the
exercise of a Restricted Global Warrant, and to increase the number of
shares of Common Stock issuable upon the exercise of an Unrestricted Global
Warrant by the amount of such reduction, and to credit or cause to be
credited to the account of the person specified in such instructions a
beneficial interest in such Unrestricted Global Warrant exercisable for a
number of shares of Common Stock equal to the amount by which the number of
shares of Common Stock issuable upon the exercise of the Restricted Global
Warrant was reduced upon such transfer.
(v) REGULATION S TEMPORARY GLOBAL WARRANT OR UNRESTRICTED GLOBAL
WARRANT TO RESTRICTED GLOBAL WARRANT. If the holder of a beneficial
interest in a Regulation S Temporary Global Warrant on or after the
termination of the Restricted Period, or the holder of a beneficial
interest in an Unrestricted Global Warrant at any
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time, wishes to transfer such interest to a person who wishes to take
delivery thereof in the form of a beneficial interest in the Restricted
Global Warrant, such transfer may be effected, subject to the Applicable
Procedures and only in accordance with this Section 2.08(c)(v) PROVIDED,
that with respect to any transfer of a beneficial interest in a Regulation
S Temporary Global Warrant (except a transfer pursuant to Section
2.08(c)(vii)(2)) the transferor and Euroclear or CEDEL, as the case may be,
must have previously delivered the certificates described in the first
paragraph of Section 2.01(b)(ii) with respect to such beneficial interest.
Upon receipt by (1) the Depositary of (A) written instructions given in
accordance with the Applicable Procedures from an Agent Member, directing
the Depositary to credit or cause to be credited to a specified Agent
Member's account a beneficial interest in the Restricted Global Warrant
exercisable for a number of shares of Common Stock equal to that of the
beneficial interest in a Regulation S Temporary Global Warrant or an
Unrestricted Global Warrant to be so transferred and (B) a written order
given in accordance with the Applicable Procedures containing information
regarding the account of the Agent Member to be credited with,and the
account of the Agent Member (or, if such account is held for Euroclear or
CEDEL, the Euroclear or CEDEL account, as the case may be) to be debited
for, such beneficial interest, and (2) the Warrant Agent, as Registrar, at
its office in The City of New York of notification from the Depositary of
the transaction described in (1) above, the Warrant Agent, as Registrar,
shall instruct the Depositary to reduce the number of shares of Common
Stock issuable upon the exercise of such Regulation S Temporary Global
Warrant or Unrestricted Global Warrant as the case may be and increase the
number of shares of Common Stock issuable upon the exercise of the
Restricted Global Warrant, by the amount of such reduction, and to credit
or cause to be credited to the account of the person specified in such
instructions a beneficial interest in such Restricted Global Warrant
exercisable for a number of shares of Common Stock equal to the amount by
which the number of shares of Common Stock issuable upon the exercise of
such Regulation S Temporary Global Warrant or Unrestricted Global Warrant
was reduced upon such transfer.
(vi) INTERESTS IN REGULATION S TEMPORARY GLOBAL WARRANT TO BE HELD
THROUGH EUROCLEAR OR CEDEL. Until the later of the termination of the
Restricted Period and the provision of the certifications required by
Section 2.01(b)(ii), interests in any Regulation S Temporary Global Warrant
may be held only through Agent Members acting for and on behalf of
Euroclear and CEDEL, and any purchaser of Warrants in a sale made in
reliance on Regulation S may not sell or offer to sell such Warrants within
the United States or to a U.S. Person or for the account or benefit of a
U.S. Person within the meaning of Regulation S.
(vii) OTHER EXCHANGES. (1) In the event that a Global Warrant or
any portion thereof is exchanged for Warrants other than Global Warrants,
such other Warrants may in turn be exchanged (on transfer or otherwise) for
Warrants that are
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not Global Warrants or for beneficial interests in a Global Warrant (if any
is then outstanding) only in a manner consistent with the provisions of
clauses (i) through (vi) above (including the certification requirements
intended to insure that transfers of beneficial interests in a Global
Warrant comply with Rule 144A, Rule 144 or Regulation S, as the case may
be) and any Applicable Procedures, as may be from time to time adopted by
the Issuer and the Warrant Agent; PROVIDED, that, except as permitted in
paragraph (2) hereof, no beneficial interest in a Regulation S Temporary
Global Warrant shall be exchangeable for a definitive Warrant until the
expiration of the Restricted Period and then only if the certifications
described in Section 2.01(b)(ii) hereof have been provided in respect of
such interest.
(2) Notwithstanding any other provision of this Section
2.08, an Initial Purchaser may exchange beneficial interests in a
Regulation S Temporary Global Warrant held by it for one or more
Restricted Warrants (including an interest in a Restricted Global
Warrant) only after delivery by such Initial Purchaser of instructions
for such exchange substantially in the form of EXHIBIT B-7. Upon
receipt of the instruction described in the preceding sentence, the
Warrant Agent shall instruct the Depositary to reduce the number of
shares of Common Stock issuable upon the exercise of a Regulation S
Temporary Global Warrant by the number of shares of Common Stock
issuable upon the exercise of the beneficial interest in such
Regulation S Temporary Global Warrant to be so transferred and either
(A) the Warrant Agent shall instruct the Depositary to increase the
number of shares of Common Stock issuable upon the exercise of the
Restricted Global Warrant and credit or cause to be credited to the
account of the Initial Purchasers a beneficial interest in such
Restricted Global Warrant exercisable for a number of shares of Common
Stock equal to the amount by which the number of shares of Commons
Stock issuable upon the exercise of the Regulation S Temporary Global
Warrant was reduced upon such transfer or (B) authenticate and deliver
one or more Restricted Warrants exercisable for a number of shares of
Common Stock equal to the number of shares of Common Stock issuable
upon the exercise of the beneficial interest in the Regulation S
Temporary Global Warrant to be so transferred, pursuant to the
instructions described in the first sentence of this subclause (2).
(d) TRANSFER OF RESTRICTED WARRANTS (OTHER THAN A RESTRICTED
GLOBAL WARRANT) TO A GLOBAL WARRANT. If the holder of a Restricted Warrant
(other than a Restricted Global Warrant) wishes at any time to transfer such
Warrant to a person who wishes to take delivery thereof in the form of a
beneficial interest in a Restricted Global Warrant, a Regulation S Temporary
Global Warrant or an Unrestricted Global Warrant, such transfer may be effected,
subject to the other provisions of this Warrant Agreement and the Applicable
Procedures, only in accordance with this Section 2.08(d). Upon receipt by (1)
the Depositary of (A) written instructions given in accordance with the
Applicable Procedures
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from an Agent Member directing the Depositary to credit or cause to be credited
to a specified Agent Member's account a beneficial interest in a Restricted
Global Warrant, a Regulation S Temporary Global Warrant or an Unrestricted
Global Warrant, as the case may be, exercisable for a number of shares of Common
Stock equal to the number of shares of Common Stock issuable upon the exercise
of the Restricted Warrant to be so transferred, (B) a written order given in
accordance with the Applicable Procedures containing information regarding the
account of the Agent Member (and, in the case of any transfer pursuant to
Regulation S, the Euroclear and CEDEL account for which such Agent Member's
account is held, or if such account is held for Euroclear or CEDEL, the
Euroclear or CEDEL account, as the case may be) to be credited with such
beneficial interest and (C) an appropriately completed certificate substantially
in the form of EXHIBIT B-4 hereto and (2) the Warrant Agent of (A) the
Restricted Warrant to be transferred, (B) notification from the Depositary of
the transaction described in (1) above and (C) the certificate described in
(1)(C) above, the Warrant Agent shall cancel the Restricted Warrant and instruct
the Depositary to increase the number of shares of Common Stock issuable upon
the exercise of a Restricted Global Warrant, Regulation S Temporary Global
Warrant or Unrestricted Global Warrant, as the case may be, by the number of
shares of Common Stock issuable upon the exercise of the Restricted Warrant so
transferred, and to credit or cause to be credited to the account of the person
specified in such instructions (which, in the case of any increase in the number
of shares of Common Stock issuable upon the exercise of such Regulation S
Temporary Global Warrant, shall be the Agent Member for Euroclear or CEDEL or
both, as the case may be) a corresponding number of shares of Common Stock
issuable upon the exercise of such Restricted Global Warrant, such Regulation S
Temporary Global Warrant or such Unrestricted Global Warrant. Any transfer of a
Restricted Warrant to a person who wishes to take delivery thereof in the form
of a beneficial interest in a Global Warrant other than a Restricted Global
Warrant may only be effected in accordance with Regulation S or Rule 144.
(e) Notwithstanding any other provision of this Section 2.08,
transfers of any Warrant or a beneficial interest in a Global Warrant made in
reliance on Rule 144A may be effected only after delivery to the Depositary or
the Warrant Agent by the proposed transferee of an appropriately completed
certificate substantially in the form of EXHIBIT B-8.
(f) Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the Register. No service charge shall be made
for any registration of transfer or exchange of the Warrants, but the Warrant
Agent may require payment of a sum sufficient to cover any stamp duty, tax or
other governmental charge or insurance charge payable in connection therewith
and any other amounts required to be paid by the provisions of the Warrants.
(g) All Warrants issued upon any registration of transfer or exchange
of Warrants shall be the valid obligations of Holdings, evidencing the same
debt, and entitled
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to the same benefits under this Warrant Agreement, as the Warrants surrendered
upon such registration of transfer or exchange.
SECTION 2.09. REPLACEMENT CERTIFICATES. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, Holdings shall issue and the Warrant Agent shall countersign a
replacement Warrant Certificate if the reasonable requirements of the Warrant
Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the
State of New York are met. Such Holder shall furnish an indemnity bond
sufficient in the judgment of Holdings and the Warrant Agent to protect Holdings
and the Warrant Agent from any loss which either of them may suffer if a Warrant
Certificate is replaced. Holdings and the Warrant Agent may charge the Holder
for their expenses in replacing a Warrant Certificate. Every replacement
Warrant Certificate is an additional obligation of Holdings.
SECTION 2.10. TEMPORARY CERTIFICATES. Until definitive Warrant
Certificates are ready for delivery, Holdings may prepare and the Warrant Agent
shall countersign temporary Warrant Certificates. Temporary Warrant
Certificates shall be substantially in the form of definitive Warrant
Certificates but may have variations that Holdings considers appropriate for
temporary Warrant Certificates. Without unreasonable delay, Holdings shall
prepare and the Warrant Agent shall countersign definitive Warrant Certificates
and deliver them in exchange for temporary Warrant Certificates.
SECTION 2.11. CANCELLATION. (a) In the event Holdings shall purchase
or otherwise acquire Warrant Certificates, the same shall thereupon be delivered
to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and may, but shall
not be required to, destroy all Warrant Certificates surrendered for transfer,
exchange, replacement, exercise or cancellation unless Holdings directs the
Warrant Agent to deliver canceled Warrant Certificates to Holdings. Holdings
may not issue new Warrant Certificates to replace Warrant Certificates to the
extent they represent Warrants which have been exercised or Warrants which
Holdings has purchased or otherwise acquired.
ARTICLE 3
EXERCISE TERMS
SECTION 3.01. EXERCISE PRICE. Each Warrant shall initially entitle
the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase 0.537495 shares of Common Stock for a per share exercise
price (the "EXERCISE PRICE") of $0.01.
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SECTION 3.02. EXERCISE PERIODS. (a) Subject to the terms and
conditions set forth herein, the Warrants shall be exercisable at any time or
from time to time after the Separation Date; PROVIDED, HOWEVER, that holders of
Warrants will be able to exercise their Warrants only if (A)(i) the Common Shelf
Registration Statement relating to the Warrant Shares is then in effect, or
(ii) the exercise of such Warrants is exempt from the registration requirements
of the Securities Act, and the Warrant Shares are qualified for sale or exempt
from qualification under the applicable securities laws of the states in which
such Holders reside, and (B) the exercise of the Warrants complies with the
Communications Act of 1934, as amended (the "COMMUNICATIONS ACT"), which
compliance may require FCC approval of such exercise.
(b) No Warrant shall be exercisable after 5:00 p.m., New York time,
August 1, 2007 (the "EXPIRATION DATE").
SECTION 3.03. EXPIRATION. Each Warrant shall terminate and become
void as of the earlier of (i) the close of business on the Expiration Date or
(ii) the date such Warrant is exercised. Holdings shall give notice not less
than 90 and not more than 120 days prior to the Expiration Date to the Holders
of all then outstanding Warrants to the effect that the Warrants will terminate
and become void as of the close of business on the Expiration Date; PROVIDED,
HOWEVER, that if Holdings fails to give notice as provided in this Section 3.03,
the Warrants will nevertheless expire and become void on the Expiration Date.
SECTION 3.04. MANNER OF EXERCISE. Warrants may be exercised upon (i)
surrender to the Warrant Agent at the principal corporate trust office of the
Warrant Agent of the related Warrant Certificate, together with the form of
election to purchase Common Stock on the reverse thereof duly completed and
signed by the Holder thereof, and (ii) payment to the Warrant Agent, for the
account of Holdings, of the Exercise Price for each Warrant Share issuable upon
the exercise of such Warrants then exercised. Such payment shall be made in
cash or by certified or official bank check payable to the order of Holdings.
Subject to Section 3.02, the rights represented by the Warrants shall be
exercisable at the election of the Holders thereof either in full at any time or
from time to time in part and in the event that a Warrant Certificate is
surrendered for exercise of less than all the Warrants represented by such
Warrant Certificate at any time prior to the Expiration Date, a new Warrant
Certificate representing the remaining Warrants shall be issued. The Warrant
Agent shall countersign and deliver the required new Warrant Certificates, and
Holdings, at the Warrant Agent's request, shall supply the Warrant Agent with
Warrant Certificates duly signed on behalf of Holdings for such purpose.
SECTION 3.05. ISSUANCE OF WARRANT SHARES. Subject to Section 2.08
and to compliance with the Communications Act, upon the surrender of Warrant
Certificates and payment of the per share Exercise Price, as set forth in
Section 3.04, Holdings shall issue and cause the Warrant Agent or, if appointed,
a transfer agent for the Common Stock ("TRANSFER AGENT") to countersign and
deliver to or upon the written order of the Holder and in such
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name or names as the Holder may designate a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
other securities or property to which it is entitled, registered or otherwise,
to the Person or Persons entitled to receive the same, together with cash as
provided in Section 3.06 in respect of any fractional Warrant Shares otherwise
issuable upon such exercise. Such certificate or certificates shall be deemed
to have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the per share
Exercise Price, as aforesaid; PROVIDED, HOWEVER, that if, at such date, the
transfer books for the Warrant Shares shall be closed, the certificates for the
Warrant Shares in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened and until such
date Holdings shall be under no duty to deliver any certificates for such
Warrant Shares; PROVIDED FURTHER, HOWEVER, that such transfer books, unless
otherwise required by law, shall not be closed at any one time for a period
longer than 20 calendar days.
SECTION 3.06. FRACTIONAL WARRANT SHARES. Holdings shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrant
Shares purchasable pursuant thereto. If any fraction of a Warrant Share would,
except for the provisions of this Section 3.06, be issuable on the exercise of
any Warrant (or specified portion thereof), Holdings shall pay to the Holder at
the time of exercise an amount in cash equal to the Current Market Value per
Warrant Share, as determined on the day immediately preceding the date the
Warrant is exercised, multiplied by such fraction, computed to the nearest whole
cent.
SECTION 3.07. RESERVATION OF WARRANT SHARES. Holdings shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "REGISTRAR") shall at all
times until the Expiration Date reserve such number of authorized shares as
shall be required for such purpose. Holdings will keep a copy of this Agreement
on file with the Transfer Agent. All Warrant Shares which may be issued upon
exercise of Warrants shall, upon issue, be fully paid, non-assessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof. Holdings will supply such Transfer Agent
with duly executed stock certificates for such purpose and will itself provide
or otherwise make available any cash which may be payable as provided in Section
3.06. Holdings will furnish to such Transfer Agent a copy of all notices of
adjustments (and certificates related thereto) transmitted to each Holder.
SECTION 3.08. COMPLIANCE WITH LAW. Notwithstanding anything in this
Agreement to the contrary, in no event shall a Holder be entitled to exercise a
Warrant unless (A)(i) a registration statement filed under the Securities Act in
respect of the issuance of the
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Warrant Shares is then in effect, or (ii) in the opinion of counsel to Holdings
addressed to the Warrant Agent the exercise of such Warrants is exempt from the
registration requirements of the Securities Act and such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states in which such holders reside, and (B) the exercise of the
Warrants complies with the Communications Act, which compliance may require FCC
approval of such exercise.
SECTION 3.09. REGULATION S. In the event that the Warrant Shares are
not registered pursuant to an effective registration statement at the time any
Warrant is exercised pursuant to the terms of this Article III, the Company and
the Trustee shall apply legends and registration procedures with respect to
Warrant Shares in a manner consistent with Article II hereof.
ARTICLE 4
ANTIDILUTION PROVISIONS
SECTION 4.01. CHANGES IN COMMON STOCK. In the event that at any time
or from time to time Holdings shall (i) pay a dividend or make a distribution on
its Common Stock in shares of its Common Stock, (ii) subdivide its outstanding
shares of Common Stock into a larger number of shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock or (iv) increase or decrease the number of shares of Common
Stock outstanding by reclassification of its Common Stock, then the number of
shares of Common Stock issuable upon exercise of each Warrant immediately after
the happening of such event shall be adjusted to a number determined by
multiplying the number of shares of Common Stock that such holder would have
owned or have been entitled to receive upon exercise had such Warrants been
exercised immediately prior to the happening of the events described above (or,
in the case of a dividend or distribution of Common Stock or other shares of
capital stock, immediately prior to the record date therefor) by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately after the happening of the events described above and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the happening of the events described above.
An adjustment made pursuant to this Section 4.01 shall become effective
immediately after the effective date of such event, retroactive to the record
date therefor in the case of a dividend or distribution in shares of Common
Stock or other shares of Holdings' capital stock.
SECTION 4.02. CASH DIVIDENDS AND OTHER DISTRIBUTIONS. In the event
that at any time or from time to time Holdings shall distribute to all holders
of Common Stock (i) any dividend or other distribution of shares of its capital
stock or any other assets, properties or securities or (ii) any options,
warrants or other rights to subscribe for or
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purchase any of the foregoing (other than, in each case, (w) the issuance of any
rights under a stockholder rights plan, (x) any dividend or distribution
described in Section 4.01, (y) any rights, options, warrants or securities
described in Section 4.03 and (z) any cash dividends or other cash distributions
from current earnings), then the number of shares of Common Stock issuable upon
the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock issuable upon the exercise of
such Warrant immediately prior to the record date for any such dividend or
distribution by a fraction, the numerator of which shall be the Current Market
Value per share of Common Stock on the record date for such dividend or
distribution and the denominator of which shall be such Current Market Value per
share of Common Stock on the record date for such dividend or distribution less
the sum of (x) the amount of cash, if any, distributed per share of Common Stock
and (y) the fair value (as determined in good faith by the Board, whose
determination shall be evidenced by a board resolution filed with the Warrant
Agent, a copy of which will be sent to Holders upon request) of the portion, if
any, of the distribution applicable to one share of Common Stock consisting of
evidences of indebtedness, shares of stock, securities, other assets or
property, warrants, options or subscription or purchase rights. Such adjustment
shall be made whenever any distribution is made and shall become effective as of
the date of distribution, retroactive to the record date for any such
distribution; PROVIDED, HOWEVER, that Holdings is not required to make an
adjustment pursuant to this Section 4.02 if at the time of such distribution
Holdings makes the same distribution to Holders of Warrants as it makes to
holders of Common Stock PRO RATA based on the number of shares of Common Stock
for which such Warrants are exercisable (whether or not currently exercisable).
No adjustment shall be made pursuant to this Section 4.02 which shall have the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each Warrant.
SECTION 4.03. RIGHTS ISSUE TO ALL HOLDERS OF COMMON STOCK. In the
event that at any time or from time to time Holdings shall issue to all holders
of Common Stock without any charge, rights, options or warrants entitling the
holders thereof to subscribe for shares of Common Stock, or securities
convertible into or exchangeable or exercisable for Common Stock, entitling such
holders to subscribe for or purchase shares of Common Stock within 60 days after
the record date at a price per share (or with an initial conversion, exchange or
exercise price) that is lower at the record date for such issuance than the then
Current Market Value per share of Common Stock other than in connection with the
adoption of a stockholder rights plan by Holdings, then the number of shares of
Common Stock issuable upon the exercise of each Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant by a fraction, the numerator
of which shall be the sum of (i) the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, warrants or
securities plus (ii) the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the sum of (x) the number of shares of Common Stock outstanding on the date
of issuance of such rights,
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options, warrants or securities plus (y) the total number of shares of Common
Stock which the aggregate consideration expected to be received by Holdings
(assuming the exercise or conversion of all such rights, options, warrants or
securities) would purchase at the then Current Market Value per share of Common
Stock. Such adjustment shall be made immediately after such rights, options or
warrants are issued and shall become effective, retroactive to the record date
for the determination of stockholders entitled to receive such rights, options,
warrants or securities. No adjustment shall be made pursuant to this
Section 4.03 which shall have the effect of decreasing the number of shares of
Common Stock purchasable upon exercise of each Warrant.
SECTION 4.04. OTHER ISSUANCES OF COMMON STOCK OR RIGHTS. In the
event that at any time or from time to time the Holdings shall issue (i) shares
of Common Stock for a consideration per share less than the Current Market
Price per share (excluding securities issued in transactions referred to in
Sections 4.01, 4.02 and 4.03 above) or (ii) securities convertible into or
exchangeable for shares of Common Stock for a conversion or exchange price
which, together with the consideration received upon issuance would be less than
the then Current Market Price per share of Common Stock (excluding securities
issued in transactions referred to in Sections 4.02 and 4.03 above), then the
number of shares of Common Stock issuable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock theretofore issuable upon the exercise of each Warrant by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding on the date of issuance of such shares of Common Stock
or such securities plus (ii) the number of additional shares of Common Stock so
issued or into or for which such securities are convertible or exchangeable, and
the denominator of which shall be the sum of (x) the number of shares of Common
Stock outstanding on the date of issuance of such Common Stock or such
securities plus (y) the total number of shares of Common Stock which the
aggregate consideration received or expected to be received by Holdings
(assuming the exercise or conversion of all such securities) would purchase at
the then Current Market Value per share of Common Stock. Such adjustment shall
be made immediately after such shares of Common Stock or securities are issued
and shall become effective, retroactive to the record date for the determination
of stockholders entitled to receive such shares or securities. No adjustment
shall be made pursuant to this Section 4.04 which shall have the effect of
decreasing the number of shares of Common Stock purchasable upon exercise of
each Warrant. In addition, Holdings shall adjust the number of shares of Common
Stock purchasable upon exercise of the Warrants in the event of any issuance or
any commitment to issue (with respect to such commitment, the adjustment will
occur on the actual date of issuance), at any time within 90 days of the Issue
Date, of Common Stock or rights, options or warrants to subscribe therefor to
any person; any such adjustment shall be intended to preserve the relative
ownership interest in Holdings of the holders of such Warrants as of the Issue
Date. No adjustment will be required under this Section 4.04 upon conversion of
the Series A Preferred Stock of Holdings or upon issuance of options or shares
of Common Stock pursuant to employee stock option or restricted stock purchase
plans.
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SECTION 4.05. COMBINATION; LIQUIDATION. (a) Except as provided in
Section 4.05(b), in the event of a Combination, each Holder shall have the right
to receive upon exercise of the Warrants the kind and amount of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive upon or as a result of such Combination had such Warrant
been exercised immediately prior to such event. Unless paragraph (b) is
applicable to a Combination, Holdings shall provide that the surviving or
acquiring Person (the "SUCCESSOR COMPANY") in such Combination will enter into
an agreement with the Warrant Agent confirming the Holders' rights pursuant to
this Section 4.05(a) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
4. The provisions of this Section 4.05(a) shall similarly apply to successive
Combinations involving any Successor Company.
(b) In the event of a Combination, where consideration to the holders
of Common Stock in exchange for their shares is payable solely in cash, the
holders of the Warrants shall be entitled to receive, upon surrender of their
Warrant Certificates, distributions on an equal basis with the holders of Common
Stock or other securities issuable upon exercise of the Warrants, as if the
Warrants had been exercised immediately prior to such event, less the Exercise
Price.
In case of any Combination described in this Section 4.05(b), the
surviving or acquiring Person and, in the event of any dissolution, liquidation
or winding-up of Holdings, Holdings, shall deposit promptly with the Warrant
Agent the funds, if any, necessary to pay to the holders of the Warrants the
amounts to which they are entitled as described above. After such funds and the
surrendered Warrant Certificates are received, the Warrant Agent is required to
deliver a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrants.
SECTION 4.06. OTHER EVENTS. If any event occurs as to which the
foregoing provisions of this Article 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then such Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of shares of Common Stock issuable upon
exercise of any Warrant.
SECTION 4.07. SUPERSEDING ADJUSTMENT. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares issuable upon the exercise of each
Warrant shall be readjusted pursuant to the
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applicable section of Article 4 as if (A) the only shares of Common Stock
issuable upon exercise of such rights, options, warrants or conversion or
exchange privileges were the shares of Common Stock, if any, actually issued
upon the exercise of such rights, options, warrants or conversion or exchange
privileges and (B) shares of Common Stock actually issued, if any, were issuable
for the consideration actually received by Holdings upon such exercise plus the
aggregate consideration, if any, actually received by Holdings for the issuance,
sale or grant of all such rights, options, warrants or conversion or exchange
privileges whether or not exercised; PROVIDED, HOWEVER, that no such
readjustment shall (except by reason of an intervening adjustment under Section
4.01) have the effect of decreasing the number of Warrant Shares purchasable
upon the exercise of each Warrant or increase the Exercise Price by an amount in
excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such rights, options, warrants or conversion or
exchange privileges.
SECTION 4.08. MINIMUM ADJUSTMENT. The adjustments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the number of shares of Common Stock issuable upon exercise of Warrants that
would otherwise be required shall be made unless and until such adjustment
either by itself or with other adjustments not previously made increases or
decreases by at least 1% of the number of shares of Common Stock issuable upon
exercise of Warrants immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Article 4 and not previously made, would result in
a minimum adjustment. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence. In computing adjustments under this Article 4, fractional interests
in Common Stock shall be taken into account to the nearest one-hundredth of a
share.
SECTION 4.09. NOTICE OF ADJUSTMENT. Whenever the number of shares of
Common Stock and other property if any, issuable upon exercise of the Warrants
is adjusted, as herein provided, Holdings shall deliver to the Warrant Agent a
certificate of a firm of independent accountants selected by the Board (who may
be the regular accountants employed by Holdings) setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated (including a description of the basis on which (i) the
Board determined the fair value of any evidences of indebtedness, other
securities or property or warrants, options or other subscription or purchase
rights and (ii) the Current Market Value of the Common Stock was determined, if
either of such determinations were required), and specifying the number of
shares of Common Stock issuable upon exercise of Warrants after giving effect to
such adjustment. Holdings shall promptly cause the Warrant Agent to mail a copy
of such certificate to each Holder in accordance with Section 7.06. The Warrant
Agent shall be entitled to rely on such certificate and shall be under no duty
or responsibility with respect to any such certificate, except to
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exhibit the same from time to time, to any Holder desiring an inspection thereof
during reasonable business hours. The Warrant Agent shall not at any time be
under any duty or responsibility to any Holder determine whether any facts exist
which may require any adjustment of the number of shares of Common Stock or
other stock or property issuable on exercise of the Warrants, or with respect to
the nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment or the validity or value of any shares
of Common Stock, evidences of indebtedness, warrants, options, or other
securities or property.
SECTION 4.10. NOTICE OF CERTAIN TRANSACTIONS. In the event that
Holdings shall propose to (a) pay any dividend payable in securities of any
class to the holders of its Common Stock or to make any other non-cash dividend
or distribution to the holders of its Common Stock, (b) offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) issue any (i) shares of Common Stock,
(ii) rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (in the case of (i), (ii) and (iii), if such
issuance or adjustment would result in an adjustment hereunder), (d) effect any
capital reorganization, reclassification, consolidation or merger, (e) effect
the voluntary or involuntary dissolution, liquidation or winding-up of Holdings
or (f) make a tender offer or exchange offer with respect to the Common Stock,
Holdings shall, in each case, within five days of any such determination send to
the Warrant Agent and the Warrant Agent shall within five days send the Holders
a notice (in such form as shall be furnished to the Warrant Agent by Holdings)
of such proposed action or offer. Such notice shall be mailed by the Warrant
Agent to the Holders at their addresses as they appear in the Certificate
Register, which shall specify the record date for the purposes of such dividend,
distribution or rights, or the date such issuance or event is to take place and
the date of participation therein by the holders of Common Stock, if any such
date is to be fixed, and shall briefly indicate the effect of such action on the
Common Stock and on the number and kind of any other shares of stock and on
other property, if any, and the number of shares of Common Stock and other
property, if any, issuable upon exercise of each Warrant. Such notice shall be
given as promptly as possible and (x) in the case of any action covered by
clause (a) or (b) above, at least ten days prior to the record date for
determining holders of the Common Stock for purposes of such action or (y) in
the case of any other such action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
SECTION 4.11. ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may state the
same number of shares of Common Stock issuable upon exercise of the Warrants as
are stated in the Warrant Certificates initially issued pursuant to this
Agreement. Holdings, however, may at any time
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in its sole discretion make any change in the form of Warrant Certificate that
it may deem appropriate to give effect to such adjustments and that does not
affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
SECTION 4.12. EXERCISE PRICE EQUAL TO PAR VALUE. There shall be no
adjustment of the Exercise Price, except as provided in this Section 4.12. In
the event that the par value of the Class A Common Stock changes as a result of
any dividend, distribution, subdivision, combination or reclassification covered
by Section 4.01 hereof, the Exercise Price will be adjusted to equal such new
par value.
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. EFFECTIVENESS OF REGISTRATION STATEMENT. Subject to
Section 5.02, Holdings shall cause to be filed pursuant to Rule 415 (or any
successor provision) of the Securities Act and shall use its best efforts to
file not later than 30 days after the Issue Date, a shelf registration statement
relating to the offer and sale of the Warrants by the Holders from time to time
in accordance with the methods of distribution elected by such holders and set
forth in such registration statement (the "WARRANT SHELF REGISTRATION
STATEMENT"), and shall use its best efforts to cause the Warrant Shelf
Registration Statement to be declared effective on or before 90 days after the
Issue Date. Subject to Section 5.02, Holdings shall cause to be filed pursuant
to Rule 415 (or any successor provision) of the Securities Act a shelf
registration statement (separately from the Warrant Shelf Registration Statement
or included as part thereof) covering the issuance of Warrant Shares to the
Holders upon exercise of the Warrants by the Holders thereof (the "COMMON SHELF
REGISTRATION STATEMENT", and together with the Warrant Shelf Registration
Statement, the "REGISTRATION STATEMENTS") and shall use its best efforts to
cause the Common Shelf Registration Statement to be declared effective on or
before 90 days after the Issue Date. Subject to Section 5.02, Holdings shall
cause each of the Registration Statements to remain effective until (A) in the
case of the Common Shelf Registration Statement, the earliest of (i) such time
as all Warrants have been exercised and (ii) 30 days after the Expiration Date,
and (B) in the case of the Warrant Shelf Registration Statement, the earliest of
(i) such time as all the Warrants have been sold thereunder, (ii) 30 days after
the expiration date, (iii) two years after its effective date and (iv) the date
that Warrants held by non-affiliates of the Company are tradeable without
restriction under Rule 144(k) under the Securities Act. In connection with any
Registration Statement, (i) Holdings shall furnish to the Warrant Agent, prior
to the filing with the Commission, a copy of any Registration Statement, and
each amendment thereof and each amendment or supplement, if any, to the
prospectus included therein and shall use its reasonable best efforts to reflect
in each such document, when filed with the
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Commission, such comments as the Warrant Agent may reasonably propose, (ii)
Holdings shall furnish to each Holder, without charge, at least one copy of any
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits thereto (including those incorporated by reference), (iii) Holdings
shall, for so long as any Registration Statement is effective, deliver to each
Holder, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request, and
Holdings consents to the proper use of the prospectus therein and any amendment
or supplement thereto by each of the selling Holders in connection with the
offering and sale of the Warrants or the Warrant Shares, as the case may be,
covered by such prospectus and any amendment or supplement thereto, (iv)
Holdings may require each Holder of Warrants to be sold pursuant to the Warrant
Shelf Registration Statement or to be exercised in connection with the Common
Shelf Registration Statement to promptly furnish to Holdings such information
regarding the Holder and the distribution of such Warrants or Warrant Shares as
Holdings may from time to time reasonably request for inclusion in such
Registration Statement, (v) Holdings shall, if requested, promptly incorporate
in a prospectus supplement or post-effective amendment to such Registration
Statement such information as a majority in interest of the Holders reasonably
agree should be included therein and shall make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, (vi) Holdings shall enter into such agreements (including
underwriting agreements) as are appropriate, customary and reasonably necessary
in connection with and such Registration Statement and (vii) Holdings shall (A)
make available all material customary for reasonable due diligence examinations
in connection with such Registration Statements, (B) make such representations
and warranties to the Holders of Warrants as are customary and reasonable in
connection with such Registration Statements, (C) obtain such opinions of
counsel to Holdings addressed to and reasonably satisfactory to the Holders as
are customary and reasonable in connection with such Registration Statements and
(D) obtain such "comfort" letters and updates thereof from the independent
certified public accountants of Holdings addressed to the Holders as are
customary and reasonable in connection with such Registration Statements.
Holdings will furnish the Warrant Agent with current prospectuses meeting the
requirements of the Securities Act in sufficient quantity to permit the Warrant
Agent to deliver, at Holdings' expense, a prospectus to each holder of a Warrant
upon the exercise thereof. Holdings shall promptly inform the Warrant Agent of
any change in the status of the effectiveness or availability of any
Registration Statement.
SECTION 5.02. SUSPENSION. During any consecutive 365-day period,
Holdings shall be entitled to suspend the availability of each of the Warrant
Shelf Registration Statement for two periods of 30 consecutive days, except for
the period of 30 consecutive days immediately prior to the Expiration Date if
Holdings' Board determines in the exercise of its reasonable judgement that
there is a valid business purpose for such suspension and provides notice that
such determination was made by Holdings' board to the
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holders of the Warrants; PROVIDED, HOWEVER, that in no event shall Holdings be
required to disclose the business purpose for such suspension if Holdings
determines in good faith that such business purpose must remain confidential.
SECTION 5.03. BLUE SKY. Holdings shall use its reasonable efforts to
register or qualify the Warrants and the Warrant Shares under all applicable
securities laws, blue sky laws or similar laws of all jurisdictions in the
United States in which any holder of Warrants may or may be deemed to purchase
Warrants or Warrant Shares upon the exercise of Warrants and shall use its
reasonable efforts to maintain such registration or qualification through the
earlier of (A) in the case of the Common Shelf Registration Statement, (i) such
time as all Warrants have been exercised and (ii) 30 days after the Expiration
Date and (B) in the case of the Warrant Shelf Registration Statement, the
earliest of (i) such time as all the Warrants have been sold thereunder, (ii) 30
days after the expiration date, (iii) two years after its effective date and
(iv) the date that Warrants held by non-affiliates of the Company are tradeable
with restriction under Rule 144(k) under the Securities Act; PROVIDED, HOWEVER,
that Holdings shall not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 5.03 or to take any action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
SECTION 5.04. ACCURACY OF DISCLOSURE. Holdings represents and
warrants to each Holder and agrees for the benefit of each Holder that (i) each
of the Warrant Shelf Registration Statement and the Common Shelf Registration
Statement and any amendment thereto will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading; and (ii) each
of the prospectus furnished to such Holder for delivery in connection with the
sale of Warrants and the prospectus delivered to such Holder upon the exercise
of Warrants and the documents incorporated by reference therein will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that Holdings shall have no liability under
clauses (i) or (ii) of this Section 5.04 with respect to any such untrue
statement or omission made in any Registration Statement in reliance upon and in
conformity with information furnished to Holdings by or on behalf of any of the
Holders specifically for inclusion therein.
SECTION 5.05. INDEMNIFICATION. (a) In connection with any
Registration Statement required hereunder, Holdings agrees to indemnify and hold
harmless each Holder of the Warrants and each person, if any, who controls such
Holder within the meaning of the Securities Act or the Exchange Act (each Holder
and such controlling persons being referred to collectively as the "HOLDER
INDEMNIFIED PARTIES") from and against any losses, claims, damages or
labilities, joint or several, or any actions in respect thereof (including but
not limited to any losses, claims, damages, liabilities or actions relating to
purchases and sales
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of the Warrants or the Warrant Shares) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or prospectus or in any amendment or
supplement thereto, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and shall reimburse, as incurred, the
Indemnified Parties for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; PROVIDED, HOWEVER, that (i) Holdings
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement or any preliminary or final prospectus or in any amendment or
supplement thereto in reliance upon and in conformity with written information
pertaining to any Holder and furnished to Holdings by or on behalf of any Holder
specifically for inclusion therein, (ii) with respect to any untrue statement or
omission or alleged untrue statement or omission made in any prospectus relating
to such Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any person as to which there is
a prospectus delivery requirement (a "DELIVERING SELLER") who or which sold the
Securities to the person asserting any such losses, claims, damages or
liabilities to the extent that any such loss, claim, damage or liability of such
Delivering Seller results from the fact that there was not sent or given to such
person, on or prior to the written confirmation of such sale, a copy of the
relevant prospectus, as amended and supplemented, provided that (A) Holdings
shall have previously furnished copies thereof to such Delivering Seller in
accordance with this Agreement and (B) such furnished prospectus, as amended and
supplemented, would have corrected any such untrue statement or omission or
alleged untrue statement or omission, and (iii) this indemnity agreement will be
in addition to any liability which Holdings may otherwise have to such
Indemnified Party.
(b) In connection with any Registration Statement, each Holder of the
Warrants, severally and not jointly, will indemnify and hold harmless Holdings
and each person, if any, who controls Holdings within the meaning of the
Securities Act or the Exchange Act and the directors, officers, agents and
employees of such controlling persons (Holdings and each such person, "ISSUER
INDEMNIFIED PARTIES") from and against any losses, claims, damages or
liabilities or any actions in respect thereof to which Holdings or any such
controlling person or director, officers, agent or employee of such controlling
person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement or preliminary or final
prospectus or in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they
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were made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to Holdings by or on behalf of such Holder specifically for
inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, Holdings for any legal or
other expenses reasonably incurred by Holdings or any such controlling person in
connection with investigating or defending any loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Holder may otherwise have to Holdings and its controlling
persons.
(c) Promptly after receipt by an Indemnified Party under this section
of notice of the commencement of any action or proceeding (including a
governmental investigation), such Indemnified Party will, if a claim in respect
thereof is to be made against the indemnifying party under this section, notify
the Indemnifying Party of the commencement thereof; but the omission so to
notify the indemnifying party will not, in any event, relieve the Indemnifying
Party from any obligations to any Indemnified Party other than the
indemnification obligation provided in paragraph (a) or (b) above, except to the
extent that it is prejudiced or harmed in any material respect by failure to
give such prompt notice. In case any such action is brought against any
Indemnified Party, and it notifies the Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with one counsel (and local counsel as
necessary) reasonably satisfactory to such Indemnified Party (who shall not,
except with the consent of the Indemnified Party, be counsel to the Indemnifying
Party), and after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof the Indemnifying Party will not
be liable to such Indemnified Party under this section for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such Indemnified Party in connection with the defense thereof. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, not to
be unreasonably withheld, effect any settlement of any pending or threatened
action in respect of which any Indemnified Party is or could have been a party
and indemnity could have been sought hereunder by such Indemnified Party unless
such settlement includes an unconditional release of such Indemnified Party from
liability on any claims that are the subject matter of such action. No
Indemnifying Party shall be liable for any amounts paid in settlement of any
action or claim without its written consent, which consent shall not be
unreasonably withheld, but if settled in accordance with its written consent or
if there be a final judgment of the plaintiff in any such action, the
Indemnifying Party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this section is
unavailable or insufficient to hold harmless an Indemnified Party under
subsections (a) or (b) above for any reason other than as provided in subsection
(c) above, then each Indemnifying Party shall
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contribute to the amount paid or payable by such Indemnified Party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
or Parties on the one hand and the Indemnified Party on the other or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Indemnifying Party or parties on the one hand and the Indemnified Party on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Holdings on
the one hand or such Holder or such other indemnified person, as the case may
be, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid by an Indemnified Party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection, with investigating or defending any action
or claim which is the subject of this Section 5.05(d). Notwithstanding any
other provision of this Section 5.05(d), the Holders shall not be required to
contribute any amount in excess of the amount by which the net proceeds received
by such Holders from the sale of the Warrants pursuant to the Warrant Shelf
Registration Statement or the Warrant Shares pursuant to the Common Shelf
Registration Statement exceeds the amount of damages which such Holders would
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5.05(d), each
officer, director, employee, representative and agent of an Indemnified Party
and each person, if any, who controls such Indemnified Party within the meaning
of the Securities Act or the Exchange Act shall have the same rights to
contribution as such Indemnified Party, and each officer, director, employee,
representative and agent of Holdings and each person, if any, who controls
Holdings within the meaning of the Securities Act or the Exchange Act shall have
the same rights to contribution as Holdings.
(e) The agreements contained in this section shall survive the sale
of the Warrants pursuant to the Warrant Shelf Registration Statement and the
sale of the Warrant Shares pursuant to the Common Shelf Registration Statement,
as the case may be, and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any Indemnified Party.
SECTION 5.06. ADDITIONAL ACTS. If the sale of Warrants or the
issuance or sale of any Common Stock or other securities issuable upon the
exercise of the Warrants
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requires registration or approval of any governmental authority (other than the
registration requirements under the Securities Act), or the taking of any other
action under the laws of the United States of America or any political
subdivision thereof before such securities may be validly offered or sold in
compliance with such laws, then Holdings covenants that it will, in good faith
and as expeditiously as reasonably possible, use all reasonable efforts to
secure and maintain such registration or approval or to take such other action,
as the case may be.
SECTION 5.07. EXPENSES. All expenses incident to Holdings'
performance of or compliance with its obligations under this Article 5 will be
borne by Holdings, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all reasonable fees and expenses incurred in connection with compliance
with state securities or blue sky laws, (iii) all reasonable expenses of any
Persons incurred by or on behalf of Holdings in preparing or assisting in
preparing, printing and distributing the Warrant Shelf Registration Statement,
the Common Shelf Registration Statement or any other registration statement,
prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Article 5, (iv) the fees and
disbursements of the Warrant Agent, (v) the fees and disbursements of counsel
for Holdings and the Warrant Agent and (vi) the fees and disbursements of the
independent public accountants of Holdings, including the expenses of any
special audits or comfort letters required by or incident to such performance
and compliance.
SECTION 5.08. LIQUIDATED DAMAGES. If the Registration Statement:
(i) is not filed with the Commission on or prior to the date specified for such
filing in Section 5.01 hereof; (ii) has not been declared effective by the
Commission within the time period specified in Section 5.01 hereof; or (iii)
following the date such Registration Statement is declared effective by the
Commission, shall cease to be effective, except as provided for under Section
5.02 hereof, without being restored to effectiveness by amendment or otherwise
within 30 Business Days (each such event referred to in clauses (i) through
(iii), a "SHELF REGISTRATION DEFAULT") to the extent permitted by applicable
law, the Company shall pay as liquidated damages and not as a penalty to each
Holder during the first 90-day period immediately following the occurrence, and
during the continuance of such Shelf Registration Default, an amount equal to
$.0025 per week per Warrant (or per such number of Warrant Shares then issuable
upon exercise of or in respect of a Warrant) held by such Holder for each week
or pro rata for a portion of each week thereof that the Shelf Registration
Default continues. To the extent permitted by applicable law, the amount of the
liquidated damages will increase by an additional $.0025 per week per Warrant
(or per such number of Warrant Shares then issuable upon exercise of or in
respect of a Warrant) with respect to each subsequent 90-day period until all
Shelf Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.0125 per week per Warrant (or per such number of Warrant
Shares then issuable upon exercise of or in respect of a Warrant).
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All accrued liquidated damages shall be paid to record Holders as of
such payment date by the Company by wire transfer of immediately available
funds, or by mailing a federal funds check, on each Damages Payment Date. All
obligations of the Company set forth in the preceding paragraph that are
outstanding with respect to any Registrable Security at the time such security
has been effectively registered under the Act shall survive until such time as
all such obligations with respect to such security have been satisfied in full.
ARTICLE 6
WARRANT AGENT
SECTION 6.01. APPOINTMENT OF WARRANT AGENT. Holdings hereby appoints
the Warrant Agent to act as agent for Holdings in accordance with the express
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
SECTION 6.02. RIGHTS AND DUTIES OF WARRANT AGENT.
(a) AGENT FOR HOLDINGS. In acting under this Warrant Agreement and
in connection with the Warrant Certificates, the Warrant Agent is acting solely
as agent of Holdings and does not assume any obligation or relationship or
agency or trust for or with any of the holders of Warrant Certificates or
beneficial owners of Warrants.
(b) COUNSEL. The Warrant Agent may consult with counsel satisfactory
to it (who may be counsel to Holdings), and the advice of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice of such counsel.
(c) DOCUMENTS. The Warrant Agent shall be protected and shall incur
no liability for or in respect of any action taken or thing suffered by it in
reliance upon any Warrant Certificate, notice, direction, consent, certificate,
affidavit, statement, opinion or other paper or document reasonably believed by
it to be genuine and to have been presented or signed by the proper parties.
(d) NO IMPLIED OBLIGATIONS. The Warrant Agent shall be obligated to
perform only such duties as are specifically set forth herein and in the Warrant
Certificates, and no implied duties or obligations of the Warrant Agent shall be
read into this Agreement or the Warrant Certificates. The Warrant Agent shall
not be under any obligation to take any action hereunder which may tend to
involve it in any expense or liability for which it does not receive indemnity
if such indemnity is reasonably requested. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by Holdings of any
of the Warrant Certificates countersigned by the Warrant Agent and delivered by
it to the Holders or on behalf of the Holders pursuant to this Agreement or for
the application by Holdings of
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the proceeds of the Warrants. The Warrant Agent shall have no duty or
responsibility in case of any default by Holdings in the performance of its
covenants or agreements contained herein or in the Warrant Certificates or in
the case of the receipt of any written demand from a Holder with respect to such
default, including any duty or responsibility to initiate or attempt to initiate
any proceedings at law or otherwise.
(e) NOT RESPONSIBLE FOR ADJUSTMENTS OR VALIDITY OF STOCK. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the number of shares of Common Stock issuable upon exercise of each Warrant or
the Exercise Price, or with respect to the nature or extent of any adjustment
when made or with respect to the method employed or provided to be employed
herein or in any supplemental agreement in making the same. The Warrant Agent
shall not be accountable with respect to the validity or value of any shares of
Common Stock or of any securities or property which may at any time be issued or
delivered upon the exercise of any Warrant or upon any adjustment pursuant to
Article 4, and it makes no representation with respect thereto. The Warrant
Agent shall not be responsible for any failure of Holdings to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates upon the surrender of any Warrant Certificate for the purpose of
exercise or upon any adjustment pursuant to Article 4, or to comply with any of
the covenants of Holdings contained in Article 4.
SECTION 6.03. INDIVIDUAL RIGHTS OF WARRANT AGENT. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of Holdings or its
affiliates or become pecuniarily interested in transactions in which Holdings or
its affiliates may be interested, or contract with or lend money to Holdings or
its affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for Holdings or for any other legal
entity.
SECTION 6.04. WARRANT AGENT'S DISCLAIMER. The Warrant Agent shall
not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates
other than its countersignature thereon.
SECTION 6.05. COMPENSATION AND INDEMNITY. Holdings and the Warrant
Agent have entered into an agreement pursuant to which Holdings agrees to pay
the Warrant Agent from time to time compensation for its services and to
reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses incurred by it, including the reasonable compensation and expenses of
the Warrant Agent's agents and counsel. Holdings shall indemnify the Warrant
Agent against any and all loss, liability, damage, claim or expense (including
agents' and attorneys' fees and expenses) incurred by it without gross
negligence, willful misconduct, or bad faith on its part arising out of or in
connection with the acceptance or performance of its duties under this
Agreement. The Warrant Agent shall
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notify Holdings promptly of any claim for which it may seek indemnity. Holdings
need not reimburse any expense or indemnify against any loss or liability
incurred by the Warrant Agent through wilful misconduct, negligence or bad
faith. Holdings' payment obligations pursuant to this Section 6.05 shall
survive the termination of this Agreement.
To secure Holdings' payment obligations under this Agreement, the
Warrant Agent shall have a lien prior to the Holders on all money or property
held or collected by the Warrant Agent.
SECTION 6.06. SUCCESSOR WARRANT AGENT.
(a) HOLDINGS TO PROVIDE WARRANT AGENT. Holdings agrees for the
benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) RESIGNATION AND REMOVAL. The Warrant Agent may at any time
resign by giving written notice to Holdings of such intention on its part,
specifying the date on which its desired resignation shall become effective;
PROVIDED, HOWEVER, that such date shall not be less than 60 days after the date
on which such notice is given unless Holdings otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of Holdings and specifying such
removal and the date when it shall become effective, which date shall not be
less than 60 days after such notice is given unless the Warrant Agent otherwise
agrees. Any resignation or removal under this Section 6.06 shall take effect
upon the appointment by Holdings as hereinafter provided of a successor Warrant
Agent (which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Warrant Agent. If a successor
Warrant Agent does not take office within 60 days after the retiring Warrant
Agent resigns or is removed, the retiring Warrant Agent or the Holders of 10% of
the Warrants may petition, at the expense of Holdings, any court of competent
jurisdiction for the appointment of a successor.
(c) HOLDINGS TO APPOINT SUCCESSOR. In the event that at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under Federal bankruptcy laws, as now or hereafter constituted,
or under any other applicable Federal or state bankruptcy, insolvency or similar
law, or shall consent to the appointment of or taking possession by a receiver,
custodian, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Warrant Agent or its property or affairs, or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due, or shall take corporate action in
furtherance of any such action, or a decree or order for relief by a court
having jurisdiction in the premises shall have been entered in respect of the
Warrant Agent in an involuntary case under the Federal bankruptcy laws, as
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now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law, or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver,custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by Holdings by an instrument in writing filed with the successor
Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be the Warrant Agent hereunder; PROVIDED, HOWEVER, that in
the event of the resignation of the Warrant Agent hereunder, such resignation
shall be effective on the earlier of (i) the date specified in the Warrant
Agent's notice of resignation and (ii) the appointment and acceptance of a
successor Warrant Agent hereunder.
(d) SUCCESSOR TO EXPRESSLY ASSUME DUTIES. Any successor Warrant
Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to Holdings an instrument accepting such appointment hereunder,
and thereupon such successor Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights and obligations of such
predecessor with like effect as if originally named as Warrant Agent hereunder,
and such predecessor, upon payment of its charges and disbursements then unpaid,
shall thereupon become obligated to transfer, deliver and pay over, and such
successor Warrant Agent shall be entitled to receive, all monies, securities and
other property on deposit with or held by such predecessor, as Warrant Agent
hereunder.
(e) SUCCESSOR BY MERGER. Any corporation into which the Warrant
Agent hereunder may be merged or consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all the corporate trust or stock transfer assets and business of
the Warrant Agent, provided that it shall be qualified as aforesaid, shall be
the successor Warrant Agent under this Agreement without the execution or filing
of any paper or any further act on the part of any of the parties hereto.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. SEC REPORTS AND OTHER INFORMATION. Notwithstanding
that Holdings may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, Holdings shall file with the SEC and thereupon
provide the Warrant Agent and Holders with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S.
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corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections. Delivery of such
reports, information and documents to the Warrant Agent is for informational
purposes only and the Warrant Agent's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including Holdings' compliance with any of its
covenants hereunder.
SECTION 7.02. PERSONS BENEFITTING. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than Holdings,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this agreement or any part hereof.
SECTION 7.03. RESTRICTIONS ON RIGHTS OF HOLDERS. Holders of
unexercised Warrants are not entitled to (i) receive notice of or vote on
matters submitted to the stockholders of Holdings, (ii) receive notice of any
meetings of stockholders of Holdings, or (iii) receive dividends or other
distributions. The Holders of Warrants are not entitled to share in the assets
of Holdings in the event of liquidation, dissolution or the winding up of
Holdings.
SECTION 7.04. AMENDMENT. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Agreement as Holdings and the Warrant
Agent may deem necessary or desirable (including without limitation any addition
or modification to provide for compliance with the transfer restrictions set
forth herein); provided, however, that such action shall not adversely affect
the rights of any of the Holders. Any amendment or supplement to this Agreement
that has an adverse effect on the interests of the Holders shall require the
written consent of the Holders of a majority of the then outstanding Warrants
(excluding Warrants held by Holdings or any of its Affiliates (as defined in the
Indenture)). The consent of each Holder affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares issuable upon exercise of Warrants would be decreased (other
than pursuant to adjustments provided herein). In determining whether the
Holders of the required number of Warrants have concurred in any direction,
waiver or consent, Warrants owned by Holdings or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with Holdings shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Warrant Agent shall be
protected in relying on any such direction, waiver or consent, only Warrants
which the Warrant Agent actually knows are so owned shall be so disregarded.
Also, subject to the foregoing, only Warrants outstanding at the time shall be
considered in any such determination.
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<PAGE>
SECTION 7.05. NOTICES. Any notice or communication shall be in
writing and delivered in Person or mailed by first-class mail (registered or
certified, return receipt requested), telecopier, or overnight courier
guaranteeing next day delivery addressed as follows:
if to Holdings:
Teletrac Holdings, Inc.
2323 Grand, Suite 1100
Kansas City, MO 64108-2670
Attention: James A. Queen
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attention: Robert A. Schwed
if to the Warrant Agent:
Norwest Bank Minnesota, National Association
Norwest Center, Sixth and Marquette
Minneapolis, MN 55479-0069
Attention: Corporate Trust Administration
Facsimile: (612) 667-9825
Holdings or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the Certificate Register and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 7.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF. ANY ACTION ARISING OUT OF THIS
AGREEMENT
-42-
<PAGE>
SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COURTS IN THE STATE OF NEW
YORK.
SECTION 7.07. SUCCESSORS. All agreements of Holdings in this
Agreement and the Warrant Certificates shall bind its successors. All
agreements of the Warrant Agent in this Agreement shall bind its successors.
SECTION 7.08. COUNTERPARTS. This Agreement may be executed in any
number of 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
taken together shall constitute one and the same agreement.
SECTION 7.09. TABLE OF CONTENTS; HEADINGS. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 7.10. SEVERABILITY. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
-43-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TELETRAC HOLDINGS, INC.
by_______________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Warrant Agent
by_______________________________
Name:
Title:
-44-
<PAGE>
EXHIBIT A-3
{FORM OF FACE OF WARRANT CERTIFICATE}
THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 AGGREGATE
PRINCIPAL AMOUNT OF 4% SENIOR NOTES DUE 2007 OF TELETRAC, INC. (THE "NOTES") AND
A WARRANT. THE WARRANTS AND THE NOTES WILL NOT TRADE SEPARATELY UNTIL THE
EARLIEST OF (I) 180 DAYS AFTER THE CLOSING DATE OF THE SALE OF THE UNITS, (II)
THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES OR THE
EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE NOTES, (III) SUCH DATE
AS DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION
MAY DETERMINE, OR (IV) IN THE EVENT OF A "CHANGE IN CONTROL" (AS DEFINED IN THE
INDENTURE GOVERNING THE NOTES), THE DATE TELETRAC, INC. MAILS THE REQUIRED
NOTICE THEREOF TO THE HOLDERS OF THE NOTES.
THE CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF TELETRAC
HOLDINGS, INC. ("HOLDINGS") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
ACCORDINGLY, NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT
ANY TIME UNLESS, AT THE TIME OF EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE
EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (II)
THE ISSUANCE OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), A NEW YORK
CORPORATION TO HOLDINGS OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
<PAGE>
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
WARRANT AGREEMENT REFERRED TO HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB") OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS SECURITY
FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IT IS ACQUIRING THIS SECURITY IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE
144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(D) UNDER THE SECURITIES
ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE
TRANSFER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE ISSUER OF SUCH SECURITY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES
-2-
<PAGE>
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION." THE "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING
THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN
VIOLATION OF THE FOREGOING RESTRICTIONS. EXERCISE OF THIS WARRANT IS SUBJECT TO
COMPLIANCE WITH THE COMMUNICATIONS ACT OF 1934, AS AMENDED, WHICH COMPLIANCE MAY
REQUIRE APPROVAL BY THE FEDERAL COMMUNICATIONS COMMISSION OF SUCH EXERCISE. THE
COMMUNICATIONS ACT OF 1934, AS AMENDED MAY PROHIBIT THE EXERCISE OF SOME OR ALL
OF THE WARRANTS. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR
AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY SIMILAR TO THE EFFECT
OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
No. { } Certificate for ______ Warrants
WARRANTS TO PURCHASE CLASS A COMMON STOCK
OF TELETRAC HOLDINGS, INC.
THIS CERTIFICATES THAT _______________________, or its registered
assigns, is the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its
option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from Teletrac Holdings, Inc., a
Delaware corporation ("Holdings"), [_____] shares of Class A Common Stock, par
value $0.01 per share, of Holdings (the "Common Stock") at the per share
exercise price of $0.01 (the "Exercise Price"). This Warrant Certificate shall
terminate and become void as of the close of business on August 1, 2007 (the
"Expiration Date") or upon the exercise hereof as to all the shares of Common
Stock subject hereto. The
-3-
<PAGE>
number of shares issuable upon exercise of the Warrants and the Exercise Price
per share shall be subject to adjustment from time to time as set forth in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of August 6, 1997 (the "Warrant Agreement"), between
Holdings and Norwest Bank Minnesota, N.A. (the "Warrant Agent", which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of Holdings, the Warrant Agent and the Holders of the
Warrants. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may
be obtained for inspection by the Holder hereof upon written request to the
Warrant Agent at Norwest Center, Sixth and Market, Minneapolis, MN 55479-0069,
Attention of Corporate Trust Administration.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part by presentation of this Warrant Certificate with
the Election to Purchase attached hereto duly executed and with the simultaneous
payment of the Exercise Price in cash (subject to adjustment) to the Warrant
Agent for the account of Holdings at the office of the Warrant Agent. Payment
of the Exercise Price in cash shall be made by certified or official bank check
payable to the order of Holdings or by wire transfer of funds to an account
designated by Holdings for such purpose.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time on
or after the Separation Date; provided, however, that Holders of Warrants will
be able to exercise their Warrants only if (A)(i) a shelf registration statement
relating to the Common Stock underlying the Warrants is effective or (ii) the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933 and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states or other
jurisdictions in which such Holders reside; and (B) or the exercise of the
Warrants complies with the Communications Act of 1934, as amended, which
compliance may require FCC approval of such exercise, PROVIDED FURTHER, however,
that no Warrant shall be exercisable after August 1, 2007.
In the event Holdings enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the kind and amount of
shares of capital stock or other securities or other property of such surviving
entity as the Holder would have been entitled to receive upon or as a result of
the combination had the Holder exercised its Warrants immediately prior to such
Combination; provided, however, that in the event that, in connection with such
Combination, consideration to holders of Common Stock in
-4-
<PAGE>
exchange for their shares is payable solely in cash or in the event of the
dissolution, liquidation or winding-up of Holdings, the Holder hereof will be
entitled to receive such cash distributions as the Holder would have received
had the Holder exercised its Warrants immediately prior to such Combination,
less the Exercise Price.
As provided in the Warrant Agreement, the number of shares of Common
Stock issuable upon the exercise of the Warrants is subject to adjustment upon
the happening of certain events.
Holdings may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.06 of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the issuance of the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate
representing those Warrants which were not exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant
Certificate for other Warrant Certificates evidencing an equal number of
Warrants. No fractional Warrant Shares will be issued upon the exercise of the
Warrants, but Holdings shall pay an amount in cash equal to the Current Market
Value per Warrant Share on the day immediately preceding the date the Warrant is
exercised, multiplied by the fraction of a Warrant Share that would otherwise be
issuable on the exercise of any Warrant.
All shares of Common Stock issuable by Holdings upon the exercise of
the Warrants shall, upon such issue, be duly and validly issued and fully paid
and non-assessable.
The holder in whose name the Warrant Certificate is registered may be
deemed and treated by Holdings and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither Holdings nor the
Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the rights of
a stockholder of Holdings.
-5-
<PAGE>
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
TELETRAC HOLDINGS, INC.
by__________________________________
by__________________________________
DATED:
Countersigned:
- --------------------------------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Warrant Agent
by__________________________________
Authorized Signatory
-6-
<PAGE>
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
TELETRAC HOLDINGS, INC.
The undersigned hereby irrevocably elects to exercise Warrants at an
exercise price per Warrant (subject to adjustment) of $___ to acquire ________
shares of Class A Common Stock, par value $0.01 per share, of Teletrac Holdings,
Inc. on the terms and conditions specified within the Warrant Certificate and
the Warrant Agreement therein referred to, surrenders this Warrant Certificate
and all right, title and interest therein to Teletrac Holdings, Inc. and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants
be registered or placed in the name and at the address specified below and
delivered thereto.
Date: , 19__/200_
________________________________
(Signature of Owner)
________________________________
(Street Address)
________________________________
(City) (State) (Zip Code)
Signature Guaranteed by
__________________________________
{Signature must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved guarantee
medallion program pursuant to Securities
and Exchange Commission Rule 17Ad-5}
1. The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed.
-7-
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name: ___________________________________________________
Street Address: _________________________________________
City, State and Zip Code: _______________________________
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name: ___________________________________________________
Street Address: _________________________________________
City, State and Zip Code: _______________________________
-8-
<PAGE>
EXHIBIT B-1
[FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF
BENEFICIAL INTEREST IN A REGULATION S
TEMPORARY GLOBAL WARRANT]
OWNER SECURITIES CERTIFICATION
TELETRAC HOLDINGS, INC.
WARRANTS TO PURCHASE SHARES OF CLASS A COMMON STOCK
OF TELETRAC HOLDINGS, INC., CUSIP No. ___
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. ("Holdings")
and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
This is to certify that, as of the date hereof, ______ of the
above-captioned Warrants are beneficially owned by non-U.S. person(s). As used
in this paragraph, the term "U.S. person" has the meaning given to it by
Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by facsimile or tested telex on or
prior to the date on which you intend to submit your certification relating to
the Warrants held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of Holdings and the Initial Purchasers.
Dated: __________, ____
By:___________________________________
As, or as agent for, the beneficial
owner(s) of the Warrants to which this
certificate relates.
-1-
<PAGE>
EXHIBIT B-2
[FORM OF CERTIFICATION TO BE GIVEN
BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
DEPOSITARY SECURITIES CERTIFICATION
TELETRAC HOLDINGS, INC.
WARRANTS TO PURCHASE SHARES OF CLASS A COMMON STOCK OF
TELETRAC HOLDINGS, INC., CUSIP No. ___
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. ("Holdings")
and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
This is to certify that, with respect to U.S. _______ of the
above-captioned Warrants, except as set forth below, we have received in
writing, by tested telex or by electronic transmission, from member
organizations appearing in our records as persons [being entitled to a portion
of the principal amount of Warrants set forth above (our "Member
Organizations"), certifications with respect to such portion, substantially to
the effect set forth in the Warrant Agreement.(1)
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, exercise of any rights or collection of any interest)
any portion of the Regulation S Temporary Global Warrant (as defined in the
Warrant Agreement) excepted in such certifications and (ii) that as of the date
hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, exercise of any rights or collection of any interest)
are no longer true and cannot be relied upon as of the date hereof.
______________________
(1) Unless Morgan Guaranty Trust Company of New York, London Branch is
otherwise informed by the Agent, the long form certificate set out in the
Operating Procedures will be deemed to meet the requirements of this sentence.
B-2-1
<PAGE>
We understand that this certification is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of Holdings and the Initial Purchasers.
Dated: _____________, ____
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
Brussels office, as operator of the Euroclear
System]
or
[CEDEL BANK, SOCIETE ANONYME]
By____________________________
B-2-2
<PAGE>
EXHIBIT B-3
[FORM OF CERTIFICATION TO BE GIVEN BY
TRANSFEREE OF BENEFICIAL INTEREST IN A
REGULATION S TEMPORARY GLOBAL WARRANT]
TRANSFEREE SECURITIES CERTIFICATION
TELETRAC HOLDINGS, INC.
WARRANTS TO PURCHASE SHARES OF CLASS A COMMON STOCK OF
TELETRAC HOLDINGS, INC., CUSIP No. ___
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. ("Holdings")
and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
For purposes of acquiring a beneficial interest in the Regulation S
Temporary Global Warrant, the undersigned certifies that it is not a U.S. Person
as defined by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by facsimile on or prior to the
date on which you intend to submit your certification relating to the Warrants
held by you in which we intend to acquire a beneficial interest in accordance
with your operating procedures if any applicable statement herein is not correct
on such date, and in the absence of any such notification it may be assumed that
this certification applies as of such date.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of Holdings and the Initial Purchasers.
Dated: ___________, ____
By:_____________________________
As, or as agent for, the beneficial acquiror of
the Warrants to which this certificate relates.
B-3-1
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF RESTRICTED WARRANT TO
[RESTRICTED](1) [RESTRICTED GLOBAL](1)
[UNRESTRICTED] (2)(3) [UNRESTRICTED GLOBAL](2)(3)
[REGULATION S TEMPORARY GLOBAL](4) WARRANT
(Transfers and exchanges pursuant to Section 2.08(c) and (d)
of the Warrant Agreement)
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Warrants to Purchase Shares of Class A
COMMON STOCK OF TELETRAC HOLDINGS, INC.
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. ("Holdings")
and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
___________________________
(1) Use for transfer of Restricted Warrant for Unrestricted Warrant or interest
in Restricted Global Warrant.
(2) Use for transfers of Restricted Warrant for Unrestricted Warrant or
interest in Unrestricted Global Warrant.
(3) Use for transfer of Restricted Warrant pursuant to Rule 903 or Rule 904
after termination of Restricted Period.
(4) Use for transfers of Restricted Warrant pursuant to Rule 903 or Rule 904
prior to termination of Restricted Period.
B-4-1
<PAGE>
This letter relates to ________ Warrants held in definitive form
(CUSIP No. ____) by [insert name of transferor] (the "Transferor"). The
Transferor has requested an exchange or transfer of such Warrants.
In connection with such request and in respect of such Warrants, the
Transferor does hereby certify that (i) such Warrants are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), (b) Rule 144 under the Act
or (c) Rule 144A under the Act, and accordingly the Transferor does hereby
further certify that
[(A) the offer of the Warrants was not made to a person in the
United States;
(B) either:
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention
of the requirements of Rule 903 (b) or 904(b) of Regulation S, as
applicable; and
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act.](5)(6) [the Warrants have been
transferred in a transaction permitted by Rule 144](7) [the transfer
has
________________________
(5) Use for transfer of Restricted Warrant pursuant to Rule 903 or Rule 904
after termination of Restricted Period.
(6) Use for transfers of Restricted Warrant pursuant to Rule 903 or Rule 904
prior to termination of Restricted Period.
(7) Use for transfers of Restricted Warrant for Unrestricted Warrant or
interest in
(continued...)
B-4-2
<PAGE>
been effected pursuant to and in accordance with Rule 144A under the
Act and, accordingly, the Transferor does hereby further certify that
the Warrants are being transferred to a Person that the Transferor
reasonably believes is purchasing the Warrants for its own account, or
for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A and
in accordance with any applicable securities laws of any state of the
United States.](8)
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
Dated: ___________, ____
By:_____________________________
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
cc: Teletrac, Inc.
___________________
(7)(...continued)
Unrestricted Global Warrant.
(8) Use for transfer of Restricted Warrant for Unrestricted Warrant or interest
in Restricted Global Warrant.
B-4-3
<PAGE>
EXHIBIT B-5
FORM OF CERTIFICATION FOR TRANSFER OR
EXCHANGE OF RESTRICTED GLOBAL WARRANT TO REGULATION S
TEMPORARY GLOBAL WARRANT
(Exchanges or transfers pursuant to
Section 2.08(c)(iii) of the Warrant Agreement)
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Warrants to Purchase Shares of Class A
Common Stock of Teletrac Holdings, Inc. (the
"WARRANTS")
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. ("Holdings")
and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
This letter relates to U.S. ________ which are held in the form of the
Restricted Global Warrant (CUSIP No. ____) with the Depositary in the name of
[insert name of transferor] (the "Transferor"). The Transferor has requested an
exchange or transfer of such beneficial interest for an interest in the
Regulation S Temporary Global Warrant (CUSIP No. __) to be held with the
Depositary in the name of [Euroclear] [Cedel Bank, societe anonyme].
In connection with such request and in respect of such Warrants, the
Transferor does hereby certify that such exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Warrants and
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and accordingly the Transferor does
hereby certify that:
B-5-1
<PAGE>
(1) the offer of the Warrants was not made to a person in the United
States;
[(2) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on its
behalf reasonably believed that the transferee was outside the United
States;](1)
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;](1)
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: _______________
cc: Teletrac, Inc.
_____________________
(1) Insert one of these provisions, which come from the definition of
"offshore transaction" in Regulation S.
B-5-2
<PAGE>
EXHIBIT B-6
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL WARRANT TO
UNRESTRICTED GLOBAL WARRANT
(Exchanges or transfers pursuant to
Section 2.08(c)(iv) of the Warrant Agreement)
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Warrants to Purchase Shares of
Class A Common Stock of Teletrac
HOLDINGS, INC. (THE "WARRANTS")
Reference is hereby made to the Warrant Agreement, dated as of August 6,
1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. ("Holdings") and
Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
This letter relates to U.S. ________ Warrants which are held in the form
of the Restricted Global Warrant (CUSIP No. ____) with the Depositary in the
name of [insert name of transferor] (the "Transferor"). The Transferor has
requested an exchange or transfer of such beneficial interest in the Securities
for an interest in the Unrestricted Global Warrant (CUSIP No. ____).
In connection with such request, and in respect of such Warrants, the
Transferor does hereby certify that such exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Warrants and, (i)
with respect to transfers made in reliance on Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), the Transferor does hereby
certify that:
(1) the offer of the Warrants was not made to a person in the
United States;
B-6-1
<PAGE>
[(2) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on its
behalf reasonably believed that the transferee was outside the United
States;](1)
[(2) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged with
a buyer in the United States;]1
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
and (ii) with respect to transfers made in reliance on Rule 144 under the
Securities Act, certify that the Warrants are being transferred in a transaction
permitted by Rule 144 under the Securities Act.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: _______________
cc:
_____________________
(1) Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
B-6-2
<PAGE>
EXHIBIT B-7(1)
FORM OF INSTRUCTION FOR EXCHANGE
EXCHANGE INSTRUCTIONS
TELETRAC HOLDINGS, INC.
Warrants to Purchase Shares
of Class A Common Stock of _____
Pursuant to Section 2.08(d)(vii)(2) of the Warrant Agreement, dated as
of August 6, 1997 (the "Warrant Agreement"), between Teletrac Holdings, Inc. and
Norwest Bank Minnesota, National Association, as Warrant Agent, [Name of Initial
Purchaser] hereby requests that ________ Warrants held by you for our account in
the Regulation S Temporary Global Warrant (CUSIP No. ___) (as defined in the
Warrant Agreement) be exchanged for one or more Restricted [Global] Warrants
[(CUSIP No. ____)] in the denominations and registered in the names of the
holders requested as set forth below:
DENOMINATIONS REGISTERED NAME
____________________ ____________________________________
____________________ ____________________________________
____________________ ____________________________________
____________________ ____________________________________
Dated: _______________ [Name of Initial Purchaser]
By:_____________________________
______________________
(1) For use prior to the exchange of a Regulation S Temporary Global Warrant
for one or more Restricted Warrants.
B-7-1
<PAGE>
EXHIBIT B-8
FORM OF CERTIFICATION FOR TRANSFER
OF RESTRICTED [GLOBAL](1) WARRANT
TRANSFEREE CERTIFICATION
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Warrants to Purchase Shares of Class A
Common Stock of Teletrac Holdings, Inc.
(THE "WARRANTS")
Reference is hereby made to the Warrant Agreement, dated as of August 6,
1997, (the "Warrant Agreement"), between Teletrac Holdings, Inc. and Norwest
Bank Minnesota, National Association, as Warrant Agent. Capitalized terms used
but not defined herein shall have the meanings given to them in the Warrant
Agreement.
This letter relates to ________ Restricted Warrants held in definitive
form (CUSIP No. ____) (the "Transferred Warrant") by [insert name of transferor]
(the "Transferor"). The Transferor has requested an exchange or transfer of
such Warrants to the undersigned transferee (the "Transferee") and the
Transferee is aware that the transfer to it is being made in reliance on Rule
144A under the Securities Act of 1933, as amended (the "Securities Act").
In connection with such request and in respect of the Transferred
Warrants, the Transferee does hereby certify that such transfer has been
effected pursuant to and in accordance with Rule 144A under the Securities Act
and, accordingly, the Transferee does hereby further certify that the Transferee
is purchasing the Transferred Warrants for its own account, or for one or more
accounts with
_________________________
(1) Include if relates to interest in Global Warrant.
B-8-1
<PAGE>
respect to which the Transferee exercises sole investment discretion, and the
Transferee and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A and in accordance with any applicable securities laws of any state of
the United States.
We understand that the Transferred Warrants have not been and will not
be registered under the Securities Act and may not be offered, sold, pledged or
otherwise transferred without registration under the Securities Act, except
(a)(1) to a person whom the Transferee reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
purchasing for its own account or for the account of a qualified institutional
buyer in a transaction meeting the requirements of Rule 144A or (2) pursuant to
an exemption from registration under the Securities Act in accordance with Rule
144 thereunder (if available) or (3) in a transaction outside the United States
in compliance with the provisions of Regulation S under the Securities Act and
(B) in each case in accordance with any applicable securities laws of any state
of the United States or other applicable jurisdiction.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of Telectrac Holdings, Inc. and the Initial Purchasers.
Dated: _______________
[Insert Name of Transferee]
By:_____________________________
Name:
Title:
cc: Teletrac, Inc.
B-8-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELETRAC, INC.
$105,000,000
14% SENIOR NOTES DUE 2007
_________________________
_________
INDENTURE
Dated as of August 6, 1997
_________
_________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
_________
Trustee
and
Collateral Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.................... 1
Section 1.01. Definitions............................................. 1
Section 1.02. Other Definitions....................................... 18
Section 1.03. Incorporation by Reference of Trust Indenture Act....... 19
Section 1.04. Rules of Construction................................... 19
ARTICLE 2. THE NOTES..................................................... 20
Section 2.01. Form and Dating......................................... 20
Section 2.02. Restricted Notes........................................ 25
Section 2.03. Global Notes............................................ 25
Section 2.04. Form of Execution and Authentication.................... 27
Section 2.05. Registrar and Paying Agent.............................. 27
Section 2.06. Paying Agent to Hold Money in Trust..................... 28
Section 2.07. Lists of Holders of the Notes........................... 28
Section 2.08. Transfer and Exchange................................... 28
Section 2.09. Replacement Notes....................................... 35
Section 2.10. Outstanding Notes....................................... 36
Section 2.11. Treasury Notes.......................................... 36
Section 2.12. Temporary Notes......................................... 36
Section 2.13. Cancellation............................................ 37
Section 2.14. Defaulted Interest...................................... 37
Section 2.15. Record Date............................................. 37
Section 2.16. CUSIP and CINS Numbers.................................. 37
ARTICLE 3. REDEMPTION.................................................... 38
Section 3.01. Notices to Trustee...................................... 38
Section 3.02. Selection of Notes to be Redeemed....................... 38
Section 3.03. Notice of Redemption.................................... 38
Section 3.04. Effect of Notice of Redemption.......................... 39
Section 3.05. Deposit of Redemption Price............................. 39
Section 3.06. Notes Redeemed in Part.................................. 40
Section 3.07. Optional Redemption..................................... 40
Section 3.08. Mandatory Redemption.................................... 41
Section 3.09. Offer to Purchase by Application of Excess Proceeds..... 41
ARTICLE 4. COVENANTS..................................................... 43
Section 4.01. Payment of Notes........................................ 43
Section 4.02. Maintenance of Office or Agency......................... 43
Section 4.03. Reports................................................. 44
Section 4.04. Compliance Certificate; Notice of Default............... 45
Section 4.05. Taxes and Other Claims.................................. 45
Section 4.06. Stay, Extension and Usury Laws.......................... 45
Section 4.07. Restricted Payments..................................... 46
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.......................................... 49
Section 4.09. Incurrence of Indebtedness or Issuance of Disqualified
Stock................................................. 50
Section 4.10. Merger, Consolidation or Sale of Assets................. 52
Section 4.11. Transactions with Affiliates............................ 53
Section 4.12. Liens................................................... 54
Section 4.13. Additional Guarantees................................... 54
Section 4.14. Offer to Purchase Upon Change of Control................ 55
Section 4.15. Maintenance of Properties and Insurance................. 56
Section 4.16. Limitation on Issuances and Sales of Capital Stock
of Restricted Subsidiaries............................ 57
Section 4.17. Business Activities..................................... 57
Section 4.18. Limitation on Sales of Assets and Subsidiary Interests.. 57
ARTICLE 5. SUCCESSORS.................................................... 58
ARTICLE 6. DEFAULTS AND REMEDIES......................................... 58
Section 6.1. Events of Default....................................... 58
Section 6.2. Acceleration............................................ 61
Section 6.3. Other Remedies.......................................... 61
Section 6.4. Waiver of Past Defaults................................. 62
Section 6.5. Control by Majority..................................... 62
Section 6.6. Limitation on Suits..................................... 62
Section 6.7. Rights of Holders of Notes to Receive Payment........... 63
Section 6.8. Collection Suit by Trustee.............................. 63
Section 6.9. Trustee May file Proofs of Claim........................ 63
Section 6.10. Priorities.............................................. 64
Section 6.11. Undertaking for Costs................................... 64
<PAGE>
ARTICLE 7. TRUSTEE....................................................... 65
Section 7.01. Duties of Trustee....................................... 65
Section 7.02. Rights of Trustee....................................... 66
Section 7.03. Individual Rights of Trustee............................ 67
Section 7.04. Trustee's Disclaimer.................................... 67
Section 7.05. Notice of Defaults...................................... 67
Section 7.06. Reports by Trustee to Holders of the Notes.............. 67
Section 7.07. Compensation and Indemnity.............................. 68
Section 7.08. Replacement of Trustee.................................. 69
Section 7.09. Successor Trustee by Merger, Etc........................ 70
Section 7.10. Eligibility; Disqualification........................... 70
Section 7.11. Preferential Collection of Claims Against Company....... 70
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE...................... 70
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance............................................ 70
Section 8.02. Legal Defeasance and Discharge.......................... 71
Section 8.03. Covenant Defeasance..................................... 71
Section 8.04. Conditions to Legal or Covenant Defeasance.............. 71
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions................. 73
Section 8.06. Repayment to Company.................................... 74
Section 8.07. Reinstatement........................................... 74
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.............................. 74
Section 9.01. With Consent of Holders of Notes........................ 74
Section 9.02. Without Consent of Holders of Notes..................... 75
Section 9.03. Compliance with Trust Indenture Act..................... 76
Section 9.04. Revocation and Effect of Consents....................... 76
Section 9.05. Notation on or Exchange of Notes........................ 76
Section 9.06. Trustee to Sign Amendments, Etc......................... 76
Section 9.07. Payments for Consents................................... 77
Section 9.08. Effect of Supplemental Indentures....................... 77
ARTICLE 10. COLLATERAL AND SECURITY....................................... 77
Section 10.01. Collateral Documents..................................... 77
Section 10.02. Execution of Collateral Documents........................ 78
ARTICLE 11. MISCELLANEOUS................................................. 78
Section 11.01. Trust Indenture Act Controls............................. 78
Section 11.02. Notices.................................................. 78
Section 11.03. Communication by Holders of Notes with Other Holders of
Notes.................................................. 79
Section 11.04. Certificate and Opinion as to Conditions Precedent....... 80
Section 11.05. Statements Required in Certificate or Opinion............ 80
Section 11.06. Rules by Trustee and Agents.............................. 80
Section 11.07. No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders......................... 81
Section 11.08. Governing Law............................................ 81
Section 11.09. No Adverse Interpretation of Other Agreements............ 81
Section 11.10. Successors............................................... 81
Section 11.11. Severability............................................. 81
Section 11.12 Counterpart Originals.................................... 81
Section 11.13 Table of Contents, Headings, Etc......................... 81
<PAGE>
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT C-1 [FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF BENEFICIAL
INTEREST IN A REGULATION S TEMPORARY GLOBAL NOTE]
EXHIBIT C-2 [FORM OF CERTIFICATION TO BE GIVEN BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
EXHIBIT C-3 [FORM OF CERTIFICATION TO BE GIVEN BY TRANSFEREE OF BENEFICIAL
INTEREST IN A REGULATION S TEMPORARY GLOBAL NOTE]
EXHIBIT C-4 FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF RESTRICTED NOTE
TO [RESTRICTED] [RESTRICTED GLOBAL] [UNRESTRICTED] [UNRESTRICTED
GLOBAL] [REGULATION S TEMPORARY GLOBAL] NOTE
EXHIBIT C-5 FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF RESTRICTED
GLOBAL NOTE TO REGULATION S TEMPORARY GLOBAL NOTE (Exchanges or
transfers pursuant to Section 2.06(d)(iii) of the Indenture)
EXHIBIT C-6 FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF RESTRICTED
GLOBAL NOTE TO UNRESTRICTED GLOBAL NOTE (Exchanges or transfers
pursuant to Section 2.08(d)(iii) of the Indenture)
EXHIBIT C-7 FORM OF INSTRUCTION FOR EXCHANGE EXCHANGE INSTRUCTIONS TELETRAC,
INC., 14% Senior Notes due 2007
EXHIBIT C-8 FORM OF CERTIFICATION FOR TRANSFER OF RESTRICTED [GLOBAL] NOTE,
TRANSFEREE CERTIFICATION
v
<PAGE>
INDENTURE dated as of August 6, 1997 between Teletrac, Inc. (the
"Company"), a Delaware corporation, and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee") and as Collateral Agent (as defined in
the Pledge Agreement).
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 14% Senior Notes due
2007:
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Agent Members" has the meaning set forth in Section 2.03(e).
"Applicable Procedures" has the meaning set forth in Section 2.06(d)(iii).
<PAGE>
"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 million; or (b) for net proceeds in excess of $5 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 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; and (iv) a
Restricted Payment that is permitted by Section 4.07; 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 shall not be deemed to be Asset
Sales.
"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 designed as a "Bank Credit Facility" for purposes of this
Indenture.
"Bankruptcy Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Bankruptcy Law" means title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease" means, at the time any determination thereof is made, any
lease of property, real or personal, in respect of which the present value of
the minimum rental commitment would be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on the balance sheet in accordance
with GAAP.
-2-
<PAGE>
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) In the case of an association or business entity, and any
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) U.S. 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 of $500 million, investing solely in
investments of the types described in (i) through (v) above.
"CEDEL" means Cedel Bank, societe anonyme.
-3-
<PAGE>
"Change of Control" means:
(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" has the meaning set forth in the Pledge Agreement.
"Collateral Agent" means the Collateral Agent under the Pledge Agreement.
"Collateral Documents" means the Pledge Agreement and any financing
statements filed pursuant thereto.
"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;
(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
-4-
<PAGE>
extent that it represents an accrual of or 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,
commission, 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;
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(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.
"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 this 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 this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as to which the Trustee
may give notice to the Company.
"Custodian" means Norwest Bank Minnesota, National Association, and any
successor custodian, as custodian of the Global Notes for DTC under custody
agreements, or any similar successor agreement or agreements.
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"Depositary" means, with respect to the Global Notes, DTC or such other
Person as shall be designated as Depositary by the Company pursuant to this
Indenture.
"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 Notes mature.
"DTC" means the Depository Trust Company, a New York corporation.
"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).
"Euroclear" means the Euroclear System, operated by Morgan Guaranty Trust
Company of New York, Brussels Office.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means 14% Senior Secured Notes Due 2007 issued by the
Company, and containing terms identical to those of the Original Notes (except
that such Exchange Notes shall have been issued in an exchange offer registered
under the Securities Act), that are issued and exchanged for the Original Notes
pursuant to the Registration Rights Agreement and this Indenture.
"Existing Indebtedness" means the 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 owns more than 5.0% of the Class A Common Stock, on a fully diluted
basis, as of the date of this Indenture.
"FCC" means the Federal Communications Commission.
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"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 arm's-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 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.
"Global Note" means any Regulation S Temporary Global Note, any Restricted
Global Note or any Unrestricted Global Note, as the case may be.
"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 of America 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.
"Guarantor" means any entity that executes, pursuant to the terms of this
Indenture, a Guarantee of the obligations of the Company under the Notes, and
their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under: (i) interest rate swap 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.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means Teletrac Holdings, Inc., a Delaware corporation.
"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
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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 the 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.
"Indenture" means this Indenture, as originally executed or as amended or
supplemented from time to time.
"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.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation and TD Securities (USA) Inc.
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"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 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.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under this Indenture.
"Joint Venture" means a Person in a Related Business in which the Company
holds 50% or less of the Voting Equity Interests.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"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).
"Liquidated Damages" has the meaning set forth in Section 5 of the
Registration Rights Agreement.
"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
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(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 noncash 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 any
Unrestricted Subsidiary) would permit (upon notice, lapse of time 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
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(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.
"Notes" means the Original Notes and the Exchange Notes.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated July 31, 1997
relating to the offering of the Units.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary
or any Vice-President of such Person.
"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.
"Opinion of Counsel" means an opinion from legal counsel, who may be an
employee of or counsel to the Company (or any Guarantor, if applicable), any
Subsidiary of the Company (or any Guarantor, if applicable) or the Trustee.
"Original Notes" means the 14% Senior Notes due 2007 issued under this
Indenture on the date of this Indenture.
"Owner Securities Certification" has the meaning specified in Section
2.01(b)(ii).
"Permitted Investment" means:
(i) any Investment in the Company or in any Wholly Owned
Restricted Subsidiary of the Company;
(ii) any Investment in 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;
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(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 Investments 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 Section 4.15; and
(v) any Investment made by the Company or any of its Restricted
Subsidiaries in a Related Business; provided that, at any 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
million.
"Permitted Liens" means:
(i) Liens securing the 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 in accordance with Section 4.09(vi) hereof or
securing Permitted Refinancing Indebtedness incurred pursuant hereto to
refinance Indebtedness in accordance with Section 4.09(vi) hereof;
(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
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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 Section 4.09(vi) hereof.
"Permitted Refinancing Indebtedness" has the meaning set forth in Section
4.09 hereof.
"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 Pledge Agreement for the deposit of the Pledged Securities.
"Pledge Agreement" means the Pledge Agreement dated as of the date of this
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 Offering to be deposited in
the Pledge Account and pledged as security for the payment of the first six
semi-annual interest payments on the Notes.
"Preferred Equity Interest", in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"Purchase Agreement" means the Purchase Agreement, dated July 31, 1997,
among the Company, Teletrac Holdings, Inc. and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" within the meaning of Rule
144A.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Temporary Global Note" has the meaning set forth in Section
2.01(b)(i).
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"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.
"Registration Rights Agreement" means the Registration Rights Agreement
among the Company, Donaldson, Lufkin & Jenrette Securities Corporation and TD
Securities USA) Inc.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Global Note" has the meaning set forth in Section 2.01(c).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the period (a) beginning on and including the
later of (i) the Offering Date (as defined in the Offering Memorandum) and (ii)
the Issue Date and (b) ending on the later of (i) 40 days thereafter and (ii)
the Separation Date.
"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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the date on which the Notes and Warrants will be
separately transferable, which date shall be the earliest of (i) the date that
is 180 days following the Closing Date, (ii) the Commencement of the Exchange
Offer (as defined in the Offering Memorandum), (iii) the date a shelf
registration statement with respect to the Notes is declared effective, (iv)
such date as Donaldson, Lufkin & Jenrette Securities Corporation shall determine
in its sole discretion, and (v) in the event a Change of Control occurs, the
date the Company mails the required notice thereof to the Holders.
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"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date of this 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).
"Supplemental Indenture" means any supplemental indenture relating to this
Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement between the Company
and Holdings as in effect on the date hereof.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date on
which this Indenture is qualified under the TIA.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unit" means the Units offered pursuant to the Offering Memorandum,
consisting of one Original Note and one Warrant.
"Unrestricted Global Note" has the meaning set forth in Section 2.01(b)(i).
"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
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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:
(a) to subscribe for additional Equity Interests; or
(b) 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 any 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 on Officers' Certificate certifying
that such designation complied with the foregoing conditions and was
permitted by the covenant set forth in Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as
an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant set forth in Section 4.09 hereof,
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 Section 4.09 hereof, 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
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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 Interest 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.
"Warrant" means a Warrant to purchase .537495 shares of the Class A Common
Stock, par value $.01 per share, of the Company.
"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.
Section 1.02. Other Definitions.
Term Defined in
Section
"Asset Sale Offer"..................................... 3.09
"Affiliate Transaction"................................ 4.11
"Change of Control Offer".............................. 4.15
"Change of Control Payment"............................ 4.15
"Change of Control Payment Date"....................... 4.15
"Covenant Defeasance".................................. 8.03
"Event of Default"..................................... 6.01
"Excess Proceeds"...................................... 4.19
"incur"................................................ 4.09
"Intercompany Indebtedness"............................ 4.09
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Term Defined in
Section
"Legal Defeasance"..................................... 8.02
"Offer Amount"......................................... 3.09
"Offer Payment"........................................ 4.21
"Offer Payment Date"................................... 4.21
"Offer Period"......................................... 3.09
"Offer to Purchase".................................... 4.21
"Paying Agent"......................................... 2.04
"Payment Default"...................................... 6.01
"Permitted Refinancing"................................ 4.09
"Purchase Date"........................................ 3.09
"Refinancing Indebtedness"............................. 4.09
"Registrar"............................................ 2.04
"Restricted Payments".................................. 4.07
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes and any Guarantee of the Notes;
"indenture security Holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means each of the Company and any successor obligor
upon the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA, defined
by reference to another statute or defined by SEC rule under the TIA have the
meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) The Original Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibits A-1 through A-3 hereto, the terms
of which are incorporated in and made a part of this Indenture. The Exchange
Notes and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit B hereto. The Notes may have notations, legends or
endorsements approved as to form by the Company, and required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be issuable only in denominations of $1,000 and
integral multiples thereof.
(b)(i) Notes that are to be offered and resold by the Initial Purchasers
in reliance on Regulation S shall be issued initially in the form of a single
temporary Global Note (a "Regulation S Temporary Global Note") in fully
registered form without interest coupons, substantially in the form of Exhibit
A-1 hereto, with such applicable legends as are provided for in subsection (d)
hereof. Any Regulation S Temporary Global Note shall be duly executed by the
Company and authenticated by the Trustee, as provided herein, and shall be
registered in the name of the Depositary or its nominee and deposited with the
Trustee, at its New York office, as custodian for the Depositary, for credit to
the respective accounts of beneficial owners of such Note (or to such other
accounts as they may direct) at Euroclear or CEDEL. On or after the termination
of the Restricted Period, interests in the Regulation S Temporary Global Note
will be exchangeable for an unrestricted Global Note (an "Unrestricted Global
Note"), in definitive, fully registered form without interest coupons,
substantially in the form of Exhibit A-2 hereto, with such applicable legends as
are provided for in subsection (d) and in accordance with clause (ii) below.
The aggregate principal amount of a Regulation S Temporary Global Note and an
Unrestricted Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
as hereinafter provided.
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(ii) A holder of a beneficial interest in a Regulation S Temporary
Global Note may receive payments of interest on such Regulation S Temporary
Global Note only after delivery by such Person to Euroclear or CEDEL, as the
case may be, of a written certification (an "Owner Securities Certification")
substantially in the form of Exhibit C-1 hereto, and upon delivery by
Euroclear or CEDEL, as the case may be, to the Paying Agent of a
certification or certifications (each, a "Depositary Securities
Certification") substantially in the form of Exhibit C-2 hereto. The
delivery by such holder of a beneficial interest in such Regulation S
Temporary Global Note of such certification shall constitute an irrevocable
instruction by such holder to Euroclear or CEDEL, as the case may be, to
exchange such holder's beneficial interest in the Regulation S Temporary
Global Note for a beneficial interest in the Unrestricted Global Note upon
the expiration of the Restricted Period in accordance with the next
succeeding paragraph. No interest shall be paid to any holder of a
beneficial interest in a Regulation S Temporary Global Note until the
foregoing Owner Securities Certification has been provided to Euroclear or
CEDEL, as the case may be, by such holder and no interest shall be paid to
Euroclear or CEDEL on such holder's interest in a Regulation S Temporary
Global Note unless Euroclear or CEDEL, as the case may be, has provided a
Depositary Securities Certification to the Paying Agent with respect to such
interest.
Upon (i) the expiration of the Restricted Period, (ii) receipt by
Euroclear or CEDEL, as the case may be, and the Paying Agent of the
certificates described in the preceding paragraph, (iii) receipt by the
Depositary of (1) written instructions given in accordance with the
Applicable Procedures from an Agent Member directing the Depositary to credit
or cause to be credited to a specified Agent Member's account a beneficial
interest in the Unrestricted Global Note in a principal amount equal to that
of the beneficial interest in such Regulation S Temporary Global Note and (2)
a written order given in accordance with the Applicable Procedures regarding
the account of the Agent Member, and the Euroclear or CEDEL account for which
such Agent Member's account is held, to be credited with, and the account of
the Agent Member to be debited for, such beneficial interest and (iv) receipt
by the Trustee of notification from the Depositary of the transactions
described in (iii) above, the Trustee, as Registrar, shall instruct the
Depositary to reduce the principal amount of such Regulation S Temporary
Global Note and to increase the principal amount of such Unrestricted Global
Note, by the principal amount of the beneficial interest in such Regulation S
Temporary Global Note to be so transferred, and to credit or cause to be
credited to the account of the person specified in such instructions a
beneficial interest in such Unrestricted Global Note having a principal
amount equal to the amount by which the principal amount of such Regulation S
Temporary Global Note was reduced upon such transfer.
(c) Notes that are to be offered and resold by the Initial Purchasers in
accordance with Rule 144A shall be issued in definitive, fully registered form
without interest coupons, substantially in the form of Exhibit A-3 hereto, with
such applicable legends as are provided for in subsection (d) below. Such Notes
may be issued in the form of a single Global Note (the "Restricted Global
Notes"). Restricted Global Notes shall be duly executed by the Company and
authenticated by the Trustee as provided herein and
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shall be registered in the name of a nominee of the Depositary and deposited
with the Trustee, at its New York office, as custodian for the Depositary, for
credit to the respective account of beneficial owners of such Restricted Global
Notes. The aggregate principal amount of a Restricted Global Note may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary, as hereinafter provided.
(d) The Notes shall be issued in the form of one or more Global Notes and
the Depository Trust Company, its nominees, and their respective successors,
shall act as the Depositary with respect thereto. Each Global Note shall (i) be
registered in the name of the Depositary for such Global Note or the nominee of
such Depositary, and (ii) shall bear a legend substantially to the following
effect:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN."
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO HEREIN.
Each Restricted Note shall bear the following legend on the face thereof:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED
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STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF
OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (A "QIB") OR (B) IT IS NOT A U.S. PERSON, IS NOT
ACQUIRING THIS SECURITY FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
(TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE
SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT
ON THE DATE OF THE TRANSFER OF THIS SECURITY, RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER), (E) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902
OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
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PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
The Trustee must refuse to register any transfer of a Note bearing such legend
that would violate the restrictions described in such legend.
Each Regulation S Temporary Global Note shall bear a legend
substantially in the following form:
THIS NOTE IS A REGULATION S TEMPORARY GLOBAL NOTE WITHIN THE
MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. INTERESTS IN
THIS REGULATION S TEMPORARY GLOBAL NOTE MAY NOT BE OFFERED OR
SOLD TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S.
PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD (AS
DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF AN
INTEREST IN THIS REGULATION S TEMPORARY GLOBAL NOTE MAY BE MADE
FOR AN INTEREST IN A RESTRICTED GLOBAL NOTE OR IN AN UNRESTRICTED
GLOBAL NOTE UNTIL AFTER THE LATER OF THE DATE OF TERMINATION OF
THE RESTRICTED PERIOD AND THE DATE ON WHICH THE OWNER SECURITIES
CERTIFICATION AND THE DEPOSITARY SECURITIES CERTIFICATION
RELATING TO SUCH INTEREST HAVE BEEN PROVIDED IN ACCORDANCE WITH
THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE BENEFICIAL
OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
Prior to the Separation Date, each Note shall bear a legend
substantially in the following form:
THE NOTES REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED
AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000
AGGREGATE PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2007 OF
TELETRAC, INC. (THE "NOTES") AND ONE WARRANT TO PURCHASE SHARES
OF CLASS A COMMON STOCK OF TELETRAC HOLDINGS, INC. (THE
"WARRANTS"). THE WARRANTS AND THE NOTES WILL NOT TRADE
SEPARATELY UNTIL THE EARLIEST OF (I) 180 DAYS AFTER THE CLOSING
DATE OF THE SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN
EXCHANGE OFFER
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WITH RESPECT TO THE NOTES OR THE EFFECTIVENESS OF A SHELF REGISTRATION
STATEMENT FOR THE NOTES, (III) SUCH DATE AS DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION MAY DETERMINE,
OR (IV) IN THE EVENT OF A "CHANGE IN CONTROL" (AS DEFINED IN THE
INDENTURE GOVERNING THE NOTES), THE DATE TELETRAC, INC. MAILS THE
REQUIRED NOTICE THEREOF TO THE HOLDERS OF THE NOTES.
(e) The Notes are being offered and sold by the Company to the
Initial Purchasers pursuant to the Purchase Agreement.
Section 2.02. Restricted Notes.
During the period beginning on the Issue Date and ending on the date
two years from the Closing Date, all Notes offered and sold to QIBs in reliance
on Rule 144A shall be deemed "Restricted Notes" and shall bear on their face,
and be subject to the restrictions on transfer provided in, the legend set forth
therefor in Section 2.01(d); provided, however, that the term "Restricted Notes"
shall not include Notes as to which restrictions have been terminated in
accordance with Section 2.08(c).
Section 2.03. Global Notes.
(a) Notwithstanding any other provision of this Indenture, a Global
Note shall not be exchanged in whole or in part for a Note registered in the
name of any person other than the Depositary or one or more of its nominees
thereof, unless (1) the Depositary (A) notifies the Company that it is unwilling
or unable to continue as Depositary for such Global Note and the Company
thereupon fails to appoint a successor Depositary within 90 days or (B) ceases
to be a clearing agency registered under the Exchange Act, (2) there shall have
occurred and be continuing an Event of Default, or an event which with notice or
lapse of time or both would become an Event of Default with respect to the
Notes, or (3) the Company, at its sole option, notifies the Trustee in writing
that it elects to cause the issuance of certificated Notes; provided, however,
that no exchange may be made pursuant to this clause (3) in respect of any
interest in a Regulation S Temporary Global Note unless and until the Restricted
Period shall have expired and the certifications required by Section 2.08(b)(ii)
shall have been provided in respect of such interest. Any Global Note shall be
so exchanged from time to time in whole and not in part as directed by the
Depositary. Any Note issued in exchange for a Global Note or any portion
thereof shall be a Global Note, provided, however, that any such Note so issued
that is registered in the name of a Person other than the Depositary or a
nominee thereof shall not be a Global Note.
(b) Notes issued in exchange for a Global Note or any portion thereof
shall be issued in definitive, fully registered form, shall have an aggregate
principal
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registered in such names and be in such authorized denominations as the
Depositary shall designate and shall bear the applicable legends provided for
herein. Any Global Note to be exchanged in whole shall be surrendered by the
Depositary to the Transfer Agent located in the Borough of Manhattan, The
City of New York, to be so exchanged. With regard to any Global Note to be
exchanged in part, either such Global Note shall be so surrendered or
exchanged or, if the Trustee is acting as custodian for the Depositary or its
nominee with respect to such Global Note, the principal amount thereof shall
be reduced, by an amount equal to the portion thereof to be so exchanged, by
means of an appropriate adjustment made on the records of the Trustee. Upon
any such surrender or adjustment, the Trustee shall authenticate and deliver
the Note issuable on such exchange to or upon the order of the Depositary or
an authorized representative thereof. Any Note delivered in exchange for the
Global Note or any portion thereof shall, except as otherwise provided by
Section 2.08, bear the legend regarding transfer restrictions required by
Section 2.01(d).
(c) Subject to the provisions in the legends required by
Section 2.01(d) above, the registered Holder may grant proxies and otherwise
authorize any Person, including Agent Members and Persons who may hold
interests in Agent Members, to take any action that such Holder is entitled
to take under this Indenture.
(d) In the event of the occurrence of any of the events specified in
paragraph (a) of this Section 2.05, the Company will promptly make available to
the Trustee a reasonable supply of certificated Notes in definitive, fully
registered form.
(e) Neither members of, nor participants in, the Depositary ("Agent
Members") nor any other Person on whose behalf Agent Members may act shall have
any rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary or under the Global Note, and the Depositary may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note. With respect to any Global Note deposited on behalf of the subscribers
for the Notes represented thereby with the Trustee as custodian for the
Depositary for credit to their respective accounts (or to such other accounts as
they may direct) at Euroclear or CEDEL, the provisions of the "Operating
Procedures of the Euroclear System" and the "Terms and Conditions Governing Use
of Euroclear" and the "Management Regulations" and "Instructions to
Participants" of CEDEL, respectively, shall be applicable to Global Notes.
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Section 2.04. Form of Execution and Authentication.
Two Officers of the Company shall sign the Notes for the Company by manual
or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at
the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount of $105,000,000 of the Notes exchanged therefor.
The aggregate principal amount of Notes outstanding at any time shall not
exceed the amount set forth herein except as provided in Section 2.09.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
an Agent to deal with the Company or any Affiliate of the Company.
Section 2.05. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar") and (ii) an office or agency where Notes may
be presented for payment ("Paying Agent"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent, Registrar or co-registrar without prior notice
to any Holder of a Note. The Company shall notify the Trustee and the Trustee
shall notify the Holders of the Notes of the name and address of any Agent
not a party to this Indenture. Neither the Company nor any Affiliate may act
as Paying Agent. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails to maintain a Registrar or Paying Agent, or fails to give the foregoing
notice, the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 7.07.
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The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes.
Section 2.06. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders of the Notes or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the Notes,
and shall notify the Trustee of any Default by the Company in making any such
payment. While any such Default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company)
shall have no further liability for the money delivered to the Trustee. If
the Company acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders of the Notes all money held by it
as Paying Agent.
Section 2.07. Lists of Holders of the Notes.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders of the Notes and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Holders of the Notes, including the aggregate principal amount
of the Notes held by each thereof, and the Company shall otherwise comply
with TIA Section 312(a).
Section 2.08. Transfer and Exchange.
(a) General. At the option of each Holder but subject to the
provisions of this Section 2.08, Notes may be exchanged for other Notes of
any authorized denomination or denominations and of the same aggregate
principal amount, upon surrender of the Notes to be exchanged at any office
or agency of the Trustee appointed in or pursuant to Section 2.05 for such
purpose. Subject to the terms of this Section 2.08, upon surrender for
registration of transfer of any Note at any such office or agency of the
Trustee, the Company shall prepare and execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denomination or
denominations and of the same aggregate principal amount.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
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Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the company and the Registrar (it being understood that,
until notice to the contrary is given to Holders of Notes, the Company and
the Registrar shall each be deemed to have approved the form of instrument of
transfer, if any, printed on any definitive Note), duly executed by the
Holder or such Holder's attorney duly authorized in writing.
No service charge shall be made for any registration, registration
of transfer or exchange of Notes, but the Company and the Trustee shall have
the right to require payment from the Holder requesting any such registration
of transfer or exchange of an amount in United States Dollars sufficient to
pay or discharge any stamp duty, tax or other governmental charge or
insurance charge that may be imposed in connection with such registration of
transfer or exchange.
The Company shall not be required to register the transfer of, or
exchange, any Note called for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(b) Redemption Period. Neither the Company nor the Trustee shall
be required (i) to issue Notes, to register the transfer of Notes or to
exchange Notes during a period beginning at the opening of business fifteen
(15) days before the day of the mailing of a notice of redemption with
respect to less than all of the Notes and ending at the close of business on
the day of such mailing, or (ii) to register the transfer of Notes or to
exchange Notes being redeemed in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(c) Restricted Notes. Every Restricted Note, including any Note
issued upon transfer or exchange thereof, shall be subject to the
restrictions on transfer provided in the legend required to be set forth on
the face of such Restricted Note pursuant to Section 2.01, unless such
restrictions on transfer shall be waived by the written consent of the
Company, and the Holder of each Restricted Note, by such Holder's acceptance
thereof, agrees to be bound by such restrictions on transfer. Whenever any
Restricted Note is presented or surrendered for registration of transfer or
for exchange for a Note registered in a name other than that of the Holder,
such Restricted Note must be accompanied by a transferor's certificate in
substantially the form set forth in Exhibit C-4 and, in the case of transfers
of Restricted Notes pursuant to Rule 144A, a transferee's certificate
substantially in the form set forth in Exhibit C-8. The Registrar shall not
be required to accept for such registration of transfer or exchange any
Restricted Note unless such Registrar is satisfied that the restrictions on
transfer as set forth in this Indenture have been complied with.
The restrictions imposed by this Section 2.08(c) and Section 2.02
upon the transferability of any particular Restricted Note shall cease and
terminate when such Restricted Note (i) has been sold pursuant to an
effective registration statement, (ii) may
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be transferred pursuant to Rule 144 (or any successor provision thereto),
unless the Holder thereof is an affiliate of the Issuer within the meaning of
Rule 144 (or such successor provision), or (iii) has been transferred
pursuant to Regulation S. Any Restricted Note as to which such restrictions
on transfer shall have expired in accordance with their terms or shall have
terminated may, upon surrender of such Restricted Note for exchange to the
Registrar in accordance with the provisions of this Section 2.08
(accompanied, in the event that such restrictions on transfer have terminated
by reason of a transfer pursuant to Rule 144 or any successor provision, by
an opinion of counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Issuer, addressed
to the Issuer and in form acceptable to the Issuer, to the effect that the
transfer of such Restricted Note has been made in compliance with Rule 144 or
such successor provision) be exchanged for a new Note, of like aggregate
principal amount, which shall not bear the restrictive legend required by
Section 2.01(d). The Company shall inform the Trustee of the effective date
of any registration statement registering the Notes under the Securities Act.
The Trustee shall not be liable for any action taken or omitted to be taken
by it in good faith in accordance with the aforementioned opinion of counsel
or registration statement.
As used in the preceding two paragraphs of this Section 2.08(c), the
term "transfer" encompasses any sale, pledge, transfer or other disposition
of any Restricted Note.
(d) Transfer of Global Notes and Interests Therein. Notwithstanding
any other provision of this Indenture or the Notes, transfers of a Global Note,
in whole or in part, and transfers of interests therein of the kind described
in clauses (iii), (iv) or (v) below, shall be made only in accordance with this
Section 2.08(d), and all transfers of an interest in a Regulation S Temporary
Global Note shall comply with Sections 2.08(d)(ii), (v) and (vi) below.
(i) General. A Global Note may not be transferred, in whole or in
part, to any person other than the Depositary or a nominee thereof, and no
such transfer to any such other person may be registered; provided,
however, that this clause (i) shall not prohibit any transfer of a Note
that is issued in exchange for a Global Note but is not itself a Global
Note. No transfer of a Note to any person shall be effective under this
Indenture or the Notes unless and until such Note has been registered in
the name of such person. Nothing in this Section 2.08(d)(i) shall prohibit
or render ineffective any transfer of a beneficial interest in a Global
Note effected in accordance with the other provisions of this Section
2.08(d).
(ii) Regulation S Temporary Global Note. If the holder of a
beneficial interest in a Regulation S Temporary Global Note wishes at any
time to transfer such interest to a person who wishes to take delivery
thereof in the form of a beneficial interest in such Regulation S Temporary
Global Note, such transfer may be effected, subject to Applicable
Procedures (as defined below), only in
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accordance with this Section 2.08(d)(ii). Upon delivery (i) by a
beneficial owner of an interest in a Regulation S Temporary Global Note to
Euroclear or CEDEL, as the case may be, of an Owner Securities
Certification, (ii) by the transferee of such beneficial interest in the
Regulation S Temporary Global Note to Euroclear or CEDEL, as the case may
be, of a written certification (a "Transferee Securities Certification")
substantially in the form of Exhibit C-3 hereto and (iii) by Euroclear or
CEDEL, as the case may be, to the Trustee of a Depositary Securities
Certification, the Trustee may direct either Euroclear or CEDEL, as the
case may be, to reflect on its records the transfer of a beneficial
interest in the Regulation S Temporary Global Note from the beneficial
owner providing the Owner Securities Certification to the Person providing
the Transferee Securities Certification.
(iii) Restricted Global Note to Regulation S Temporary Global
Note. If the holder of a beneficial interest in a Restricted Global Note
wishes at any time to transfer such interest to a person who wishes to take
delivery thereof in the form of a beneficial interest in a Regulation S
Temporary Global Note, such transfer may be effected, subject to the rules
and procedures of the Depositary, Euroclear and CEDEL, in each case to the
extent applicable (the "Applicable Procedures"), only in accordance with
the provisions of this Section 2.06(d)(iii). Upon receipt by (1) the
Depositary of (A) written instructions given in accordance with the
Applicable Procedures from an Agent Member directing the Depositary to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in a Regulation S Temporary Global Note in a principal
amount equal to that of the beneficial interest in such Restricted Global
Note, (B) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Agent Member
(and the Euroclear or CEDEL account, as the case may be) to be credited
with, and the account of the Agent Member to be debited for, such
beneficial interest and (C) a certificate in substantially the form of
Exhibit C-5 attached hereto given by the holder of such beneficial interest
and (2) the Trustee, as Registrar, at its office in The City of New York of
(A) notification from the Depositary of the transaction described in (1)
above and (B) the certificate described in (1)(C) above, the Trustee, as
Registrar, shall instruct the Depositary to reduce the principal amount of
a Restricted Global Note, and to increase the principal amount of a
Regulation S Temporary Global Note by the principal amount of the
beneficial interest in the Restricted Global Note to be so transferred, and
to credit or cause to be credited to the account of the person specified in
such instructions (which shall be the Agent Member for Euroclear or CEDEL
or both, as the case may be) a beneficial interest in such Regulation S
Temporary Global Note having a principal amount equal to the amount by
which the principal amount of the Restricted Global Note was reduced upon
such transfer.
(iv) Restricted Global Note to Unrestricted Global Note. If the
holder of a beneficial interest in a Restricted Global Note wishes at any
time to transfer
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such interest to a person who wishes to take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, such transfer may
be effected, subject to the Applicable Procedures, only in accordance with
this Section 2.08(d)(iv). Upon receipt by (1) the Depositary of (A)
written instructions given in accordance with the Applicable Procedures
from an Agent Member directing the Depositary to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in an
Unrestricted Global Note in a principal amount equal to that of the
beneficial interest in such Restricted Global Note, (B) a written order
given in accordance with the Applicable Procedures containing information
regarding the account of the Agent Member (and, in the case of any such
transfer pursuant to Regulation S, the Euroclear or CEDEL account for which
such Agent Member's account is held) to be credited with, and the account
of the Agent Member to be debited for, such beneficial interest and (C) a
certificate in substantially the form of Exhibit C-6 attached hereto given
by the holder of such beneficial interest and (2) the Trustee, as
Registrar, at its office in The City of New York of (A) notification from
the Depositary of the transaction described in (1) above and (B) the
certificate described in (1)(C) above, the Trustee, as Registrar, shall
instruct the Depositary to reduce the principal amount of a Restricted
Global Note, and to increase the principal amount of an Unrestricted Global
Note by the principal amount of the beneficial interest in the Restricted
Global Note to be so transferred, and to credit or cause to be credited to
the account of the person specified in such instructions a beneficial
interest in such Unrestricted Global Note having a principal amount equal
to the amount by which the principal amount of the Restricted Global Note
was reduced upon such transfer.
(v) Regulation S Temporary Global Note or Unrestricted Global Note to
Restricted Global Note. If the holder of a beneficial interest in a
Regulation S Temporary Global Note on or after the termination of the
Restricted Period, or the holder of a beneficial interest in an
Unrestricted Global Note at any time, wishes to transfer such interest to a
person who wishes to take delivery thereof in the form of a beneficial
interest in the Restricted Global Note, such transfer may be effected,
subject to the Applicable Procedures and only in accordance with this
Section 2.08(d)(v) provided, that with respect to any transfer of a
beneficial interest in a Regulation S Temporary Global Note (except a
transfer pursuant to Section 2.08(d)(vii)(2)) the transferor and Euroclear
or CEDEL, as the case may be, must have previously delivered the
certificates described in the first paragraph of Section 2.08(b)(ii) with
respect to such beneficial interest. Upon receipt by (1) the Depositary of
(A) written instructions given in accordance with the Applicable Procedures
from an Agent Member, directing the Depositary to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in the
Restricted Global Note equal to that of the beneficial interest in a
Regulation S Temporary Global Note or an Unrestricted Global Note to be so
transferred and (B) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Agent
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Member to be credited with, and the account of the Agent Member (or, if
such account is held for Euroclear or CEDEL, the Euroclear or CEDEL
account, as the case may be) to be debited for, such beneficial interest,
and (2) the Trustee, as Registrar, at its office in The City of New York of
notification from the Depositary of the transaction described in (1) above,
the Trustee, as Registrar, shall instruct the Depositary to reduce the
principal amount of such Regulation S Temporary Global Note or Unrestricted
Global Note as the case may be and increase the principal amount of the
Restricted Global Note, by the principal amount of the beneficial interest
in such Regulation S Temporary Global Note or Unrestricted Global Note to
be so transferred, and to credit or cause to be credited to the account of
the person specified in such instructions a beneficial interest in such
Restricted Global Note having a principal amount equal to the amount by
which the principal amount of such Regulation S Temporary Global Note or
Unrestricted Global Note was reduced upon such transfer.
(vi) Interests in Regulation S Temporary Global Note to be Held
Through Euroclear or CEDEL. Until the later of the termination of the
Restricted Period and the provision of the certifications required by
Section 2.01(b)(ii), interests in any Regulation S Temporary Global Note
may be held only through Agent Members acting for and on behalf of
Euroclear and CEDEL, and any purchaser of Notes in a sale made in reliance
on Regulation S may not sell or offer to sell such Notes within the United
States or to a U.S. Person or for the account or benefit of a U.S. Person
within the meaning of Regulation S.
(vii) Other Exchanges. (1) In the event that a Global Note or
any portion thereof is exchanged for Notes other than Global Notes, such
other Notes may in turn be exchanged (on transfer or otherwise) for Notes
that are not Global Notes or for beneficial interests in a Global Note (if
any is then outstanding) only in a manner consistent with the provisions of
clauses (i) through (vi) above (including the certification requirements
intended to insure that transfers of beneficial interests in a Global Note
comply with Rule 144A, Rule 144 or Regulation S, as the case may be) and
any Applicable Procedures, as may be from time to time adopted by the
Company and the Trustee; provided, that, except as permitted in paragraph
(2) hereof, no beneficial interest in a Regulation S Temporary Global Note
shall be exchangeable for a definitive Note until the expiration of the
Restricted Period and then only if the certifications described in Section
2.01(b)(ii) have been provided in respect of such interest.
(2) Notwithstanding any other provision of this Section 2.08, an
Initial Purchaser may exchange beneficial interests in a Regulation S
Temporary Global Note held by it for one or more Restricted Notes
(including an interest in a Restricted Global Note) only after delivery by
such Initial Purchaser of instructions for such exchange substantially in
the form of Exhibit C-7. Upon receipt of the instruction described in the
preceding sentence, the Trustee shall instruct the Depositary to reduce the
principal amount of a Regulation S
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Temporary Global Note by the principal amount of the beneficial interest in
such Regulation S Temporary Global Note to be so transferred and either (A)
the Trustee shall instruct the Depositary to increase the principal amount
of the Restricted Global Note and credit or cause to be credited to the
account of the Initial Purchasers a beneficial interest in such Restricted
Global Note having a principal amount equal to the amount by which the
principal amount of the Regulation S Temporary Global Note was reduced upon
such transfer or (B) authenticate and deliver one or more Restricted Notes
in the aggregate principal amount of the beneficial interest in the
Regulation S Temporary Global Note to be so transferred, pursuant to the
instructions described in the first sentence of this subclause (2).
(e) Transfer of Restricted Notes (Other Than a Restricted Global
Note) to a Global Note. If the holder of a Restricted Note (other than a
Restricted Global Note) wishes at any time to transfer such Note to a person
who wishes to take delivery thereof in the form of a beneficial interest in a
Restricted Global Note, a Regulation S Temporary Global Note or an
Unrestricted Global Note, such transfer may be effected, subject to the other
provisions of this Indenture and the Applicable Procedures, only in
accordance with this Section 2.08(e). Upon receipt by (1) the Depositary of
(A) written instructions given in accordance with the Applicable Procedures
from an Agent Member directing the Depositary to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in a
Restricted Global Note, a Regulation S Temporary Global Note or an
Unrestricted Global Note, as the case may be, in a principal amount equal to
the principal amount of the Restricted Note to be so transferred, (B) a
written order given in accordance with the Applicable Procedures containing
information regarding the account of the Agent Member (and, in the case of
any transfer pursuant to Regulation S, the Euroclear and CEDEL account for
which such Agent Member's account is held, or if such account is held for
Euroclear or CEDEL, the Euroclear or CEDEL account, as the case may be) to be
credited with such beneficial interest and (C) an appropriately completed
certificate substantially in the form of Exhibit C-4 hereto and (2) the
Trustee of (A) the Restricted Note to be transferred, (B) notification from
the Depositary of the transaction described in (1) above and (C) the
certificate described in (1)(C) above, the Trustee shall cancel the
Restricted Note and instruct the Depositary to increase the principal amount
of a Restricted Global Note, Regulation S Temporary Global Note or
Unrestricted Global Note, as the case may be, by the principal amount of the
Restricted Note so transferred, and to credit or cause to be credited to the
account of the person specified in such instructions (which, in the case of
any increase in the principal amount of such Regulation S Temporary Global
Note, shall be the Agent Member for Euroclear or CEDEL or both, as the case
may be) a corresponding principal amount of such Restricted Global Note, such
Regulation S Temporary Global Note or such Unrestricted Global Note. Any
transfer of a Restricted Note to a person who wishes to take delivery thereof
in the form of a beneficial interest in a Global Note other than a Restricted
Global Note may only be effected in accordance with Regulation S or Rule 144.
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(f) Notwithstanding any other provision of this Section 2.08,
transfers of any Note or a beneficial interest in a Global Note made in
reliance on Rule 144A may be effected only after delivery to the Depositary
or the Trustee by the proposed transferee of an appropriately completed
certificate substantially in the form of Exhibit C-8.
(g) Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and each
such registration shall be noted on the Register. No service charge shall be
made for any registration of transfer or exchange of the Notes, but the
Trustee may require payment of a sum sufficient to cover any stamp duty, tax
or other governmental charge or insurance charge payable in connection
therewith and any other amounts required to be paid by the provisions of the
Notes.
(h) All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
(i) The Company shall not be required (i) to issue Notes, to
register the transfer of Notes or to exchange Notes during a period beginning
at the opening of business fifteen (15) days before the day of the mailing of
a notice of redemption of Notes being redeemed under Section 3.03 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of Notes or to exchange Notes being redeemed in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
Section 1.029. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee, any Agent or any authenticating
agent from any loss which any of them may suffer if a Note is replaced. Each of
the Company and the Trustee may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company.
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Section 2.10. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.11, a Note does not cease to be outstanding because
the Company, a Subsidiary of the Company or an Affiliate of the Company holds
the Note.
Section 2.11. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Subsidiary of the Company or any Affiliate of the Company shall
be considered as though not outstanding, except that for purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Responsible Officer knows to
be so owned shall be so considered. Notwithstanding the foregoing, Notes
that are to be acquired by the Company, any Subsidiary of the Company or an
Affiliate of the Company pursuant to an exchange offer, tender offer or other
agreement shall not be deemed to be owned by the Company, a Subsidiary of the
Company or an Affiliate of the Company until legal title to such Notes passes
to the Company, such Subsidiary or such Affiliate, as the case may be.
Section 2.12. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that
the Company and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee, upon
receipt of the written order of the Company signed by two Officers of the
Company, shall authenticate definitive Notes in exchange for temporary Notes.
Until such exchange, temporary Notes shall be entitled to the same rights,
benefits and privileges as definitive Notes.
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Section 2.13. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy canceled
Notes (subject to the record retention requirement of the Exchange Act),
unless the Company directs canceled Notes to be returned to it. The Company
may not issue new Notes to replace Notes that it has redeemed or paid or that
have been delivered to the Trustee for cancellation. All canceled Notes held
by the Trustee shall be destroyed and certification of their destruction
delivered to the Company, unless by a written order, signed by two Officers
of the Company, the Company shall direct that canceled Notes be returned to
it.
Section 2.14. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders of
the Notes on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior
to the payment date, in each case at the rate provided in the Notes. The
Company shall, with the consent of the Trustee, fix or cause to be fixed each
such special record date and payment date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to Holders of the Notes a notice that
states the special record date, the related payment date and the amount of
such interest to be paid.
Section 2.15. Record Date.
The record date for purposes of determining the identity of Holders of
the Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided
for in TIA Section 316(c).
Section 2.16. CUSIP and CINS Numbers.
The Company in issuing the Notes may use "CUSIP" and "CINS" numbers and,
if it does so, the Trustee shall use the CUSIP and CINS numbers in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP and CINS numbers printed in the notice or on the Notes
and that reliance may be placed only on the other identification numbers
printed on the Notes. The Company will promptly notify the Trustee of any
change in the CUSIP and CINS numbers.
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ARTICLE 3.
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07, it shall furnish to the Trustee, at least 30 days
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the redemption date, (ii) the principal amount of Notes to
be redeemed, (iii) the redemption price and (iv) the redemption provision
being relied on for such redemption..
Section 3.02. Selection of Notes to be Redeemed or Repurchased.
If less than all of the Notes are to be redeemed at any time, the
selection of Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or if the Notes are not so listed on a pro
rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate; provided that no Notes with a principal
amount of $1,000 or less shall be redeemed in part.
Notices of redemption or repurchase shall be mailed by first class mail
at least 30 days but not more than 60 days before the redemption or
repurchase date to each Holder of Notes to be redeemed or repurchased at its
registered address. If any Note is to be redeemed or repurchased in part
only, the notice that relates to such Note shall state the portion of the
principal amount thereof to be redeemed or repurchased. A 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
Notes. 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 Notes or portions thereof called for
redemption or repurchase.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09, the redemption notice shall be
mailed in accordance with the provisions of Section 3.03, shall identify the
Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the provision being relied on for such redemption;
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(d) if any Note is being redeemed in part only, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued;
(e) the name and address of the Paying Agent;
(f) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(g) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(h) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(i) that no representation is made as to the correctness or accuracy
of the CUSIP and CINS numbers, if any, listed in such notice or printed on
the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days (unless a shorter period
is acceptable to the Trustee) prior to the redemption date, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become due and payable on the redemption date at the
redemption price.
Section 3.05. Deposit of Redemption Price.
On or prior to any redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date. The Trustee or
the Paying Agent shall promptly return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all Notes to
be redeemed.
On and after the redemption date, interest shall cease to accrue on the
Notes or the portions of Notes called for redemption. If a Note is redeemed on
or after an interest record date but on or prior to the related interest payment
date, then any accrued and
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unpaid interest shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes.
Section 3.06. Notes Redeemed in Part.
Upon surrender and cancellation of a Note that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder of the
Notes at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption
The Notes will not be redeemable prior to August 1, 2002. Thereafter, the
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:
Year Redemption Price
---- ----------------
2002.................................. 107.000%
2003.................................. 104.667%
2004.................................. 102.333%
2005 and thereafter................... 100.000%
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 (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 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.
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Section 3.08. Mandatory Redemption.
Except as set forth in Sections 3.09 and 4.14 below, the Notes will not be
subject to any mandatory redemption or sinking fund provisions.
Section 3.09. Offer to Purchase by Application of Excess Proceeds from Asset
Sale.
When the cumulative amount of Excess Proceeds (as defined in Section 4.19)
exceeds $5 million, the Company shall be make an offer to all Holders of the
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
that may be purchased out of such 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, together with accrued and unpaid interest and
Liquidated Damages (if any) thereon to the date of purchase fixed for the
closing of such offer in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of 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 as provided under this
Indenture. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, on a pro rata basis, the amount of Excess Proceeds shall be reset at
zero.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the maximum principal amount of Notes that may be
purchased with such Excess Proceeds (which maximum principal amount of Notes
shall be the "Offer Amount") or, if less than the Offer Amount has been
tendered, all Notes tendered in response to the Asset Sale Offer.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued interest shall be paid to
the Person in whose name a Note is registered at the close of business on such
record date, and no additional interest shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
Upon the commencement of any Asset Sale Offer, the Company shall send, by
first class mail, a notice to each of the Holders of the Notes, with a copy to
the Trustee. The notice shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and the length of time the Asset Sale Offer shall remain open;
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(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company, a Depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice at least three business
days before the Purchase Date;
(f) that Holders shall be entitled to withdraw their election if the
Company, Depositary or Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have the Note purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes or portion thereof
tendered, and deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, Depositary or Paying Agent,
as the case may be, shall promptly (but in any case not later than five days
after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee shall authenticate and mail or deliver such new Note, to such Holder
equal in principal amount to any unpurchased portion of the Note surrendered.
Any Note not so accepted shall be promptly mailed or delivered by the Company to
the
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Holder thereof. The Company shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
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The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will furnish to the Holders of
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 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 Notes for the Exchange Notes or has
registered all of the Notes for resale under the Securities Act.
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Section 4.04. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 30 days after the end
of each of the Company's fiscal quarters, an Officers' Certificate stating that
a review of the activities of the Company and its Subsidiaries during the
preceding fiscal quarter has been made under the supervision of the signing
Officers with a view to determining whether each has kept, observed, performed
and fulfilled its obligations under this Indenture and the Collateral Documents,
and further stating, as to each such Officer signing such certificate, that to
the best of his or her knowledge each entity has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and the Collateral
Documents and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture or the Collateral Documents,
including, without limitation, a default in the performance or breach of Section
4.07, Section 4.09, Section 4.10, Section 4.15 or Section 4.20 (or, if a Default
or Event of Default shall have occurred, describing all such Defaults or Events
of Default of which he or she may have knowledge and what action each is taking
or proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action each is taking or proposes to take with respect thereto.
(b) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of (i) any Default or
Event of Default, (ii) any default under any of the Collateral Documents or
(iii) any default under any Indebtedness referred to in Section 6.01(v), an
Officers' Certificate specifying such Default, Event of Default or default and
what action the Company or any of its Affiliates is taking or proposes to take
with respect thereto.
Section 4.05. Taxes and Other Claims.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, (i) all material taxes, assessments, and governmental
levies, and (ii) all material lawful claims for labor, materials and supplies
that, if unpaid, would by law become a Lien upon its properties or any
Subsidiaries' properties except, in each case, as contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all
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benefit or advantage of any such law, and covenants that it shall not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law has been enacted.
Section 4.07. Restricted Payments.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries, to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of any Equity Interests of the Company
(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 retire 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)
voluntarily purchase, redeem, defease or otherwise acquire or retire for value
any Indebtedness that is expressly subordinated in right of payment to the
Notes, except in accordance with the scheduled mandatory redemption or repayment
provisions set forth in the original documentation governing such Indebtedness;
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:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(2) 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 Section 4.09 hereof;
and
(3) 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 (without duplication) of:
(A) 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
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(B) 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 (x) Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and (y) 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 that as Disqualified Stock
or Indebtedness; plus
(C) 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 (x) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (y) the
initial amount of such Restricted Investment.
(b) The provisions set forth in paragraph (a) above shall 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 this 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 (3)(B) of paragraph (a) above;
(iii) the repayment, defeasance, redemption or repurchase of
Intercompany Indebtedness 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 (3)(B) of paragraph (a) above;
(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 or pursuant to employee restricted stock purchase plans in an
aggregate amount not to exceed
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$500,000 in any calendar year and in an aggregate amount not to exceed $2.0
million since the date of this Indenture,
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.
(c) 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 Section 4.09 hereof; provided that (i) in no event shall 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
subsection (a) of this Section 4.07. 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.
(d) 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's Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations
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required by this covenant were computed, which calculations may be based upon
the latest available financial statements of the Company.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
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) this Indenture, the Pledge Agreement and the 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;
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(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 clause (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.
Section 4.09. Incurrence of Indebtedness or Issuance of Disqualified Stock.
The Company shall not, and the Company shall 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 the Company and its
Restricted Subsidiaries shall 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 Interest; 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 Notes and this Indenture
and any guarantees of the Notes issued by any Subsidiary under the
terms of this Indenture.
(ii) Existing Indebtedness;
(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 a 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;
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(iv) Indebtedness of the Company owed to and held by any of its
Wholly Owned Restricted Subsidiaries and Indebtedness of any Wholly
Owned Restricted Subsidiaries 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 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 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);
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(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.
Section 4.10. Merger, Consolidation or Sale of Assets.
The Company shall 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 Notes, the
Pledge Agreement and this 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 Section 4.09 hereof.
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Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, 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 arm's 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 of the Company 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 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 Section 4.07 hereof and Permitted Investments of a
type referred to in clauses (i) and (iii) of the definition of
Permitted Investments;
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(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 this Indenture and described in the Offering Memorandum
and renewals and extensions of such agreements on terms no less
favorable to the Holders than the terms of such original agreements
and transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or 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.
Section 4.13. Additional Guarantees.
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 to the Trustee a supplemental indenture to this Indenture providing
for a Guarantee ("Subsidiary Guarantee") of payment by such Restricted
Subsidiary of all of the Company's obligations under the Notes and this
Indenture on the terms set forth in this indenture 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 Notes, then the Guarantee of
such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the 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
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 under the terms of this 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.
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Section 4.14. Offer to Purchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have a
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's 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 the date upon which the
Change of Control occurred (the "Change of Control Date"), the Company shall
send, by first class mail, a notice to each Holder, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Change of Control Offer. Such
notice shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered and not withdrawn shall be
accepted for payment;
(ii) the purchase price (including the amount of accrued interest)
and Liquidated Damages (if any) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days from the date such notice is
mailed, other than as may be required by law) (the "Change of Control
Payment Date");
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing such Holder's election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes
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surrendered; provided that each Note purchased and each new Note issued
shall be in an original principal amount of $1,000 or integral multiples
thereof; and
(vii) the circumstances and relevant facts regarding such Change of
Control.
(b) On or before the Change of Control Payment Date, the Company shall to
the extent lawful (i) accept for payment all Notes or portions thereof property
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent in U.S. dollars, an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered and (iii) deliver or cause
to be delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so accepted the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to such Holders a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered; provided that each such new Note
will be in a principal amount of $1,000 or an integral multiple thereof. Any
Notes not so accepted shall be promptly mailed by the Company to the Holder
thereof. For purposes of this Section 4.14, the Trustee shall act as the Paying
Agent.
Any amounts remaining after the purchase of Notes pursuant to a Change
of Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with the provisions
under this Section 4.14, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 4.14 by virtue thereof.
The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(c) The provisions of Subsections (a) and (b) above shall not apply 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 this Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Section 4.15. Maintenance of Properties and Insurance.
The Company shall, and shall cause each of its Subsidiaries to, maintain
its properties in good working order and condition (subject to ordinary wear and
tear) and make all reasonably necessary repairs, renewals, replacements,
additions and
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improvements required for it to actively conduct and carry on its business;
provided, however, that nothing in this Section 4.15 shall prevent the Company
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the good faith judgment of
the Board of Directors or other governing body of the Company desirable in the
conduct of its businesses and is not disadvantageous in any material respect to
the Holders.
Section 4.16. Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries.
The Company shall not, and shall 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 other Capital Stock of such Restricted Subsidiary and that complies
with the provisions of Section 4.18 hereof, to the extent such provisions apply;
(ii) if required, the issuance, transfer, conveyance, sale or other 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 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).
Section 4.17. Business Activities.
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.
Section 4.18. Limitation on Sales of Assets and Subsidiary Interests.
The Company shall not, and shall 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
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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 borrowed under the Bank Credit Facility
pursuant to clause (vi) of the covenant set forth in Section 4.09 hereof, 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 ant manner that is not prohibited by this 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" for purposes of
Section 3.09 hereof.
ARTICLE 5.
SUCCESSORS
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 4.10, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the Company shall refer instead to the successor corporation and
not to the Company), and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
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 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 Notes;
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(iii) failure to comply with the provisions set forth in Section
4.10, 4.14 or 4.18 hereof;
(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
this Indenture or the Notes other than those referred to in clauses (i),
(ii) and (iii) above;
(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 this 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;
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(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 the
Offering Memorandum (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);
(ix) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company, any Restricted
Subsidiary which constitutes, or any group of Restricted Subsidiaries that,
taken together, would constitute, a Significant Subsidiary, in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a decree
or order adjudging the Company, such Restricted Subsidiary or such
Restricted Subsidiaries, bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, such Restricted Subsidiary or
such Restricted Subsidiaries, under any applicable Federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, such Restricted
Subsidiary or such Restricted Subsidiaries, or of any substantial part of
its or their property, or ordering the winding up or liquidation of its or
their affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days;
(x) the commencement by the Company, any such Restricted
Subsidiary or such Restricted Subsidiaries of a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company, such Restricted
Subsidiary or such Restricted Subsidiaries in an involuntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or state law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company, such Restricted Subsidiary or such Restricted
Subsidiaries, or of any substantial part of its or their property, or the
making by it or them of an assignment for the benefit of creditors, or the
admission by it or them in writing of its or their inability to pay its or
their debts generally as they become due, or the taking of corporate action
by the Company or such Restricted Subsidiary or such Restricted
Subsidiaries, in furtherance of any such action.
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Section 6.2. Acceleration.
If any Event of Default occurs and is continuing, the Trustee by notice to
the Company, or the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes by written notice to the Company and the Trustee, may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default specified in clause (ix) or (x) of
Section 6.01(v), all outstanding Notes shall become and be immediately due and
payable without further action or notice. Holders of the Notes may not enforce
this Indenture or the Notes except as provided in this Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal, premium, interest or Liquidated Damages, if any) if it
determines that withholding notice is in such Holders' interest. The Holders of
a majority in aggregate principal amount of the Notes then outstanding by
written notice to the Trustee may on behalf of all of the Holders waive any
existing Default or Event of Default and its consequences hereunder except a
continuing Default or Event of Default in the payment of principal, premium,
interest or Liquidated Damages, if any, on the Notes.
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 Notes pursuant to Section
3.07, an equivalent premium shall also become and be immediately due and payable
to the extent permitted by law. 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
Notes prior to August 1, 2002, then the premium specified herein shall also
become due and payable to the extent permitted by law upon the acceleration of
the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with this 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.
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes, this Indenture or any of the Collateral Documents.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the
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Trustee or any Holder of a Note in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
Section 6.4. Waiver of Past Defaults.
The Holders of a majority in aggregate principal amount of Notes then
outstanding, by notice to the Trustee, may on behalf of the Holders of all of
the Notes waive an existing Default or Event of Default and its consequences
under this Indenture, except a continuing Default or Event of Default in the
payment of the principal, premium, interest or Liquidated Damages, if any, on
the Notes. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.5. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with the law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.6. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
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(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a Holder
for the enforcement of the payment of principal and premium (if any) or interest
and Liquidated Damages (if any) on such Note on or after the respective due
dates set forth in such Note (including upon acceleration thereof) or the
institution of any proceeding with respect to this Indenture or any remedy
hereunder, including, without limitation, acceleration, by the Holders of a
majority in principal amount of outstanding Notes, provided that upon
institution of any proceeding or exercise of any remedy, such Holders provide
the Trustee with prompt notice thereof.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.7. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, interest and
Liquidated Damages, if any, on the Note, on or after the respective due dates
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of the Holder of the Note.
Section 6.8. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or 6.01(ii) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.9. Trustee May file Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), the Company's creditors or the Company's
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder of
a Note to make such payments to the Trustee, and in the event that
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the Trustee shall consent to the making of such payments directly to the Holders
of the Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Notes may be entitled to receive
in such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder of a Note any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder of a Note thereof,
or to authorize the Trustee to vote in respect of the claim of any Holder of a
Note in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Notes for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes under this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note
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pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee security and
indemnity satisfactory to the Trustee against loss, liability, or expense that
might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.04, the Trustee shall have no duty to
inquire as to the performance of the Company's covenants in Article 4. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
4.01, 4.03 and 4.04 or (ii) any Default
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or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
Trustee (if any of the Notes are registered pursuant to the Securities Act), or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Notes, the Pledge Agreement or
the Pledged Securities it shall not be accountable for the Company's use of the
proceeds from the Notes or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Notes or any other document in connection with the sale of
the Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15, beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the events
described in TIA Section 313(a) occurred within the previous twelve months, but
not otherwise, mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b). The Trustee shall also transmit by mail all
reports as required by TIA Section 313(c).
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A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which any Notes are listed. The Company shall promptly notify the Trustee when
any Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, except any such
loss, liability or expense as may be attributable to the gross negligence,
willful misconduct or bad faith of the Trustee. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need
not pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(ix) or 6.01(x) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
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Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company and obtaining the prior written
approval of the FCC, if so required by the Communications Act, including Section
310(d) and the rules and regulations promulgated thereunder. The Holders of at
least a majority in principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee (subject to the prior written approval of the FCC, if
required by the Communications Act, including Section 310(d), and the rules and
regulations promulgated thereunder) if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) the Trustee is no longer in compliance with the foreign ownership
provisions of Section 310 of the Communications Act and the rules and
regulations promulgated thereunder.
(d) a Bankruptcy Custodian or public officer takes charge of the
Trustee or its property; or
(e) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder of a Note who has been a
Holder of a Note for at least six months fails to comply with Section 7.10, such
Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
Section 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by federal or
state authority and shall have a combined capital and surplus of at least $25
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may at its option, by an appropriate board resolution evidenced
by an Officers' Certificate, at any time (subject to 10-day prior written
notification to the Trustee), elect to have the provisions of either Section
8.02 or 8.03 applied to the outstanding Notes upon compliance with the
conditions set forth below in this Article 8.
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Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 8.01
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the outstanding Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, such Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the outstanding Notes
and to have satisfied all its other obligations under such Notes and this
Indenture insofar as such Notes are concerned (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive, solely
from the trust fund described in Section 8.04 and as more fully set forth in
such Section, payments in respect of the principal of, premium (if any),
interest and Liquidated Damages (if any) on, such Notes when such payments are
due from the Trust referred to below; (ii) the Company's obligations with
respect to the Notes concerning the issuance of temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen 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 hereunder
the Company's obligations in connection therewith; and (iv) the Legal Defeasance
of this Article 8.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 8.02
applicable to this Section, (i) the Company shall be released from its
obligations under Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 and Article 5 and (ii) the occurrence of
an event specified in Section 6.01(iv) or (v), shall not be deemed to be an
Event of Default, on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document, but the remainder of
this Indenture and such Notes shall be unaffected thereby.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or Section 8.03 to the outstanding Notes:
(i) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee in trust for the benefit of the Holders of the
Notes, cash in U.S. dollars, non-callable Government Securities or a
combination
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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 Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether
the 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:
(A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or
(B) since the date of this Indenture, there has been a change in
the applicable 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 Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred:
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (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;
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(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 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.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06, all money and Government Securities (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.05, the "Trustee") pursuant to
Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or Government Securities held by it as provided in Section
8.04 which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a)), are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
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Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustees thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States Dollars
or Government Notes in accordance with Section 8.02 or 8.03, as the case may be,
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. With Consent of Holders of Notes.
Except as provided in the next succeeding paragraph, this Indenture, the
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 Notes then
outstanding (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of this Indenture, the Notes or the Pledge
Agreement may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes).
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Section 9.02. Without Consent of Holders of Notes.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Note held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Notes
or alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants set forth in Sections 3.09, 4.14
and 4.18 hereof) or reduce the prices at which the Company shall offer to
purchase such Notes pursuant to Sections 3.09, 4.14 or 4.18 hereof;
(iii) reduce the rate of or change the time for payment of
interest on any Note;
(iv) waive a Default or Event of Default in the payment of principal
of, or premium (if any), interest or Liquidated Damages (if any) on, the
Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration);
(v) make any Notes payable in money other than that stated in the
Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of, or premium (if any), interest or Liquidated
Damages (if any) on, the Notes;
(vii) waive a redemption payment with respect to any Note; or
(viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Pledge Agreement to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of 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 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
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order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders of Notes furnished to the Trustee prior to such solicitation
pursuant to Section 2.07 or (ii) such other date as the Company shall designate.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it.
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Section 9.07. Payments for Consents.
None the Company nor any of its Subsidiaries may, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of a Note for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this Indenture or the
Notes unless such consideration is offered to be paid or agreed to be paid to
all Holders of the Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
Section 9.08. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article 9, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
ARTICLE 10.
COLLATERAL AND SECURITY
Section 10.01. Collateral Documents.
Upon the Closing of the Offering, the Company shall purchase and pledge to
the Collateral Agent pursuant to the Pledge Agreement, for the benefit of the
Holders, the Pledged Securities 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 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 payment
of the first six scheduled interest payments on the Notes will be secured by a
first priority interest in the Pledged Securities and the Pledge Account.
Pursuant to the terms of the Pledge Agreement, upon timely payment to the
Holders of the first six interest payments on the Notes, all Pledged Securities
will be released from the Pledge Account.
Each Holder of Notes, by its acceptance thereof, consents and agrees to the
terms of the Collateral Documents (including, without limitation, the provisions
providing for foreclosure and release of Collateral) as the same may be in
effect or may be amended from time to time in accordance with its terms and
authorizes and directs the Collateral Agent to enter into the Collateral
Documents and to perform its obligations and exercise its rights thereunder in
accordance therewith. The Company shall deliver to the Collateral Agent copies
of all Collateral Documents, and shall do or cause to be done all such acts and
things as may be necessary or proper, or as may be required by the provisions of
the Collateral Documents, to assure and confirm to the Collateral Agent the
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security interest in the Collateral contemplated hereby, by the Collateral
Documents or any part thereof, as from time to time constituted, so as to render
the same available for the security and benefit of this Indenture and of the
Notes secured hereby, according to the intent and purposes herein expressed.
The Company shall take, or shall cause its Subsidiaries to take, any and all
actions reasonably required to cause the Collateral Documents to create and
maintain, as security for the first six semi-annual payments of interest on the
Notes, a valid and enforceable perfected Lien in and on all the Collateral, in
favor of the Collateral Agent for the benefit of the Holders of Notes, superior
to and prior to the rights of all third Persons and subject to no other Liens
than Permitted Liens, except for those Liens with respect to which the
Collateral Documents or this Indenture expressly contemplate prior or pari passu
Liens.
Section 10.02. Execution of Collateral Documents.
Simultaneously with the execution of this Indenture, the Company and the
Collateral Agent shall execute the Collateral Documents.
ARTICLE 11.
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Teletrac, Inc.
2323 Grand, Suite 1100
Kansas City, MO
Telecopier No.: (816) 474-3475
Attention: James A. Queen
With a copy to:
Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, NY 10111
Telecopier No.: (212) 841-5725
Attention: Robert A. Schwed, Esq.
If to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center, Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No: (612) 667-9825
Attention: Corporate Trust Administration
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The Company or the Trustee, by notice to the other may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders of Notes)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of a Note shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder of a Note or any defect in
it shall not affect its sufficiency with respect to other Holders of Notes.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 1.113. Communication by Holders of Notes with Other Holders of Notes.
Holders of the Notes may communicate pursuant to TIA Section 312(b) with
other Holders of Notes with respect to their rights under this Indenture or the
Notes. The
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Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to
the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
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Section 11.07. 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 Notes, this 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 the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 11.08. Governing Law.
The internal law of the State of New York shall govern and be used to
construe this Indenture and the Notes.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successor. All agreements of the Trustee in this Indenture shall bind its
successor.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
-81-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
TELETRAC, INC.,
a Delaware corporation
By:________________________________
Name: James A. Queen
Title: Chief Executive Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:________________________________
Name: Raymond S. Haverstock
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By:________________________________
Name: Raymond S. Haverstock
Title: Vice President
<PAGE>
EXHIBIT C-1
[FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF
BENEFICIAL INTEREST IN A REGULATION S
TEMPORARY GLOBAL NOTE]
OWNER SECURITIES CERTIFICATION
TELETRAC, INC.
14% Senior Notes, CUSIP No. ___
Reference is hereby made to the Indenture, dated as of August 6, 1997
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This is to certify that, as of the date hereof, $______ of the
above-captioned Notes are beneficially owned by non-U.S. person(s). As used in
this paragraph, the term "U.S. person" has the meaning given to it by Regulation
S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex or facsimile on or
prior to the date on which you intend to submit your certification relating to
the Notes held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
Dated: __________, ____
By:___________________________________
As, or as agent for, the beneficial
owner(s) of the Notes to which this
certificate relates.
C-1-1
<PAGE>
EXHIBIT C-2
[FORM OF CERTIFICATION TO BE GIVEN
BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
DEPOSITARY SECURITIES CERTIFICATION
TELETRAC, INC.
14% Senior Notes, CUSIP No. ___
Reference is hereby made to the Indenture, dated as of August 6, 1997,
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This is to certify that, with respect to U.S. $_______ principal
amount of the above-captioned Notes, except as set forth below, we have received
in writing, by tested telex or by electronic transmission, from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount of Notes set forth above (our "Member Organizations"),
certifications with respect to such portion, substantially to the effect set
forth in the Indenture.(1)
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, exercise of any rights or collection of any interest)
any portion of the Regulation S Temporary Global Note (as defined in the
Indenture) excepted in such certifications and (ii) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by such Member Organizations with respect to
any portion of the part submitted herewith for exchange (or, if relevant,
exercise of any rights or collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
- ------------------------------
(1) Unless Morgan Guaranty Trust Company of New York, London Branch is
otherwise informed by the Agent, the long form certificate set out in the
Operating Procedures will be deemed to meet the requirements of this sentence.
C-2-1
<PAGE>
We understand that this certification is required in connection
with certain securities laws of the United States. In connection therewith,
if administrative or legal proceedings are commenced or threatened in
connection with which this certification is or would be relevant, we
irrevocably authorize you to produce this certification to any interested
party in such proceedings. This certificate and the statements contained
herein are made for your benefit and the benefit of the Issuer and the
Initial Purchasers.
Dated: _____________, ____
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
Brussels office, as operator of the Euroclear
System]
or
[CEDEL BANK, SOCIETE ANONYME]
By____________________________
C-2-2
<PAGE>
EXHIBIT C-3
[FORM OF CERTIFICATION TO BE GIVEN BY
TRANSFEREE OF BENEFICIAL INTEREST IN A
REGULATION S TEMPORARY GLOBAL NOTE]
TRANSFEREE SECURITIES CERTIFICATION
TELETRAC, INC.
14% Senior Notes, CUSIP No. ___
Reference is hereby made to the Indenture, dated as of August 6, 1997,
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
For purposes of acquiring a beneficial interest in the Regulation S
Temporary Global Note, the undersigned certifies that it is not a U.S. Person as
defined by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by facsimile on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you in which we intend to acquire a beneficial interest in accordance with
your operating procedures if any applicable statement herein is not correct on
such date, and in the absence of any such notification it may be assumed that
this certification applies as of such date.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
Dated: ___________, ____
By:_____________________________
As, or as agent for, the beneficial acquiror of
the Notes to which this certificate relates.
C-3-1
<PAGE>
EXHIBIT C-4
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF RESTRICTED NOTE TO
[RESTRICTED](1)[RESTRICTED GLOBAL](1)
[UNRESTRICTED](2)(3)[UNRESTRICTED GLOBAL](2) (3)
[REGULATION S TEMPORARY GLOBAL](4)NOTE
(Transfers and exchanges pursuant to Section 2.08(c)
of the Indenture)
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Teletrac, Inc. 14% Senior Notes
due 2007 (the "Notes")
Reference is hereby made to the Indenture, dated as of August 6, 1997,
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Restricted Notes
held in definitive form (CUSIP No. ____) by [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or transfer of such
Notes.
_____________________
(1) Use for transfer of Restricted Note for Unrestricted Note or interest in
Restricted Global Note.
(2) Use for transfers of Restricted Note for Unrestricted Note or interest in
Unrestricted Global Note.
(3) Use for transfer of Restricted Note pursuant to Rule 903 or Rule 904 after
termination of Restricted Period.
(4) Use for transfers of Restricted Note pursuant to Rule 903 or Rule 904 prior
to termination of Restricted Period.
C-4-1
<PAGE>
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that (i) such Notes are owned by the Transferor
and are being exchanged without transfer or (ii) such transfer has been effected
pursuant to and in accordance with (a) Rule 903 or Rule 904 under the Securities
Act of 1933, as amended (the "Act"), (b) Rule 144 under the Act or (c) Rule 144A
under the Act, and accordingly the Transferor does hereby further certify that
[(A) the offer of the Notes was not made to a person in the
United States;
(B) either:
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention
of the requirements of Rule 903 (b) or 904(b) of Regulation S, as
applicable; and
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act.](5)(6)[the Notes have been
transferred in a transaction permitted by Rule 144](7)[the transfer
has been effected pursuant to and in accordance with Rule 144A under
the Act and, accordingly, the Transferor does hereby further certify
that the Notes are being transferred to a Person that the Transferor
reasonably believes is purchasing the Notes for its own account, or
for one or more accounts with respect to which such Person exercises
sole investment
(5) Use for transfer of Restricted Note pursuant to Rule 903 or Rule 904 after
termination of Restricted Period.
(6) Use for transfers of Restricted Note pursuant to Rule 903 or Rule 904 prior
to termination of Restricted Period.
(7) Use for transfers of Restricted Note for Unrestricted Note or interest in
Unrestricted Global Note.
C-4-2
<PAGE>
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A,
in each case in a transaction meeting the requirements of Rule 144A
and in accordance with any applicable securities laws of any state
of the United States.](8)
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
Dated: ___________, ____
By:_____________________________
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
cc: Teletrac, Inc.
____________________
(8) Use for transfer of Restricted Note for Unrestricted Note or interest in
Restricted Global Note.
C-4-3
<PAGE>
EXHIBIT C-5
FORM OF CERTIFICATION FOR TRANSFER OR
EXCHANGE OF RESTRICTED GLOBAL NOTE TO REGULATION S
TEMPORARY GLOBAL NOTE
(Exchanges or transfers pursuant to
Section 2.08(d)(iii) of the Indenture)
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Teletrac, Inc. 14% Senior Notes
due 2007 (the "Notes")
Reference is hereby made to the Indenture, dated as of August 1, 1997,
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S. $________ principal amount of Notes which
are held in the form of the Restricted Global Note (CUSIP No. ____) with the
Depositary in the name of [insert name of transferor] (the "Transferor"). The
Transferor has requested an exchange or transfer of such beneficial interest for
an interest in the Regulation S Temporary Global Note (CUSIP No. __) to be held
with the Depositary in the name of [Euroclear] [Cedel Bank, societe anonyme].
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Notes and pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"), and accordingly the Transferor does hereby
certify that:
(1) the offer of the Notes was not made to a person in the United
States;
C-5-1
<PAGE>
[(2) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on its
behalf reasonably believed that the transferee was outside the United
States;](1)
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;]1
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: _______________
cc: Teletrac, Inc.
____________________
(1) Insert one of these provisions, which come from the definition of "offshore
transaction" in Regulation S.
C-5-2
<PAGE>
EXHIBIT C-6
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL NOTE TO
UNRESTRICTED GLOBAL NOTE
(Exchanges or transfers pursuant to
Section 2.08(d)(iv) of the Indenture)
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Teletrac, Inc. 14% Senior Notes
due 2007 (the "Notes")
Reference is hereby made to the Indenture, dated as of August 6, 1997,
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S. $________ principal amount of Notes which
are held in the form of the Restricted Global Note (CUSIP No. ____) with the
Depositary in the name of [insert name of transferor] (the "Transferor"). The
Transferor has requested an exchange or transfer of such beneficial interest in
the Securities for an interest in the Unrestricted Global Note (CUSIP No. ____).
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Notes and, (i)
with respect to transfers made in reliance on Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), the Transferor does hereby
certify that:
(1) the offer of the Notes was not made to a person in the United
States;
[(2) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on its
behalf reasonably believed that the transferee was outside the United
States;](1)
_____________________
(1) Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
C-6-1
<PAGE>
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;]1
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
and (ii) with respect to transfers made in reliance on Rule 144 under the
Securities Act, certify that the Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: _______________
cc:
C-6-2
<PAGE>
EXHIBIT C-7 (1)
FORM OF INSTRUCTION FOR EXCHANGE
EXCHANGE INSTRUCTIONS
TELETRAC, INC.
14% Senior Notes due 2007
Pursuant to Section 2.08(d)(vii)(2) of the Indenture, dated as of
August 6, 1997 (the "Indenture"), between Teletrac, Inc. and Norwest Bank
Minnesota, National Association, as Trustee, [Name of Initial Purchaser] hereby
requests that $________ aggregate principal amount of the above-captioned Notes
held by you for our account in the Regulation S Temporary Global Note (CUSIP
No. ___) (as defined in the Indenture) be exchanged for one or more Restricted
[Global] Rate Notes [(CUSIP No. ____)] in the denominations and registered in
the names of the holders requested as set forth below:
Denominations Registered Name
____________________ ____________________________________
____________________ ____________________________________
____________________ ____________________________________
____________________ ____________________________________
Dated: _______________ [Name of Initial Purchaser]
By:_____________________________
(1) For use prior to the exchange of a Regulation S Temporary Global Note for
one or more Restricted Notes.
C-7-1
<PAGE>
EXHIBIT C-8
FORM OF CERTIFICATION FOR TRANSFER
OF RESTRICTED [GLOBAL](1)NOTE
TRANSFEREE CERTIFICATION
Norwest Bank Minnesota, National Association,
as Trustee
[ ]
[ ]
[ ]
Attention: Corporate Trust Services Department
Re: Teletrac, Inc. 14% Senior Notes
due 2007 (the "Notes")
Reference is hereby made to the Indenture, dated as of August 6, 1997,
(the "Indenture"), between Teletrac, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Restricted Notes
held in definitive form (CUSIP No. ____) (the "Transferred Note") by [insert
name of transferor] (the "Transferor"). The Transferor has requested an
exchange or transfer of such Notes to the undersigned transferee (the
"Transferee") and the Transferee is aware that the transfer to it is being made
in reliance on Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act").
In connection with such request and in respect of the Transferred
Notes, the Transferee does hereby certify that such transfer has been effected
pursuant to and in accordance with Rule 144A under the Securities Act and,
accordingly, the Transferee does hereby further certify that the Transferee is
purchasing the Transferred Notes for its own account, or for one or more
accounts with respect to which the Transferee exercises sole investment
discretion, and the Transferee and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States.
(1) Include if relates to interest in Global Note.
C-8-1
<PAGE>
We understand that the Transferred Notes have not been and will not be
registered under the Securities Act and may not be offered, sold, pledged or
otherwise transferred without registration under the Securities Act, except
(a)(1) to a person whom the Transferee reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
purchasing for its own account or for the account of a qualified institutional
buyer in a transaction meeting the requirements of Rule 144A or (2) pursuant to
an exemption from registration under the Securities Act in accordance with Rule
144 thereunder (if available) or (3) in a transaction outside the United States
in compliance with the provisions of Regulation S under the Securities Act and
(B) in each case in accordance with any applicable securities laws of any state
of the United States or other applicable jurisdiction.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchaser.
Dated: _______________
[Insert Name of Transferee]
By:_____________________________
Name:
Title:
cc: Teletrac, Inc.
C-8-2
<PAGE>
[****Deleted Pursuant to a Request for Confidential Treatment.]
Exhibit 10.1
VLU PRODUCTION AGREEMENT
This VLU Production Agreement (the "Agreement") is made as of September 6, 1996
(the "Effective Date") by and between Tadiran Ltd., a company duly organized and
existing under the laws of Israel, through its Telematics Division ("Seller" or
"Tadiran"), and Teletrac Inc., a corporation registered in Delaware ("Buyer" or
"Teletrac") (jointly - the "Parties").
THE PARTIES THEREFORE AGREE AS FOLLOWS
1. AGREEMENT TO PURCHASE AND SELL
Within the term of this Agreement (two years from the date hereof), Buyer
shall purchase from Seller, and Seller shall sell to Buyer [****] [****]
Vehicle Location Units ("VLUs"). The Parties hereby acknowledge that
[****] [****] VLUs ordered on February 26, 1996 (purchase order number
[****]) ("the [****] Order") is included in the above [****] VLUs and this
Agreement shall apply to the [****] VLUs in full, including the [****]
Order. Within 7 days hereof Teletrac shall issue a purchase order for the
additional [****] ([****]) VLUS.
<PAGE>
[****Deleted Pursuant to a Request for Confidential Treatment.]
2. UNIT SPECIFICATIONS AND CHANGES
2.1 The VLUs shall fully comply with the VLU technical specifications, as
set forth in Exhibit "A" attached hereto (the "Specifications").
2.2 Subject to provisions of Section 15 below, the Parties may negotiate
changes to the specifications which shall be implemented in a manner
that will not interrupt the then current production of VLUs. The
Parties shall determine by mutual consent the corresponding adjustment
in prices and the delivery schedule, and this Agreement shall be
modified in writing accordingly.
3. PURCHASE PRICE/PAYMENT TERMS
3.1 The basic purchase price for each VLU shall be US $ [****] ([****]) per
unit for the [****] Order and US $[****] ([****] US Dollars and [****]
cents) per unit, exclusive of G.S.P., for the remaining [****] VLUs
(respectively - the "Purchase Price"). Should the G.S.P. apply during the
term of this Agreement, the cost of the G.S.P. shall be added to the
Purchase Price. During the term of this Agreement, from time to time,
Seller shall use its best efforts to reduce the costs that were the basis
of its initial determination of US $[****] as the appropriate purchase
price
2
<PAGE>
[****Deleted Pursuant to a Request for Confidential Treatment.]
and shall pass through to Teletrac any such cost reductions, as it
achieves. This undertaking does not constitute the grant to Teletrac of a
right to audit Tadiran's books, records or financial statements.
3.2 Subject to the provisions of Section 4 below, The Basic Price includes
freight, handling, insurance, and other delivery costs (all as of the
Effective Date and shall be adjusted accordingly upon any change in the
above), predicated upon the Seller's shipment to Garden Grove, California
("Buyer's Facility") or any other single facility in the United States
provided that the Buyer shall pay the difference in additional delivery
costs from Buyer's Facility to the final destination.
3.3 The invoice of VLUs shall contain, at a minimum, the purchase price in US
dollars, purchase order number, invoice date, quantity, description,
invoice number, reference to this Agreement, ship to name and address, bill
to name and address, emit to name and address and method and name of
carrier.
3.4 TERMS OF PAYMENT. Terms for the payment of the Purchase Price are as
defined in Exhibit "B" attached hereto.
3
<PAGE>
[****Deleted Pursuant to a Request for Confidential Treatment.]
4. DELIVERY TERMS
4.1 DELIVERY SCHEDULE. Seller shall ship the VLUs to Buyer according to the
delivery schedule attached as Exhibit "C" (the "Delivery Schedule"). The
monthly delivery rate (as set forth in Exhibit "C" or amended by the
Parties) may be increased by up to [****]% or decreased by up to [****]% by
means of a 60 days prior written notice. In no event shall the monthly
delivery rate be increased in excess of 20,000 VLUs or decreased below
[****] VLUs.
4.2 DELIVERY POINT. All VLUs shall be delivered by Seller FOB Seller's
facilities in Holon, Israel or a facility of any of Seller's subcontractors
(not necessarily in Israel). Title and risk of loss shall pass from Seller
to Buyer at Seller's facilities or subcontractors' facility.
4.3 SHIPMENT POINT. Upon request by Buyer, Seller shall arrange for and pay
the cost of packaging, insurance and freight to Buyer's Facility. US
federal, state and local taxes shall be the responsibility of Buyer.
4.4 METHOD OF SHIPMENT. Method of shipment and selection of carrier is to be
determined by Seller. Seller agrees to ship VLUs by methods that support
the Delivery Schedule as specified herein. If Seller is late in expected
delivery date, Seller shall use and pay for the most expeditious
4
<PAGE>
[****Deleted Pursuant to a Request for Confidential Treatment.]
shipment means. Seller shall, at its sole expense, provide for all
crating, packaging and packing in shipping containers that are designed to
provide adequate protection for the VLUs during shipment. Buyer shall
incur all additional costs, of in-bound freight when, at Buyer's request,
VLUs are expedited. Seller shall use reasonable efforts to comply with
such requests.
4.5 TAXES. All prices are inclusive of all present export duties (including
brokerage fees) and all Seller's corporate income taxes, duties, tariffs,
fees, levies, charges, federal, state and local sales taxes and other
compulsory payments arising out of or in connection with any such sale or
order, if payable under the laws in force in Israel, including any Israeli
governmental agency operating under the authority of such laws shall be
paid by Seller.
4.6 All claims for shortages in the number of VLUs which have been delivered to
Teletrac shall be made to Tadiran within 60 days of the actual delivery of
the VLUs to Teletrac.
5. REQUEST FOR DEVIATIONS
The Parties may request reasonable deviations from the Specifications in
writing. Requests for deviations must clearly identify the following:
description of the deviation; reference the individual Specification being
deviat-
5
<PAGE>
[****Deleted Pursuant to a Request for Confidential Treatment.]
ed; term of deviation, i.e. temporary or permanent; number of VLUs
affected; Effective Date; effect of deviation on any other technical or
performance Specification, including whether, following the deviation, the
Unit remains within the applicable margin or tolerance; anticipated delay,
if any, in Delivery Schedule due to deviation; and reason for deviation.
Deviations may be made only if a written addendum describing the deviations
(including the change, if any, in Delivery Schedule) has been mutually
agreed upon and signed by both parties.
6. WARRANTY
Seller hereby warrants the VLUs to be in compliance with the Specifications
and to be free from defects in materials and workmanship for the shorter
of: (a) three years from the date of delivery to Buyer or (b) two years
from the date the VLUs have been delivered by Buyer to third party. The
crystal to be in full compliance with the Specifications and to be free
from defects in materials and workmanship for the period of five years from
the date of receipt at Buyer's Facility. The warranty periods defined
above shall be referred to as the Warranty Period. Seller shall have the
option of either repairing or replacing VLUs found to be defective during
the Warranty Period. Time to repair or replace shall not exceed 90 days
from the date of actual
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delivery of the item to Seller's facility. Seller also warrants the
merchantability and fitness for use within the Specifications of the VLUs.
Following the expiration of the Warranty Period, Seller shall be obligated
to provide maintenance support for VLUs for a period of 15 years in
accordance with a schedule of parts and labor rates which it shall
periodically publish. Seller's schedules for parts and labor rates shall
be effective 30 days following the delivery of the schedule.
6.1 Buyer acknowledges that the warranty contained in this Section 6 above
shall not apply to damage, deterioration or malfunctions which are caused
by:
6.1.1 The improper removal or installation of VLUs.
6.1.2 Accidents, acts of nature, misuse, abuse, negligence, neglect,
unauthorized product modification or failure to follow proper
instruction procedure.
6.1.3 Repair or attempted repair by any person not authorized by
Seller.
6.2 Buyer also acknowledges that Buyer shall be responsible and shall bear all
costs and charges related to the deinstallation of defective VLUs and
reinstallation of the VLUs, Seller shall bear the cost of shipment of the
VLUs from Buyer to Seller and back.
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6.3 THE WARRANTIES CONTAINED IN THIS SECTION 6 ARE IN LIEU OF ALL OTHER
WARRANTIES WHETHER ORAL, WRITTEN, OR EXPRESS, IMPLIED OR STATUTORY. SELLER
SHALL NOT BE LIABLE FOR ANY BUSINESS EXPENSES, LOSS OF PROFIT,
INCONVENIENCE, OR DAMAGE, INCLUDING DIRECT, INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES RESULTING FROM VLU DEFECTS WHETHER RESULTING FROM
BREACH OF WARRANTY OR ANY OTHER LEGAL THEORY. SELLER DISCLAIMS ALL
LIABILITY, WHETHER IN CONTRACT, TORT, WARRANTY OR OTHERWISE TO ANY THIRD
PARTY OTHER THAN BUYER. NOTWITHSTANDING THE ABOVE, SELLER SHALL REMAIN
LIABLE TO BUYER (AND ONLY TO BUYER) UNDER THE ABOVE WARRANTY FOR THE
DURATION OF THE WARRANTY PERIOD, DESPITE PASSAGE OF TITLE TO THE VLUs TO
ANY THIRD PARTIES.
7. CONFIDENTIALITY AND PROPRIETARY RIGHTS
Neither party shall, without the prior written consent of the other party,
use (for any purpose other than that contemplated by this Agreement) or
disclose or divulge to any third party the terms and conditions of this
Agreement or any documents, specifications or information, including
technical information, received from the other party under or in connection
with this Agreement, provided, however, that Seller may disclose to any
third party, including its employees and subcontractors (provided they have
executed
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an appropriate NDA), in connection with the manufacture of the VLUs, the
documents, specifications or information received from Buyer, to the extent
that in Seller's reasonable opinion it is necessary for the purposes of
this Agreement. Seller shall have the right to disclose any information
reasonably necessary to file for patent and other intellectual property
rights protection. At all times Seller shall retain exclusive proprietary
rights in the VLU (including design, configurations, drawings,
specifications, etc.) and nothing herein may be construed as granting any
intellectual property rights in the VLU to the Buyer.
8. USE OF NAME OR TRADEMARKS
Seller shall print any name or mark requested by Buyer on the VLUs in
addition to the name "Tadiran". Buyer shall be liable for an infringement
of copyright or trademarks as a result of any name or mark requested by
Buyer on the VLUs. If Buyer elects to use another name in addition to the
name "Tadiran", Buyer shall give Seller such name or mark to be used on the
VLUs at least 90 days prior to the delivery date for such VLUs.
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9. FORCE MAJEURE
If performance by Seller of its obligations hereunder is prevented by force
majeure, affecting the activities of Seller or any party connected with the
sale, manufacture, supply, shipment or delivery of VLUs, including but not
limited to, acts of God, flood, typhoon, earthquake, tidal wave, landslide,
fire, plague, commotion, strike, labor disturbances, blockade, arrest or
restraint of government, requisition of vessel or aircraft, explosion, war,
government request, guidance, order or regulation or the boycotting of
Israeli goods, or any other unforeseeable causes or circumstances beyond
the reasonable control of Seller, then Seller shall not be liable for loss
or damage or failure or delay in performing its obligations under this
Agreement; provided, however, that Seller promptly fulfills its obligations
under this Agreement immediately after such force majeure ceases.
Notwithstanding the foregoing, Teletrac may terminate this Agreement, by
written notice to Tadiran, if performance by Tadiran is prevented by force
majeure for a period of more than 90 days.
10. COMPLIANCE
10.1 COMPLIANCE WITH AGREEMENT. Parties hereby agree to fully cooperate with
each other and to sell and buy VLUs which fully comply with the terms,
conditions, provisions and
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Specifications of this Agreement, including the exhibits attached hereto
for price set forth herein to be paid in a timely manner.
10.2 COMPLIANCE WITH LAW. Parties shall be in compliance with (as to their
respective roles as manufacturer or operator/seller) and the VLUs shall be
in compliance with all federal, state and municipal regulations governing
the sale and use of the VLUs. The Parties shall cooperate in obtaining
necessary government agency approvals. Seller shall notify Buyer thirty
days prior to submission to any governmental agency as to the nature of the
submission. Buyer may elect to jointly apply for such agency approval,
registration or listing. Buyer shall incur the cost of obtaining and
maintaining a requested listing, approval or registration.
10.3 COMPLIANCE WITH PROPRIETARY RIGHTS REQUIREMENTS. Seller shall retain the
right to use all technology, know-how, copyright, trademark and patent
rights used in producing the VLUs. The Parties agree that Seller shall
retain all rights to file for patents on the VLUs or any other protection
of intellectual property relating to the VLUs.
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11. INDEMNIFICATION
11.1 SELLER'S INDEMNIFICATION FOR ACTIONS. Subject to limitations listed below,
Seller shall indemnify, defend and hold harmless Buyer from and against all
claims, liabilities, obligations, damages, losses, deficiencies, costs,
shipping and transportation expenses, payments and expenses (including
court costs and reasonable attorney's fees), lawsuits, actions and other
proceedings, judgments and awards (collectively, "Claims") (other than
Claims due to the fault of Buyer or a failure of the VLU to perform in
accordance with the specifications), including, without limitation, Claims
of personal injury and death, arising directly out of any act or omission
of Seller, under this Agreement, including Claims of product liability.
Buyer acknowledges that the coverage of this indemnification does not
include patent infringements of the Buyer or any other breach of
obligations of Buyer contained in the Specifications. In no event shall
Seller be liable for indirect or consequential damages.
11.1.1 Buyer shall give Seller notice of any Claim within 10 business days
after Buyer's receipt of such Claim.
11.1.2 Buyer shall empower Seller to conduct the defense of any Claim and
shall cooperate fully with such defense.
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Seller shall have full authority to conduct the defense.
11.1.3 Buyer shall not be entitled to settle a Claim without the express
written permission of Seller.
11.1.4 Provided that Seller advances the funds necessary to defend a Claim,
Buyer shall be obligated to defend such Claim.
11.2 BUYER'S INDEMNIFICATION FOR ACTIONS. Buyer shall indemnify, defend and
hold harmless Seller from and against all Claims (other than Claims due to
the fault of Seller), including, without limitation, Claims of personal
injury and death, arising, out of any act or omission of Buyer, or Buyer's
agents or employees, in connection with this Agreement.
11.2.1 Seller shall give Buyer notice of any Claim within 10 business days
after Seller's receipt of such Claim.
11.2.2 Seller shall consult regularly with Buyer in connection with the
defense of any Claim.
11.2.3 Seller shall not be entitled to settle a Claim without the express
written permission of Buyer.
11.2.4 Provided that Buyer advances the funds necessary to defend a Claim,
Seller shall be obligated to defend such Claim.
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11.3 PROPRIETARY RIGHTS INDEMNIFICATION. Seller shall indemnify, defend and
hold harmless the Buyer from and against any Claims resulting or arising
from or in connection with Seller's violation of any third party's trade
secrets, proprietary information, trademarks, copyrights or patent rights
in connection with services, work or VLUs provided under this Agreement.
Buyer shall indemnify, defend and hold harmless the Seller from and against
any Claims resulting or arising from or in connection with Buyer's
violation of any third party's trade secrets, proprietary information,
trademarks, copyrights or patent rights in connection with services, work
or VLUs provided under this Agreement.
11.4 PROPRIETARY RIGHTS INDEMNIFICATION. Buyer shall indemnify, defend and hold
harmless the Seller from and against any Claims resulting or arising from
or in connection with Seller's violation of any third party's trademarks or
copyrights in connection with name or mark requested by Buyer pursuant to
Section 8 above.
11.5 COOPERATION. Each party agrees to promptly notify the other of any Claim
and to cooperate fully in the defense thereof or any negotiations related
thereto, and neither
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shall enter into any settlement without the consent of the other party.
12. CONTRACT ADMINISTRATION
Alan B. Howe ("Howe") or his duly appointed successor shall administer the
terms of this Agreement on behalf of Buyer, and Roman Sternberg
("Sternberg") or his duly appointed successor shall administer the terms of
this Agreement on behalf of Seller.
13. NOTICES
Any notice, request or demand required to be made or given hereunder by any
party shall be deemed to be duly given or made upon receipt. The notice,
request or demand must be sent by air courier or registered or certified
airmail, or facsimile to the respective addresses of the parties set forth
below, or at such other address as has been given by either party to the
other in writing in accordance with the terms of this Agreement.
Teletrac Inc.
8900 State Line Rd., Suite 500
Leawood, Kansas 66206
Attention: Alan B. Howe
With a copy to: Steven D. Scheiwe
Tadiran Ltd., Telematics Division
26 Hashoftim Street
Holon, 58102 Israel
Attention: Roman Sternberg
With a copy to: Layla Chertow
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14. TERMINATION
Each party shall have the right, as set forth below, to terminate this
Agreement without prejudice to any rights that it may have, whether under
the provisions of this Agreement, in law or in equity or otherwise, upon
the occurrence of any of the following events, hereinafter called
"Defaults".
(a) Either party, if the other party defaults in the performance of a
material obligation, provided for in this Agreement; or
(b) Either party, if the other party files a voluntary petition in
bankruptcy, files any voluntary petition seeking any reorganization,
arrangement, readjustment, liquidation, dissolution or similar relief
under the present or any future federal or state bankruptcy or
insolvency act; fails to remove an involuntary petition for a
reorganization, arrangement, readjustment, liquidation, dissolution or
similar relief under the present or any future federal or state
bankruptcy or insolvency act within 60 days after the filing of such
petition, or appoints a trustee, receiver or liquidator of its
properties.
Notwithstanding the above, a corporate reorganization or spin off not
under bankruptcy or insolvency proce-
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dures shall not be considered a default, unless there is an intention
to abandon the business.
The party claiming a Default shall give written notice of termination to
the party alleged to be in Default in accordance with the notice provision
set forth in Section 13. The defaulting party shall have 90 business days
in which to correct any such Default, and failing such, this Agreement
shall terminate. If the defaulting party shall, within ten business days,
notify the other party in writing that it disputes the asserted Default,
and the matter cannot be resolved by mutual agreement of the parties, the
matter shall be submitted to binding mediation as hereinafter provided.
15. DECREASE OF QUANTITIES AND TERMINATION OF PRODUCTION
Buyer may decrease the total quantity of the VLUs he has undertaken to
purchase under Section 1.1 above under the following conditions:
15.1 Buyer must give Seller prior written notice of Buyer's election to
decrease the quantities of VLUs to be delivered under this Agreement
("Decrease Notice"). Notwithstanding the above, Buyer may not
decrease the [****] Order.
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15.2 Should the consequences of Decrease Notice require any changes in
overall delivery schedule, the Parties shall determine a new delivery
schedule by mutual consent. In any event the quantities of the VLUs
to be supplied after the Decrease Notice shall be more than the
quantities scheduled to be supplied within 4 months following the date
of the Decrease Notice.
15.3 Buyer shall compensate Seller in the amount of US$[****] per each VLU,
canceled in accordance with Sub-sections 15.1 and 15.2 above.
15.4 Buyer may give Seller Decrease Notice of cancellation of all further
deliveries, and, in such case, Buyer shall cover the following costs:
a. [****]% of the total price of the VLUs shipped prior to the
Decrease Notice;
b. [****]% of the total price of the ordered VLUs planned to be
shipped during 30 days immediately following the date of the Decrease
Notice;
c. [****]% of the total price of the ordered VLUs planned to be
shipped within 30-60 days from the date of the Decrease Notice;
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d. [****]% of the total price of the ordered VLUs planned to be
shipped within 60-90 days from the date of the Decrease Notice;
e. US$ [****] per each VLU related to the order canceled as a result
of this termination of production.
"Planned to be shipped" shall be interpreted in accordance with the
last update of the monthly delivery rate.
In such case all inventory becomes the property of Buyer, including
all parts and partly completed units. Seller shall ship same (at
Buyer's expense) to a destination requested by Buyer.
16. BINDING MEDIATION
16.1 If one or more disputes arise between the parties with respect to the
obligations and responsibilities of either party under this Agreement, any
such dispute shall be resolved in accordance with the process described in
this Section 16, provided, however, that if either party determines that
provisional relief (e.g. a temporary restraining order or preliminary
injunction) is required to provide temporary relief, nothing herein shall
prevent the aggrieved party from applying to a court for provisional
relief. An application for provisional relief to a court shall not relieve
either party of its obligation under this
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Section 14 and shall not alter the power of the mediator to determine the
rights and obligations of the Parties under this Agreement.
16.1.1 Either party may initiate the dispute resolution process by sending a
written notice (which the parties hereby agree will automatically toll
any applicable statute of limitations) of the alleged dispute and the
alleged wrong suffered, to the members of the Dispute Resolution
Committee, consisting of the following individuals at Seller and Buyer
or their successors, who shall be persons holding positions at a level
substantially equivalent to those named ("Dispute Committee"):
SELLER BUYER
------ -----
General Manager The Chairman of the Board
Telematics Division
16.1.2 Upon receipt of any such notice, the Dispute Committee, using all
available and relevant resources of their respective companies, shall
promptly investigate the facts and circumstances surrounding the
disputes and shall meet (either in person or by telephone) to attempt
to resolve the dispute. Any resolution reached, either informally or
in such a meeting, shall be committed to writing and signed by the
Dis-
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pute Committee and communicated to the appropriate management of the
parties for implementation. This resolution shall be conclusive and
binding upon the parties.
16.1.3 If a dispute is not resolved by the Dispute Committee, any party may
pursue its action as set forth in Section 16.2 below.
16.1.4 Each of the parties specifically acknowledges and agrees that remedies
at law for any breach of this Agreement would be inadequate, and that
the parties, in addition to any other relief available, shall be
entitled to specific performance of all of the provisions of this
Agreement.
16.2 Within 5 days after the Dispute Committee has failed to resolve any
dispute, the parties shall meet to discuss and agree upon the
qualifications which they desire a mediator to possess.
Any party may suggest one or more candidates to fill the position of
mediator.
The parties shall then attempt to select a mutually acceptable
candidate.
16.2.1 Once a candidate has been agreed upon by the parties, the candidate
shall be invited to serve as the mediator. If the candidate declines
to do so, the parties
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shall meet or confer again to select another qualified candidate.
This process shall be repeated until a mediator is selected and agrees
to serve. If, however, after 30 days, the parties are unable to agree
upon a mediator, the mediator shall be selected by the President of
the New York Arbitration Association, whose selection shall be binding
upon the parties.
16.2.2 During the selection and mediation processes, each party shall
disclose to the other party any circumstances known to it which would
create any reasonable doubt about the impartiality or neutrality of an
individual who is being considered as a potential mediator or who is
serving as the mediator. The candidate or mediator may be asked to
explain such circumstances and be required to disclose any information
which would constitute grounds for doubt as to the candidate's or the
mediator's impartiality or neutrality. If any such circumstances have
been disclosed, either before or after the individual's appointment as
mediator, the candidate or mediator shall not serve or continue to
serve unless both parties agree.
16.2.3 The mediator's compensation rate shall be determined and agreed upon
at or prior to the mediator's appointment. The mediator's
compensation and all other inci-
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dental costs incurred during the mediation process will be shared
equally by the parties.
16.2.4 The mediator shall be neutral and impartial and shall use the laws of
the State of New York to resolve the dispute between the parties.
16.2.5 The mediator shall control the procedural aspects of the mediation.
The parties shall cooperate fully with the mediator at all times.
16.2.6 The mediator is free to meet and communicate separately with each
party.
16.2.7 The mediator shall, in consultation with the parties, fix the agenda
for all meetings.
16.2.8 Each party may be represented by counsel, who shall be authorized to
recommend settlement options to their principals.
16.2.9 The mediation process shall be conducted expeditiously and shall be
completed in less than 120 days from the date the mediator was
selected. Each representative shall make every effort to be available
for meetings, and the mediator shall ensure that he is able to devote
all the time necessary to quickly and effectively mediate the dispute.
16.2.10 The entire mediation process shall remain confidential. The parties
or the mediator shall not disclose
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information regarding the process, including settlement terms, unless
the parties agree otherwise. The mediator may obtain assistance and
independent expert advice with the agreement of and at the expense of
the parties.
16.2.11 The mediator shall not be liable for any good faith act or omission in
connection with his role as mediator.
16.2.12 The mediation shall take place in New York City.
16.2.13 The mediator's decision shall be final and binding upon both parties.
17. NEW YORK LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York as the same or any succeeding provision of
law may be in effect from time to time. For the purposes of any dispute
between the parties, this Agreement shall be construed as if all parties
were resident and doing business in New York. If there are any ambiguities
in the Agreement, such ambiguities shall not be construed against either
party on the basis of who drafted the documents.
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18. MISCELLANEOUS PROVISIONS
18.1 RELATIONSHIP OF PARTIES. This Agreement does not constitute and shall not
be construed as constituting a partnership or joint venture between The
Parties. Neither party shall represent that it is an agent for the other
party. Both parties acknowledge that the relationship of Seller and Buyer
shall be and at all times remain one of an independent contractor, and so
shall represent themselves to third parties. Neither party has the right
to bind the other in any manner.
18.2 SUCCESSORS. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective executors, heirs, legal
representatives, successors and assigns.
18.3 ASSIGNMENT. Parties shall not assign, transfer or sell any of their rights
hereunder to any third party without the prior written permission of the
other Party, which permission shall not be unreasonably withheld; provided,
however, that Teletrac may assign this agreement, without the permission
from Tadiran, as part of sale or transfer of all or substantially all of
its assets and business. Notwithstanding the above Tadiran may assign this
agreement to its subsidiary created as part of a corporate reorganization,
provided Tadiran shall guarantee the performance of such
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subsidiary. No rights hereunder shall devolve by operation of law or
otherwise upon any assignee, receiver, liquidator, trustee or other party.
The VLUs delivered hereunder shall be manufactured only by Tadiran Ltd.,
its legitimate assigns or Tadiran LTD's subcontractors.
18.4 NO WAIVER. Failure of either party to insist upon strict performance of
any of the terms, conditions, provisions or Specifications within this
Agreement (including the exhibits), or the delay in exercising any of its
remedies, shall not constitute a waiver of such terms conditions,
provisions or Specifications or a waiver of any default thereof nor the
remedy of such default.
18.5 SURVIVAL OF OBLIGATIONS. Each party's obligations under this Agreement
which, by their nature, would continue beyond termination or expiration of
this Agreement, including by way of illustration only and not limitation,
Section 4 or any Section related to confidentiality, warranty and
indemnification, shall survive termination or expiration of this Agreement
by either party for any reason.
18.6 ENTIRE AGREEMENT. This Agreement, together with all exhibits hereto,
constitute the entire agreement and understanding between the parties as to
the subject matter of this Agreement, and supersedes all previous
communications,
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representations or agreements. Any other document issued by Buyer shall be
deemed to be issued only for administrative convenience and no term or
condition thereof, including any purchase order, shall supersede the terms
and conditions of this Agreement.
18.7 REMEDIES. Except as specifically set forth in this Agreement, all remedies
available to either party for breach of this Agreement are cumulative, and
may be exercised concurrently or separately, and the exercise of any one
remedy shall not be deemed an election of such remedy to the exclusion of
other remedies.
18.8 HEADINGS. The paragraph headings used in this Agreement are for
convenience of reference only, and shall not in any way limit or amplify
the terms and provisions hereof, nor enter into the interpretation of this
Agreement.
18.9 BINDING AGREEMENT. The persons executing this Agreement on behalf of the
parties have been duly and validly authorized to do so, and this Agreement
is a valid and binding obligation of the parties.
18.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute
one and the same Agreement.
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18.11 SEVERABILITY. If any term of this Agreement shall be unlawful, void
or unenforceable, such term shall be deemed omitted to the extent
prohibited or invalid, but the remainder of this Agreement shall not
be invalidated and shall be given effect as far as possible. If any
term hereof is found by a court or arbitrator to be over-broad, such
term shall be limited to the extent required to make it enforceable.
18.12 MODIFICATION. This Agreement may not be modified, supplemented or
otherwise changed except by a written instrument executed by both
parties.
18.13 ATTORNEY'S FEES. If any action or proceeding (judicial or
non-judicial) is brought to interpret any term or provisions of this
Agreement, the prevailing party shall be entitled to costs and
reasonable attorney's fees in addition to any other relief to which it
is entitled.
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IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SIGNED THIS
AGREEMENT AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
TELETRAC INC.
By /s/ James A. Queen
-----------------------------
TADIRAN LTD.
By /s/ Eddy Kafry
-----------------------------
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VLU AGREEMENT
EXHIBIT A
SPECIFICATIONS
[****]
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VLU AGREEMENT
EXHIBIT B
TERMS OF PAYMENT
1. A combination of a downpayment and a Standby Letter of Credit will be
provided.
[****]
2. The payment for the delivered VLUs will be made upon shipment.
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VLU AGREEMENT
EXHIBIT C
DELIVERY SCHEDULE
The following is a projected delivery schedule for VLUs:
October 1996 [****]
November 1996 [****]
December 1996 [****]
January 1997 [****]
February 1997 [****]
March 1997 [****]
April 1997 [****]
May 1997 [****]
June 1997 [****]
July 1997 until completion [****]
A final "Baseline Schedule" will be summarized not later than October 10, 1996.
In any event, the minimum quantities to be delivered will be as follows:
October 1996 [****]
November 1996 [****]
December 1996 [****]
January 1997 [****]
February 1997 [****]
March 1997 [****]
April 1997 [****]
May 1997 [****]
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June 1997 [****]
July 1997 until completion [****]
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Exhibit 10.2
Amendment
to VLU Production Agreement
This Amendment to VLU Production Agreement dated September 6, 1996
("Amendment") is made as of May 28, 1997 by and between Tadiran Ltd. ("Seller"
or "Tadiran") and Teletrac Inc. ("Buyer" or "Teletrac").
Whereas, due to interference with proper function of the VLU caused by
unrelated third parties (the "Interference"), Specifications of the VLU Exhibit
"A" to the Agreement have to be modified; and
Whereas, in order to resolve the above problem, Teletrac requested
Tadiran, in accordance with the Agreement, to change the Specifications of the
VLU and develop a modified VLU (the "Modified VLU"); and
Whereas, the Parties wish to cooperate in order to resolve the above
problem.
The Parties hereby agree as follows:
1. Terms used in this Agreement shall have the same meaning as
defined in the Agreement.
2. Based on data and information provided by Teletrac and
independently confirmed by Tadiran, Tadiran shall make all
reasonable efforts to develop a Modified VLU which shall provide
technical solution to the Interference. Joint teams of Tadiran
and Teletrac (the "Joint Team") shall cooperate in definition of
the changes. Upon development of the Modified VLU the Joint Team
shall perform laboratory and field tests in order to determine
the suitability of the technical solution. Should the solution
be found acceptable, it shall be approved by the Joint Team.
3. The Parties hereby acknowledge that the above development shall
require joint efforts of both Parties. If the proposed technical
solutions are not successful, despite their efforts, the Parties
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shall coordinate further steps in order to resolve the problem of
Interferences.
4. Upon approval of the Joint Team, the Specifications shall be
changed in writing in accordance with the approved technical
solution (the "Revised Specifications"), which shall be signed by
both Parties. The Parties hereby undertake to make reasonable
efforts to approve the Revised Specifications and to instruct
their members of the Joint Team to promote the approval of the
technical solution in the speediest and most efficient manner.
5. Upon approval of Revised Specifications, Tadiran shall submit to
Teletrac a proposal for retrofit costs (excluding R&D) and for
adjustment of the price for all new VLU Units to be ordered under
the Agreement.
5.1. It is hereby agreed that the retrofit costs shall not exceed
US $**** per Unit if **** has to be replaced and US $****
per Unit, if **** have to be replaced. The Parties shall
add the retrofit costs to the VLU price defined in the
Agreement for all retrofit Units.
5.2. It is hereby agreed that the price for all new VLU Units to
be ordered under the Agreement shall be adjusted but shall
not exceed US $**** per Unit, if **** has to be replaced or
US $**** per Unit, if **** have to be replaced.
5.3. The above "not to exceed" estimates are based on assumption
that the cost of **** to Tadiran shall not exceed US $****.
If the cost of **** exceeds US $****, the difference shall
be added to the above "not to exceed" estimates.
5.4. As soon as production facilities could be readjusted and the
prices be agreed upon (the "Modification Effective Date"),
all Units ordered under the Agreement shall be Modified VLUs
and manufactured in accordance with the Revised
Specifications.
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6. In order to preserve the production capacity established under
the Agreement and within the framework of mutual cooperation, the
Parties hereby agree to the following changes in the on-going
production of the VLUs:
6.1. from the date of execution of this Amendment until
Modification Effective Date, the VLU's shall be manufactured
without components which require modification and without
final acceptance tests. These VLUs shall be delivered to
bonded warehouse in Thailand and upon such delivery the
title to these VLUs shall pass to Teletrac ("Warehouse
VLUs"). Tadiran represents and Teletrac shall have the
right to verify that the storing conditions in the bonded
warehouse are adequate. Teletrac shall have the right to
inspect the bonded warehouse from time to time.
The cost of storage and insurance premium for the duration
of the storage in the bonded warehouse (up to four months)
shall be paid by Tadiran. If by the end of the four-month
period the Revised Specifications have not been approved,
Tadiran shall complete the manufacture of the Warehouse VLUs
and shall ship them to Teletrac, unless the Parties agree to
continue their joint development effort.
6.2. Starting with the Modification Effective Date, all Warehouse
VLUs shall be modified according to Revised Specifications
and delivered to Teletrac in accordance with the Agreement
at a minimum monthly rate of **** Units a month (in addition
to regular deliveries as per section 6.3 below). Warranty
for Warehouse VLUs shall begin upon actual delivery to
Teletrac in accordance with the Agreement.
6.3. For the duration of the development of the Modified VLUs
until Modification Effective Date, the monthly delivery rate
defined in the Agreement may be decreased to **** VLUs. For
the purpose of determination of the monthly delivery rate,
delivery to the bonded
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warehouse shall be considered a "delivery." On Modification
Effective Date the monthly delivery rate of regular
deliveries shall be raised to a minimum of **** Units a
month.
6.4. Notwithstanding the above, it is hereby agreed that payments
for Warehouse VLUs shall be made in the following manner:
****% of the payment due for each delivery shall be paid
upon delivery to the bonded warehouse and the other ****%
plus retrofit costs shall be paid upon shipment of the
Modified VLUs in accordance with the Agreement. For
avoidance of doubt these terms of payment shall apply to
Warehouse VLUs only and terms of payment for any other VLUs
shall be in accordance with the Agreement.
The Letter of Credit issued under the Agreement in favor of
Tadiran shall apply to all payments under the Agreement and
under this Amendment.
7. All other provisions of the Agreement unless amended specifically
herein shall remain intact and Teletrac shall remain importer of
record of all VLUs and Modified VLUs.
/s/ Alan B. Howe /s/ Eddy Kafry
- ------------------------------ ----------------------------------
Teletrac Tadiran
Alan B. Howe Eddy Kafry
Vice President - Finance and President and CEO Tadiran
Corporate Development Telematics
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Exhibit 10.3
MOBILE DATA TERMINAL
PURCHASE AGREEMENT
This Mobile Data Terminal Purchase Agreement (this "Agreement") by and
between Teletrac Inc., 7391 Lincoln Way, Garden Grove, California 92641
("Teletrac") and Micronet Ltd., 7 Hashalom Road, Tel-Aviv, Israel 67892
("Micronet"), is made effective as of the 8th day of February, 1996. The
parties hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL.
1.1 SALE OF PRODUCTS. Teletrac shall purchase from Micronet a minimum of ****
Terminals, and Micronet shall sell to Teletrac a minimum of **** Terminals, on
the terms set forth herein and on the attached purchase order #****. Terminals
are defined as Micronet's production level Net-950 Mobile Data terminals. The
description and technical, engineering, and operational specifications for the
Terminals and the protocol (the "Specifications") are set forth in Appendix "A",
all of the terms of which are incorporated herein by this reference. Micronet
shall imprint serial numbers (including bar coded serial numbers) on the back
panel of each Terminal, and shall print, in white, "Net-950" on each Terminal.
1.2 INITIAL ORDER. Teletrac hereby places a firm and irrevocable order for
**** Terminals from Micronet (the "Initial Order"), all of which will be
purchased in accordance with the terms and conditions of this agreement.
1.3 SUBSEQUENT ORDERS. After the Initial Order for **** Terminals ordered
hereunder have been purchased, orders for additional Terminals shall be in
writing and shall specify arrival dates of not less than 10 weeks from delivery
of the order to Micronet. Micronet may, by written notification delivered to
Teletrac within 10 working days of Micronet Receipt of a subsequent order, elect
not to fill the subsequent order. If Micronet does not notify Teletrac of its
election to not fill the subsequent order, the order shall be filled as
described in this paragraph 1.3 and in accordance with the other terms of this
Agreement. All subsequent orders shall be for at least **** Terminals per
order. The prices set forth in paragraph 3.1 shall apply to subsequent orders,
but shall be subject to an annual increase on each anniversary of the effective
date of this Agreement, in an amount
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equal to the increase in the U.S. Consumer Price Index ("CPI") over the prior
12-month period. Micronet shall use its reasonable efforts to expeditiously
fill subsequent orders.
1.4 PURCHASE ORDERS. Purchase orders will be issued by Teletrac for purposes
of administration of delivery and quantity schedules. No term or condition of
any purchase order shall supersede the terms and conditions of this agreement.
In the event of any conflict between the terms of any purchase order and this
Agreement, the terms of this Agreement shall control. Micronet shall promptly
honor and fulfill all purchase orders in accordance with the terms and
conditions of this Agreement.
2. QUALITY CONTROL.
2.1 DEVELOPMENT. Micronet acknowledges and agrees that Teletrac is not a
participant in the development of the Terminals and is not liable for the
design, any design defects, product liability, strict liability (i.e, liability
without fault), or failure of the Terminals to meet the Specifications.
2.2 TEST UNITS. Teletrac acknowledges that it has been supplied **** test
units and that it has tested these units and found them acceptable and
conforming to the specifications and that the plastics and graphics are also
acceptable. Teletrac confirms that Micronet may proceed with production units
based on these test units. The test units shall be included in the count of
Spare terminals as defined in Paragraph 5.2.
2.3 ACCEPTANCE/REJECTION OF TERMINALS. Within two weeks of receipt, Teletrac
shall inspect all incoming Terminals (each shipment of Terminals shall be
referred to as a "Lot") to insure compliance with the Specifications. Teletrac
may reject the total lot received (if more than ****% of the Lot does not comply
with Specifications), or portions of the Lot, as to those Terminals that do not
comply with Specifications. Teletrac shall inspect Terminals on a sampling
basis. Rejected Terminals shall be promptly returned to Micronet; provided,
however, that rejected Terminals shall be Held so that they can be shipped in
bulk, and will be shipped to Micronet not more frequently than once per month.
Micronet shall bear all costs of freight, duty, insurance and other costs
incurred in returning the Terminals to Micronet and shipping new Terminals to
replace the rejected Terminals to Teletrac. Micronet acknowledges and agrees
that timely receipt of conforming Terminals is critical to Teletrac and that
Teletrac shall suffer severe damages if substantial numbers of Terminals are
non-conforming. The parties recognize that the full impact of such breach would
be very difficult to assess and it would be difficult to fix the actual amount
of damages. Therefore, to avoid possible disputes, the parties agree that if
more than
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****% of a Lot is rejected and returned, Micronet shall pay to Teletrac
liquidated damages of US $**** per rejected Terminal per day beginning after the
tenth day following Micronet's receipt of each non-conforming Terminal unit
replaced. This amount shall be invoiced and paid by Micronet within 30 calendar
days of receipt of invoice. If not paid by Micronet, the amount shall be
applied against monies owed for Terminals. The amount established under this
paragraph for liquidated damages represents a reasonable attempt by the parties
to state an amount that bears a reasonable relationship to actual damages and
does not constitute a penalty. Notwithstanding anything in this paragraph to
the contrary, Teletrac shall specify the reasons for the rejection and give
Micronet an opportunity to discuss the rejection prior to imposition of the
liquidated damages described in this paragraph.
3. PAYMENT.
3.1 PRICE. The purchase price for each Terminal (including bracket and screws)
shall be U.S. $**** per unit (the "Purchase Price"). The Purchase Price
includes packaging, export duties, Israeli taxes, and handling costs. Except as
otherwise provided herein, Teletrac is responsible for insurance and shipping
costs and shall select the carrier. Teletrac is also responsible for import
duties and U.S. taxes, provided that Micronet includes with each shipment a
"Country of Origin Certificate (Form A)".
3.2 INVOICING. Invoices for Terminals shall contain, at a minimum, the
Purchase Price in U.S. dollars, purchase order number, invoice date, quantity,
description, invoice number, reference to this Agreement, ship to name and
address, remit to name and address and method and name of carrier.
3.3 TERMS OF PAYMENT.
DOWN PAYMENT. Teletrac, by Bank wire transfer, shall make a down payment
to Micronet's account in the amount of U.S. $**** within 4 business days of the
effective date of this Agreement. Micronet shall Invoice Teletrac for this
amount. The down payment shall be applied towards the last shipment payment.
Payments for all other shipments, as per paragraph 4 below, will be made by wire
transfer immediately prior to each delivery.
4. SHIPMENT.
4.1 SHIPMENT TERMS. Unless Teletrac notifies Micronet otherwise, as provided
in Paragraph 12.2, Teletrac hereby orders **** Terminals to be shipped to
Teletrac's facility described in paragraph 4.3, on the dates set forth in the
following Shipment Schedule:
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- ------------ ------------- ------------------------------------------------
Number of Terminal Date shipped to Teletrac Facility
Terminals Type
- ------------ ------------- ------------------------------------------------
**** Net-950 Within 35 calendar days after effective date.
**** Net-950 Within 14 calendar days thereafter
**** Net-950 Within 60 Calendar days thereafter
- ------------ ------------- ------------------------------------------------
NOTE:
Micronet is allowed to accelerate shipments without limitation on quantities and
Teletrac is owed to payment terms as specified in Paragraph 3.3 above.
Shipment dates are conditional on Teletrac complying on time with payment terms
of paragraph 3.3 above.
4.2 LATE DELIVERIES. Micronet acknowledges and agrees that time is of the
essence in shipment of the Terminals and Teletrac shall suffer severe damages if
conforming Terminals are not shipped in accordance with the Shipment schedule.
The parties recognize that the full impact of such a breach would be very
difficult to assess and it would be difficult to fix the actual amount of
damages. Therefore to avoid possible disputes the parties agree that if the
shipment schedule slips by more than 15 working days due to Micronet's failure
to ship conforming Terminals, a late charge of U.S. $**** per terminal per
working day shall be imposed until the breach is cured; provided, however,that
the late charges for orders shipped under the Initial Order shall not exceed
$****.
The late charge will be invoiced by Teletrac and paid by Micronet within 30
calendar days of date of invoice. If not paid by Micronet, the amount shall be
applied against monies owed for terminals.
The amount established under this paragraph for liquidated damages represents a
reasonable attempt by the parties to state an amount that bears a reasonable
relationship to actual damages and does not constitute a penalty.
4.3 RESCHEDULING SHIPMENT DATES
Teletrac allows Micronet to accelerate shipment dates and to deliver
Teletrac bigger quantities than those stipulated in Paragraph 4.1 above.
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4.4 FOB POINT. All Terminals are F.O.B Ben-Gurion Airport, Israel, unless
Teletrac notifies Micronet that Terminals are to be sent by ship rather than
air. Shipment address is Teletrac location at 7391 Lincoln Way, Garden Grove,
California 92641.
4.5 TITLE, RISK OF LOSS, INSURANCE. Title to the Terminals and risk of loss or
damage shall pass from Micronet to Teletrac upon Micronet's delivery to the
carrier at the F.O.B. point.
4.6 METHOD OF SHIPMENT. Micronet shall at its sole expense, provide for all
crating, packaging and packing in shipping containers that are designed to
provide adequate protection for the Terminals during shipping. Each Terminal is
to be bundled with its necessary bracket and screws and washers, appropriately
protected. Terminals shall be packaged in bulk in quantities of up to 50.
5. WARRANTY AND SERVICE TERMS.
5.1 WARRANTY TERMS. Micronet hereby warrants the Terminals to be in full
compliance with the Specifications and to be free from defects in workmanship
and materials (the "Warranty") for the shorter of two years from the date of
arrival at Teletrac's facility or one year after the Terminals have been
delivered by Teletrac to a third party customer ("the warranty period").
Teletrac will provide Micronet with monthly reports containing the serial
numbers of all terminals delivered to customers during the preceding month.
Micronet also warrants the merchantability and fitness for use of the
terminals. Terminals that are repaired or replaced during the Warranty Period
shall be warranted for the longer of the period of time remaining under the
original warranty period or 90 working days. Micronet hereby (a) consents to
Teletrac's right at Teletrac's option to assign the warranty, or the
remaining portion thereof, to Teletrac's customers, and (b) agrees to perform
the obligations described in this paragraph 5 for the benefit of such
customers. During the Warranty Period Micronet shall bear all out of pocket
costs to repair or replace defective Terminals, including, without
limitation, all costs of returning the Terminals to Micronet and shipping
repaired or replaced Terminals to Teletrac.
5.2 PROCEDURES. Micronet shall, at its cost, manufacture and ship to Teletrac,
with the first shipment, **** additional terminals. These along with the ****
approved test units will serve as "Spare Terminals". Teletrac shall as
necessary, replace defective Terminals with Spare Terminals, or replace parts
from the Spare Terminals, accumulating the defective Terminals until the earlier
of (a) 10 defective Terminals are being held, or (b)
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3 months have passed since Teletrac's last shipment of defective Terminals to
Micronet. Teletrac will then notify Micronet by FAX of the number of defective
Terminals it will ship to Micronet. Within 3 working days of receipt of
Teletrac's FAX stating the number of defective Terminals being shipped, Micronet
shall (a) provide Teletrac a Return Material Authorization ("RMA") number by FAX
and (b) ship to Teletrac's California facility an equal number of replacement
Terminals to be used as Spare Terminals. Spare Terminals will not be used for
any purpose other than as replacement for defective Terminals. The procedures
described in this paragraph shall apply to service during the Warranty and
thereafter, except that post-warranty repairs will be subject to the charges
described in paragraphs 5.5 and 5.6 below. RMA numbers must be used in all
correspondence with Micronet and must be clearly marked on all packages and
boxes shipped to Micronet. Defective Terminals shall be sent to:
MICRONET LTD
7 HASHALOM ROAD
TEL-AVIV, ISRAEL 67892
Or if after May 1st 1996 to:
MICRONET LTD
IRIS BUILDING, 27 HAMETZUDA ST
AZUR, ISRAEL 58001
5.3 TIME OF REPAIR OR REPLACE. If the number of defective Terminals exceeds
the number of Spare Terminals held by Teletrac, the additional defective
Terminals shall be repaired or replaced by Micronet within 14 working days, plus
transit time from Micronet to Teletrac, from the date the defective Terminals
are delivered to Micronet. Micronet acknowledges and agrees that time is of the
essence in Teletrac's receipt of repaired or replaced Terminals.
5.4 FAILURES. The failure rate will be considered too high if it exceeds any
of the following: (a) ****% of the units in a single shipment fail the
acceptance tests; (b) ****% (cumulative) delivered within a 12 month period
fail the acceptance tests; or (c) ****% of the units delivered to customers
and in warranty do not function in full compliance with the specifications.
Malfunctions falling under the limitations in section 5.8 shall not be
counted as failures. If the failure rate is too high Micronet shall use its
best efforts to make required engineering or production changes as promptly
as possible to prevent the continued occurrence of such failures. Teletrac
may require a total recall of Terminals if such step is appropriate.
Micronet shall
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not be liable for consequential damages or lost profits or loss of business
opportunity by a third party customer.
5.5 POST-WARRANTY REPAIR. For 12 months following the termination of the
Warranty Period, Terminals shall be repaired for U.S. $**** per hour. Parts
shall be billed at Micronet's then prevailing rates. After this 12 month
period, parts and labor shall be charged at Micronet's then prevailing rates,
not to exceed the annual increase in the U.S CPI over the prior 12-month period.
Repaired Terminals shall be in full compliance with the Specifications and will
be free from defects in material and workmanship for 90 working days from the
date the repaired Terminals or Replacement Terminals have been delivered to
Teletrac or to Teletrac's customer.
5.6 FREIGHT AND OTHER COSTS AFTER WARRANTY PERIOD. After the Warranty period,
Teletrac shall bear all costs of shipping defective Terminals to Micronet and
cost of returning the repaired or replaced Terminals to Teletrac or Teletrac's
customer. Teletrac is responsible, on its own or through a qualified
independent contractor, for installation, deinstallation, and reinstallation of
all Terminals after the Warranty Period.
5.7 CONTINUING AVAILABILITY AND CORRECTIONS. Micronet shall, for a period of
five years from the effective date of this Agreement, maintain a repair facility
in Tel-Aviv or another location that is no more costly to ship to and will
require no longer transit periods than the Tel-Aviv facility and shall for the
same period, maintain service and repair capability, including spare parts
availability. Upon the termination of the Warranty Period, Micronet shall, at
its cost, perform the following services for a period of two years and six
months from the effective date of this Agreement: (a) correct any original
design or manufacturing defects that were not detected prior to shipment of the
production Terminals if such defects can be corrected on a reasonable basis; and
(b) correct any firmware defects within 30 days of notification of such defects.
Micronet shall, for a period of 5 years from the effective date of this
agreement, correct other defects in the Terminals (including the firmware) and
work with Teletrac on modifications and enhancements to the design and
performance of the Terminals (including the firmware) at the presently existing
hourly rate for Micronet's personnel, plus an annual percentage increase equal
to the increase in the U.S. CPI over the prior 12-month period. The terms of
this Paragraph 5 shall survive the termination of this agreement.
5.8 LIMITATIONS ON WARRANTY. This warranty shall not apply to Terminals which
have been subject to accident, improper storage, mishandling, unauthorized
alteration, misuse, vandalism, neglect or which have not been properly installed
or maintained.
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6. TELETRAC'S NAME AND TRADE MARKS.
Micronet shall not print or use the Teletrac name, logo, or other trade marks,
service marks, trade names, or similar indicia which Teletrac owns or becomes
licensed or sub-licensed to use (the "Teletrac Marks"). Micronet acknowledges
that Teletrac is the owner of the Teletrac Marks and that Micronet has no
interest in or right to use the Teletrac Marks.
7. NO CONSEQUENTIAL DAMAGES.
Without affecting Micronet's right to claim ordinary damages for Teletrac's
breach hereunder, in no event shall Teletrac be liable for incidental,
consequential or special damages, including, without limitation, frustration of
economic or business expectations, loss of profits, or loss of sales, arising
under or related to this Agreement or by reason of Teletrac's purchase or
failure to purchase Terminals hereunder.
8. INDEMNIFICATION
8.1 MICRONET'S INDEMNIFICATION FOR ACTIONS. On demand, Micronet shall
indemnify, defend and hold harmless Teletrac and each corporation, partner,
affiliate, subsidiary, parent, joint venture, officer, agent, employee,
director, shareholder, representative, successor and assign of Teletrac
(collectively, the "Indemnified Teletrac Parties") from and against all claims,
liabilities, obligations, damages, losses, deficiencies, costs, payments and
expenses (including, without limitation, court costs and reasonable attorney's
fees), lawsuits, actions and other proceedings, judgments and awards
(collectively, "Claims") including without limitation claims of personal injury
and death (a) to the extent that such Claims result from or arise directly or
indirectly, out of any act or omission of Micronet, or Micronet's agents or
employees, in connection with this Agreement or services provided hereunder, and
(b) any Claims that arise out of the failure of Micronet's Terminals, including,
without limitation, Claims of product liability, strict liability, design
defect, or third party Claims of breach of Warranty (collectively, "Product
Claims"); provided, however, that Micronet shall not indemnify Teletrac for
Claims that arise out of the failure of Teletrac's installation, radiolocation
system or services.
8.2 TELETRAC'S INDEMNIFICATION. On demand, Teletrac shall indemnify, defend
and hold harmless Micronet and each corporation, partner, affiliate, subsidiary,
parent, joint venture, officer, agent, employee, director, shareholder,
representative, successor and assign of Micronet from and against all Claims,
including, without limitation, Claims of personal injury and death (a) to the
extent that such Claims result from or arise,
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directly or indirectly, out of any act or omission of Teletrac, or Teletrac's
agents or employees, in connection with this Agreement or services provided
hereunder; provided, however, that Teletrac shall not indemnify Micronet for
Product Claims, or Claims that arise out of the failure of Micronet's Terminals.
8.3 PROPRIETARY RIGHTS INDEMNIFICATION. On demand, Micronet shall indemnify,
defend and hold harmless, Teletrac from and against any Claims resulting or
arising from or in connection with the violation or infringement of any third
party's trade secrets, proprietary information, trademarks, copyrights or patent
rights ("Proprietary Rights Claims") in connection with services, work or
Terminals provided by Micronet under this agreement; provided, however, that
Micronet shall not be required to indemnify Teletrac against any Proprietary
Rights Claims from third parties arising out of Specifications provided by
Teletrac. If Teletrac is enjoined or otherwise prevented by any administrative
or legal order from using or selling the Terminals due to such a violation or
alleged violation, Micronet shall take such action as is necessary to clear the
infringement claim, as follows:
(a) Replace the Terminals, without additional charge, with a compatible,
functionally equivalent and non infringing product;
(b) Modify the Terminals to avoid the infringement;
(c) Obtain a license for Micronet's continued use of the Terminals and pay any
fee required for such license; or
(d) If none of the foregoing alternatives is available despite Micronet's best
efforts, Micronet shall repurchase such Terminals from Teletrac at the price
Teletrac paid Micronet, and Teletrac shall sell such Terminals to Micronet at
such price, without waiving any other rights, remedies or claims for damages
Teletrac may have at law, in equity or under this agreement.
8.4 SURVIVAL. The parties' obligations to indemnify as described in this
Paragraph 8 shall survive the expiration or termination of this Agreement by
either party for any reason.
8.5 COOPERATION. Each party agrees to promptly notify the other of any Claim
and to cooperate fully in the defense thereof or any negotiations related
thereto, and neither shall enter into any settlement without the consent of the
other party.
9. RIGHTS AND OBLIGATIONS
9.1 NON INFRINGEMENT. Micronet represents that it owns or has the right to use
(and Teletrac hereby grants to Micronet the
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right to use, for the purpose specified herein, Teletrac's Specifications) all
technology, know how, copyright, trademark, patent, and intellectual property
rights used in producing the Terminals or as are otherwise necessary to
consummate the transactions contemplated by this Agreement.
9.2 MICRONET'S DESIGN RIGHTS.
(a) Teletrac shall not duplicate or reverse engineer Micronet's proprietary
circuitry, firmware, software, or circuit diagrams used in the design and
manufacture of the Terminals ("Micronet's Design"). Micronet acknowledges that
Micronet's Design does not include Teletrac's Specifications, which are the
proprietary property of Teletrac.
(b) Teletrac shall not provide a Terminal to any third party manufacturer for
purposes of duplicate or reverse engineering Micronet's Design. Micronet
acknowledges that Teletrac has no control over the conduct of any third party
manufacturer or other party and is not liable therefor.
(c) Teletrac shall not provide to a third party manufacturer copies of
correspondence or documentation written or prepared by Teletrac and provided to
Micronet in connection with Micronet's design. Teletrac may distribute its
Specifications.
(d) Teletrac shall not provide to a third party manufacturer copies of
correspondence or documentation (including mock-ups, designs, diagrams, charts,
and reports) written or prepared by Micronet and provided to Teletrac in
connection with Micronet's Design; provided, however, that Teletrac may
distribute materials intended for use by installers, service providers, and end
users (including service manuals installation documents, and manuals intended
for product and users).
10. INSURANCE. At all times during the term of this agreement, Micronet, at
its sole expense, shall maintain in full force and effect a policy of commercial
general liability insurance, including coverage against claims for Bodily
Injury, Personal Injury, Property Damage and Advertizing Injury caused by or
occurring in conjunction with the operation of Micronet's business including all
activities authorized or required to be performed under this Agreement. Such
insurance coverage shall designate ATT and its agents, employees, general
partners, officers and directors as Additional Insureds and shall be maintained
under one or more policies of insurance from an insurance company(s)
satisfactory to Teletrac and shall provide a minimum liability protection of
$**** per occurrence for bodily and personal injury or death, $**** per
occurrence for property damage and $**** per occurrence for product liability.
Micronet
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shall give Teletrac prompt written notice of any material modification,
cancellation/ or non-renewal of any insurance required by this agreement.
Teletrac may terminate this Agreement immediately without notice to Micronet if
any insurance required by this Agreement is canceled.
11. NOTICES
Any notice, request or demand required to be made or given hereunder by any
party must be in writing and shall be deemed to be duly given or made one day
after it has been sent by air courier; upon telephonic confirmation of receipt
if sent by fax; or ten days after it was mailed if mailed by prepaid, registered
or certified mail addresses of the parties set forth below, or at such other
address as has been given by either party to the other in writing in accordance
with the terms of this Agreement.
TELETRAC INC.
7391 Lincoln Way
Garden Grove, CA 92641
MICRONET LTD
7 HASHALOM ROAD
TEL-AVIV, ISRAEL 67892
Or if after May 1st 1996 to:
MICRONET LTD
IRIS BUILDING, 27 HAMETZUDA ST
AZUR, ISRAEL 58001
12. TERMINATION
This agreement may be terminated as set forth below:
12.1 TERMINATION WITHOUT CAUSE. Following the fulfillment of Teletrac's
obligations pertaining to the Initial Order, Teletrac may terminate this
Agreement, without cause, and cancel any orders for any additional Terminals
that have been ordered but not shipped, upon 90 days' prior written notice.
12.2 FOR BREACH. The appropriate party may, by written notice to the other,
terminate this Agreement without prejudice to any rights that it may have,
whether under the provisions of this agreement (including Teletrac's rights to
liquidated damages, as set forth in Paragraphs 2.4 and 4.2), in law or in
equity, or otherwise, upon the occurrence of any of the following events:
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(a) By Teletrac, if Micronet fails to meet any dates set forth in the Shipment
Schedule, following 30 days written notice and opportunity to cure within such
notice period; or
(b) By Teletrac, if (a) ****% or more of the terminals received in a single
shipment or (b) ****% (cumulative) delivered within a 12 month period or (c)
****% of the units delivered to customers and in warranty; do not function in
substantial compliance with the Specifications, following 30 days' written
notice and opportunity to cure within such notice; or
(c) By Teletrac, if a government agency with jurisdiction over the operation,
function, production or sale of the Terminals or over Teletrac's services or
operations (by way of an example, but not limited to, the Federal Communication
Commission) has determined that the Terminal is defective; or
(d) Except for the breaches described in subparagraphs 12.2(a), (b) or (c), by
either party, if there is a material breach or default in the other's
performance of its obligations hereunder, following 30 day's written notice and
opportunity to cure within such notice period; or
(e) By either party, if the other party files or has filed against it a
petition under any bankruptcy or insolvency act or has appointed a trustee,
receiver, or liquidator of its properties.
13. ARBITRATION. All disputes that may arise in connection with this Agreement
that are not adjusted by the parties themselves shall be submitted to binding
arbitration in Los Angeles, California under the rules and regulations then
prevailing of the American Arbitration Association. Teletrac shall select one
arbitrator, Micronet shall select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. All costs of arbitration, including
each party's attorneys' fees shall be paid by the non-prevailing party. The
award shall be binding and conclusive on each of the parties and may be used on
or enforced by the party in whose favor it runs in a court of competent
jurisdiction in Los Angeles, California (including the United States District
Court for the Central District of California). Pending resolution of any
dispute , if requested in writing by Teletrac, Micronet shall proceed diligently
with the performance of its obligations hereunder, including the shipment of
Terminals, and Teletrac shall make payment therefor on the basis set forth in
the applicable paragraphs of this agreement.
14. FORCE MAJEURE.
12
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[****Deleted pursuant to a request for confidential treatment.]
If an event of force majeure, including but not limited to acts of God, flood,
earthquake, landslide, fire, war, blockage, requisition of vessel, or aircrafts,
explosion, governmental request, order or regulations or any other unforeseeable
causes or circumstances beyond the control of Micronet, and without its fault or
negligence, directly affects the ability of Micronet to manufacture and ship the
Terminals then Micronet shall not be liable in damages for its delay in
performing its obligations hereunder, on a day for day basis as to the days of
force majeure; provided however, that Micronet shall promptly fulfill its
obligations under this agreement after the force majeure ceases.
If an event of force majeure occurs which will prevent Micronet from shipping
the Terminals for more than 120 calendar days, Teletrac shall have the automatic
and immediate right to obtain a complete and accurate set of design and
production technology documents sufficiently detailed to enable a third party to
manufacture the Terminals. ("Technology Documents"). The Technology Documents
shall be revised and updated as changes are made to the Terminals or the
manufacturing process during the term of this agreement.
15. MISCELLANEOUS PROVISIONS
15.1 RELATIONSHIP OF PARTIES. This agreement does not constitute
partnership or joint venture between Teletrac and Micronet. Both parties
acknowledge that the relationship of Micronet to Teletrac shall be one of an
independent contractor.
15.2 GOVERNING LAW. This agreement and any dispute or claim arising from
this Agreement shall be governed, construed and interpreted in accordance
with the laws of the state of California without regard to any rule of
conflicts of law.
15.3 JURISDICTION. The parties hereby consent to the personal
jurisdiction of an arbitrator or court located in Los Angeles, California and
of the United States District Court for the Central District of California.
It is the specific intent of the parties that this Agreement not be construed
in accordance with or governed by the laws of Israel and that Israeli courts
have no jurisdiction over this Agreement or any dispute or claim arising from
this agreement except as may be necessary to enforce an award of the
arbitrator or court. The parties expressly agree that the United Nations
Conventions on Contracts for the International Sale of Goods and the Hague
Convention shall not apply to the construction or interpretation of this
Agreement or affect any of its provisions.
Initials /s/ AH Initials
----------------- ----------------
13
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[****Deleted pursuant to a request for confidential treatment.]
15.4 ASSIGNMENT. Micronet shall not assign, transfer, or sell any of the
rights of Teletrac hereunder without the prior permission of Teletrac.
15.5 NO WAIVER. Failure of Teletrac to insist upon strict performance of
any of the terms, conditions, provisions, or specifications within this
Agreement, or the delay in exercising any of its remedies, shall not
constitute a waiver of such terms, conditions, provisions, or Specifications
or a waiver of any default.
15.6 SURVIVAL OF OBLIGATIONS. Obligations under this Agreement which by
their nature would continue beyond termination or expiration of this
Agreement, including by way of illustration only and not limitation,
paragraphs related to Warranty and Indemnification, shall survive termination
or expiration of this Agreement by either party for any reason.
15.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between the parties as to the subject matter of this
Agreement and supersedes all previous written or oral communications,
representations or agreements. This Agreement may not be modified except by
written instrument executed by both parties.
15.8 REMEDIES. All remedies available to either party for breach of this
Agreement are cumulative and may be exercised concurrently or separately, and
the exercise of any one remedy shall not be deemed an election of such remedy
to the exclusion of other remedies.
15.9 HEADINGS. The paragraph headings used in this Agreement are for
convenience of reference only and shall not in any way limit or amplify the
terms and provisions hereof, nor enter into the interpretation of this
Agreement.
15.10 BINDING AGREEMENT. The persons executing this Agreement on behalf
of the parties have been duly and validly authorized to do so, and this
Agreement is a valid and binding obligation of the parties.
15.11 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which shall constitute one
and the same Agreement.
15.12 SEVERABILITY. If any terms of this Agreement shall be unlawful,
void or unenforceable, such term shall be deemed omitted to the extent
prohibited or invalid, but the remainder of this Agreement shall not be
invalidated and shall be given effect as far as possible. If any term hereof
is found by a court or
14
<PAGE>
[****Deleted pursuant to a request for confidential treatment.]
arbitrator to be overbroad, such term shall be limited to the extent required to
make it enforceable.
15.13 DOLLARS. All money amounts specified in this Agreement are in U.S
dollars.
Executed as of the day and year first above written.
Teletrac Inc.
By: Steven D. Scheiwe
-------------------------------
Title: Secretary
-----------------------------
Signature: /s/ Steven D. Scheiwe
-------------------------
Micronet Ltd.
By: Eli Nahum
--------------------------------
Title: Vice President Engineering
-----------------------------
Signature: /s/ Eli Nahum
-------------------------
15
<PAGE>
[****Deleted pursuant to a request for confidential treatment.]
- --------------------------------------------------------------------------------
MESSAGE DATA TERMINAL (MDT)
NET-950
SPECIFICATIONS
VER. E, FEBRUARY 4, 1996
TELETRAC, INC. PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
MDT Specification Revision E February 1, 1996
1. SCOPE
-----
This document defines the specifications of the Message Data Terminal (MDT)
to be integrated with the Teletrac system Vehicle Location Units (VLUs).
****
2
<PAGE>
[****Deleted pursuant to a request for confidential treatment.]
Exhibit 10.4
SEPTEMBER 16 1996
REF: 1345
AMENDMENT FOR:
Mobile Data Terminal- Purchase Agreement
The following will amend the existing agreement, between Teletrac Inc. and
Micronet Ltd for the purchasing of Mobile Data Terminals as originally signed by
both parties on February 8th 1996.
This amendment is in pursuance of Teletrac official letter dated September 12th
1996 and signed by Teletrac's Vice President for Finance Mr. Alan B Howe
applying for additional **** MDTs to be supplied on equal quarterly basis.
This amendment will become effective and part of the existing agreement between
Teletrac Inc. and Micronet upon authorized signatures by both parties.
Teletrac Inc. Micronet Ltd.
By: Steve Scheiwe By: Eli Nahum
---------------------- ------------------------
Title: Secretary Title: Vice President Engin.
------------------- ---------------------
Signature: /s/ Steve Scheiwe Signature: /s/ Eli Nahum
----------------- -----------------
<PAGE>
[****Deleted pursuant to a request for confidential treatment.]
1. AGREEMENT TO PURCHASE AND SELL.
1.1 SALE OF PRODUCTS. "Teletrac shall purchase from Micronet a minimum of ****
Terminals and Micronet shall sell to Teletrac a minimum of **** Terminals,
on the terms set forth herein and on the attached purchase order # ______"
The rest of this paragraph remains unchanged.
1.2 INITIAL ORDER. "Teletrac hereby places a firm and irrevocable order for
**** Terminals from Micronet (the "Initial Order"), all of which will be
purchased in accordance with the terms and conditions of the existing
agreement from February 8th 1996 and its amendments from September 16th
1996."
1.3 "INCREMENTAL ORDERS. Within the time period of the Initial Order for ****
Terminals, ordered hereunder, incremental orders for additional Terminals
shall be in writing and shall specify arrival dates of not less than 12
weeks from delivery of the order to Micronet. All incremental orders shall
be for at least **** terminals per order and shall be filled in accordance
with this amendment and the other terms of the existing agreement.
SUBSEQUENT ORDERS After the Initial Order for **** Terminals, ordered
hereunder, have been purchased and supplied, subsequent orders for
additional Terminals shall be in writing and shall specify arrival dates of
not less than 12 weeks from delivery of the order to Micronet. Micronet
may, by written notification delivered to Teletrac within 10 working days
of Micronet receipt of a subsequent order, elect not to fill the subsequent
order. If Micronet does not notify Teletrac of its election to not fill
the subsequent order, the order shall be filled as described in the
existing agreement. All subsequent orders shall be for at least ****
Terminals per order.
The rest of this paragraph remains unchanged.
3. PAYMENT
3.1 PRICE
"The purchase price for each Terminal (including bracket and screws) shall
be:
$ U.S $**** (****) per unit (the "Purchase Price") for an order of ****
Terminals.
and
$ U.S $**** (****) per unit (the "Purchase Price") for an order of ****
Terminals. Additional orders for Terminals within the time period of such
an order but in lower quantities as specified in paragraph 1.3 shall still
be priced at $**** Ea."
The rest of this paragraph remains unchanged.
<PAGE>
[****Deleted pursuant to a request for confidential treatment.]
3.3 TERMS OF PAYMENT
Teletrac, by Bank wire transfer, shall make a down payment to Micronet's
account in the amount of U.S. $**** (****) within 4 business days of the
signature of this amendment. Micronet shall invoice Teletrac for this
amount. The down payment shall be applied towards the last shipment
payment.
Incremental orders shall require ****% down payment to be credited upon
payment of balance due prior to actual delivery.
Payments in full for all shipments, as per paragraph 4 below less down
payment credited to last shipment will be made by wire transfer immediately
prior to each delivery."
4. SHIPMENT
4.1 SHIPMENT TERMS. Unless Teletrac notifies Micronet otherwise, as provided
in Paragraph 12.2, Teletrac hereby orders **** Terminals to be shipped to
Teletrac's facility described in paragraph 4.3, on the dates set forth in
the following Shipment Schedule:
- ---------------------- --------------------- ------------------------------
- ---------------------- --------------------- ------------------------------
Number of Terminals Terminal Type Date shipped to Teletrac
Facility
- ---------------------- --------------------- ------------------------------
**** Net-950 January 1 st 1997
- ---------------------- --------------------- ------------------------------
**** Net-950 April 1 st 1997
- ---------------------- --------------------- ------------------------------
**** Net-990 July 1 st 1997
- ---------------------- --------------------- ------------------------------
**** Net-990 October 1 st 1997
- ---------------------- --------------------- ------------------------------
- ---------------------- --------------------- ------------------------------
The rest of the paragraph remains unchanged.
2
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Exhibit 10.5
ETAK, INC.
THE DIGITAL MAP COMPANY
VALUE ADDED RESELLER
LICENSE AGREEMENT
TELETRAC, INC.
AGREEMENT NO. VAR-96-023
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
TABLE OF CONTENTS
ARTICLE 1: PARTIES, BACKGROUND AND DEFINITIONS...................... 1
1.1 Parties to Agreement.......................................... 1
1.2 Background.................................................... 1
1.3 Definitions................................................... 1
1.4 Escrow Agreement.............................................. 2
ARTICLE 2: APPOINTMENT OF TELETRAC AND GRANT OF LICENSE........ 2
2.1 Appointment................................................... 2
2.2 Grant of Development License.................................. 2
2.3 Grant of Right to Sublicense.................................. 2
2.4 Sublicenses................................................... 3
2.5 Authorized Usage.............................................. 3
2.6 Unauthorized Usage............................................ 3
2.7 Ownership..................................................... 3
2.8 Authorized Type of Hardware and Environment................... 3
2.9 Object Code and Data Only..................................... 4
2.10 Copyrights.................................................... 4
2.11 Duplication of Products....................................... 4
2.12 Source Code................................................... 5
ARTICLE 3: ORDERS AND PAYMENT TERMS............................ 7
3.1 License Fees, Royalties....................................... 7
3.2 Shipment of Licensed Products................................. 7
3.3 Order Procedure............................................... 7
3.4 Shipment Terms................................................ 7
3.5 Payment Terms................................................. 7
ARTICLE 4: PROTECTION OF ETAK'S INTELLECTUAL PROPERTY.......... 8
4.1 Confidentiality of the Licensed Products...................... 8
4.2 Assistance.................................................... 8
ARTICLE 5: DEMONSTRATION PRODUCTS.............................. 8
5.1 Demonstrations................................................ 9
5.2 Demonstration and Other No-Charge Copies...................... 9
ARTICLE 6: WARRANTIES, UPDATES AND DISCLAIMER THEREOF.......... 9
6.1 Limited Warranty By Etak...................................... 9
6.2 Teletrac Express Warranty..................................... 10
(i)
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
ARTICLE 7: INDEMNIFICATION.......................................... 10
7.1 Indemnification by Etak....................................... 10
7.2 Indemnification by Teletrac................................... 11
ARTICLE 8: LIMITATION ON ETAK LIABILITY............................. 12
ARTICLE 9: RECORDS, REPORTS AND AUDITS.............................. 13
9.1 Required Records.............................................. 13
9.2 Audit......................................................... 13
ARTICLE 10: TERM AND RENEWAL......................................... 13
ARTICLE 11: TERMINATION, EFFECTS THEREOF AND REMEDIES................ 13
11.1 Termination Events........................................... 13
11.2 Survival..................................................... 14
11.3 Return of Information........................................ 14
ARTICLE 12: GENERAL PROVISIONS....................................... 14
12.1 Final Agreement; Status of Former Agreements................. 14
12.2 Governing Law; Jurisdiction.................................. 14
12.3 Product Changes.............................................. 15
12.4 Arbitration.................................................. 15
12.5 Notices...................................................... 15
12.6 Severability................................................. 15
12.7 No Waiver.................................................... 15
12.8 Attorney Fees................................................ 16
12.9 Assignment................................................... 16
12.10 Force Majeure................................................ 16
12.11 Compliance with Laws......................................... 17
12.12 Government Rights............................................ 17
12.13 No Joint Relationship........................................ 17
(ii)
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
LIST OF EXHIBITS
Exhibit A-1: Licensed Product and Services
Exhibit A-2: Derivative Product, Schedule of Fees, and Royalties
Exhibit B: Etak End User License Agreement
Exhibit C: Computer Configurations on Which Teletrac May Use the Products
Exhibit D: Preferred Escrow Agreement
Exhibit E: Source Code Addendum
(iii)
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
AGREEMENT NO. VAR-96-023
ARTICLE 1: PARTIES, BACKGROUND AND DEFINITIONS
1.1 PARTIES TO AGREEMENT. This Etak, Inc. Value Added Reseller Agreement
(the "Agreement") is entered into by and between Etak, Inc., a California
corporation ("Etak") and Teletrac, Inc., a Delaware corporation ("Teletrac"),
and is effective as of the date countersigned by Etak below.
1.2 BACKGROUND. Etak set forth on Exhibit A-1 as it
develops and distributes digital may be amended.
geographic data, geographic
access software, navigation (b) "Products" means
products, and related materials. Licensed Products and Derivative
VAR wishes to obtain a Products.
non-exclusive, object code only
license to combine certain of (c) "Teletrac Products"
Etak's products with VAR's own means all software, data,
products to create a derivative documentation and related
product which will be sublicensed materials that: (i) are or were
by VAR to End Users. created by Teletrac or by a party
other than Teletrac and licensed
Etak and Teletrac enter or purchased by Teletrac, and
into this Agreement for the (ii) in either case the party
purpose of superseding and creating them did so without
replacing all former Agreements infringing on any of Etak's
and Amendments with this intellectual property rights
Agreement, including the Escrow arising from contract or law.
Agreement Subscription Letter
dated January 14, 1992. (d) "Derivative
Products" means all works
1.3 DEFINITIONS. In this acquired by or created by or for
Agreement, the following are Teletrac which are based upon or
defined terms: incorporate all or part of one or
more Licensed Products, such as a
(a) "Licensed Products" revision, modification,
means all software ("Software"), translation, abridgment,
data ("Data"), documentation and condensation, expansion,
related materials as listed on collection, compilation or any
Exhibit A-1 hereto, as amended other form in which such Licensed
from time to time by the mutual Products may be recast,
consent of the parties. Teletrac transformed or adapted.
shall not be entitled to receive,
Etak shall not be obligated to
deliver, and Teletrac shall
refuse delivery of, any items
other than those expressly
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
(e) "End User" means that those employees and
any third party who is granted contractors before obtaining the
the right to use any of the Products have executed
Products or receives information confidentiality, non-disclosure
as a result of the use of the and proprietary rights agreements
Products. consistent with the provisions of
this Agreement, and provided
1.4 ESCROW AGREEMENT. further that those contractors
Concurrently herewith, Etak shall are not competitors of Etak.
deliver a Preferred Escrow Teletrac shall not be liable in
Agreement in the form attached money damages to Etak for
hereto as Exhibit D to be disclosing Licensed Products to a
executed by Teletrac and returned contractor who is a competitor of
to Etak for further processing, Etak, provided that Teletrac
prior to its effectiveness. obtains a representation and
Teletrac shall pay all fees warranty from each contractor
associated with this escrow signing a contract with Teletrac
account. after the date of this Agreement
stating that the contractor is
ARTICLE 2: APPOINTMENT OF not a competitor of Etak;
TELETRAC AND GRANT nevertheless, Etak shall be
OF LICENSE entitled to injunctive relief
against Teletrac and such
2.1 APPOINTMENT. Etak competitor. Upon request Etak
hereby appoints Teletrac, on a will advise Teletrac whether a
non-exclusive basis, and Teletrac particular company is considered
accepts such appointment as an a competitor of Etak.
authorized Etak Value Added
Reseller. 2.3 GRANT OF RIGHT TO
SUBLICENSE. Etak hereby grants
2.2 GRANT OF DEVELOPMENT to Teletrac the non-exclusive,
LICENSE. Etak hereby grants to non-transferable right to
Teletrac a non-exclusive, sublicense the Products to End
nontransferable, license to use Users. Etak also grants to
each Licensed Product for the Teletrac the right to duplicate
limited purpose of in-house Products for distribution to End
development by Teletrac Users, provided that (i) Teletrac
(including through the use of has paid to Etak all fees and
outside contractors, provided royalties due in accordance with
that said outside contractors Exhibit A; and (ii) Teletrac
have executed a nondisclosure and complies with all provisions of
confidentiality agreement in this Agreement. In marketing
accordance with section 4.1 Products to End Users, Teletrac
hereof), of Derivative Products. shall have the right to use third
Teletrac may create and use a parties to procure End Users, but
maximum of **** copies for in all
in-house development by Teletrac.
"In-house development" means use
as necessary within the scope of
this Agreement by employees and
contractors with a need to know
to enable Teletrac's authorized
uses, provided
2
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
cases Teletrac itself must 2.6 UNAUTHORIZED USAGE.
directly sublicense the Products Teletrac shall not use the
to End Users; provided, however, Products to provide a service or
that Teletrac shall have the for any other use involving the
right to distribute the Products processing of data of other
through authorized resellers, persons or entities, except that
distributors and agents of Teletrac is permitted to use the
Teletrac provided that all such Products to communicate the
resellers, distributors and location of the Teletrac
agents enter into sublicense and transceiver or Teletrac icons to
distribution agreements with the End User, the End User's
Teletrac on terms reviewed and designee, a Teletrac subscriber,
approved by Etak, including a Reseller, or a recipient of a
without limitation provisions television news broadcast. The
protecting Etak's intellectual "Teletrac transceiver" means
property rights in accordance Teletrac radiolocation software
with this Agreement. employing the **** through ****
mHz frequency range only in the
2.4 SUBLICENSES. Teletrac United States and the Teletrac
and/or its authorized resellers, network. "Teletrac icons" means
distributors and agent shall points of interest selected by
deliver the Products to the End Teletrac or the End User.
User in shrinkwrapped form with a Teletrac shall not use the
shrinkwrap end user license which Products for any purpose except
conforms in all material respects as expressly authorized by this
to the Teletrac end user license Article 2. Teletrac shall not
agreement attached hereto as provide any Product(s) to any End
Exhibit B, or Teletrac may use an User, or any portion thereof,
agreement executed by the End except by tangible media. Except
User which agreement contains as specifically authorized in
substantially the same terms and this Article 2, Teletrac shall
conditions as Exhibit B; for not use the Products for any
either agreement, adjustments may other purpose.
be made as appropriate to reflect
various applications by the End 2.7 OWNERSHIP. This
Users as such applications are Agreement does not constitute a
permitted under this Agreement. transfer of any title or interest
in the Licensed Products, and
2.5 AUTHORIZED USAGE. Etak reserves all rights in the
Teletrac is authorized to use the Licensed Products not expressly
Products to communicate the granted to Teletrac by this
location of the Teletrac Agreement. Any portion of the
transceiver or Teletrac icons, as Licensed Products that is
defined in Section 2.6, to End modified or merged into another
Users via telephone lines, computer program by Teletrac,
including the BBS server or
password-enabled internet access,
or other wire or wireless means.
3
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
or is combined with other shall bear the same trademarks,
programs or data to form logos, copyright notices and
Derivative Products, shall proprietary legends as the
continue to be subject to the Licensed Product which Teletrac
provisions of this Agreement, and received from Etak, and Teletrac
Etak retains ownership of all shall not remove such notice or
such Licensed Products and all alter or augment it (except for
such portions. However, Teletrac adding Teletrac's own copyright
shall be owner of any item which notice for Teletrac Products
Teletrac demonstrates to be a delivered therewith).
Teletrac Product. Specifically, Teletrac shall
conspicuously display Etak's
2.8 AUTHORIZED TYPE OF copyright/restricted rights
HARDWARE AND ENVIRONMENT. notice and logo on the display
Teletrac may use or sublicense screen, in the code, in the
the Products on any type of manuals, and on the storage
hardware or environment, but medium for each Product, in
Etak's limited warranty for the accordance with reasonable
Products shall apply only to the written instructions from Etak.
type of hardware and environment
set forth in Exhibit C. 2.11 DUPLICATION OF PRODUCTS.
Teletrac shall not duplicate,
2.9 OBJECT CODE AND DATA manufacture, copy or reproduce
ONLY. This license from Etak is any Products, or any portion
for object code and data only. thereof, except as necessary for
Except as expressly permitted (i) internal use as expressly
herein, or in the source code permitted in this Article 2; (ii)
escrow agreement attached hereto distribution to its End Users as
as Exhibit E, Teletrac shall not part of a Derivative Product or
obtain access to or any use of in connection with the licensing
Etak source code, and Etak does of a Teletrac Product; (iii)
not grant (except to the extent back-up and archival purposes;
expressly set forth in section and (iv) one copy for each
2.12 of this Agreement) any Teletrac salesperson of the
rights whatsoever in Etak's database(s) included within that
source code. Teletrac shall not salesperson's assigned territory.
derive or attempt to derive the Under no circumstances shall
source code or structure of all Teletrac grant permission to any
or any portion of the Licensed third parties to duplicate,
Products by reverse engineering, manufacture, copy or reproduce
disassembly, decompilation or any any Products, or any portion
other means. thereof, and Teletrac's
agreements with third parties
2.10 COPYRIGHTS. The shall expressly prohibit such
Licensed Products are copyrighted dupli-
by Etak, and unauthorized copying
of the Licensed Products, or any
portion thereof, is expressly
prohibited. Teletrac shall
ensure that each copy of a
Product and any portion thereof
4
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
cation, manufacture, copying and od. Notwithstanding the
reproduction. However, Teletrac foregoing, Etak shall have no
shall be authorized to contract a obligation whatsoever to make any
third party vendor for volume corrections or changes to the
duplication purposes only, Source Code. Further, any
provided that vendor is support services regarding Source
contractually under a Code requested by Teletrac and
confidential/nondisclosure which Etak in its discretion
provision and shall be prohibited agrees to provide shall be paid
from using the Licensed for at Etak's then standard
Product(s) or Product(s) for any hourly engineering rates
other purpose. For purposes of (presently $**** per hour).
this Section 2.11, loading the
Product on a single central (c) Teletrac may also use
processing unit for permitted, the Source Code to create an
licensed use by an authorized End executable object code
User shall not constitute compilation under the operating
"duplication." system(s) as defined on
Attachment A of Exhibit E, or
2.12 SOURCE CODE. Etak has under any other operating system
provided to Teletrac a copy of Teletrac shall adopt in the
the source code for MapAccess future and that Etak approves in
libraries (the "Source Code") as writing. That object code
listed on Exhibit A-l. Except compilation shall be subject to
under the conditions expressly all terms and conditions
set forth in Exhibit E, Etak applicable to Source Code under
shall not be obligated to this Agreement. Etak shall have
deliver, and Teletrac shall not no obligation whatsoever, under
be entitled to receive source any circumstances, to assist
code for any other Licensed Teletrac in this compilation, and
Products. The Source Code has Etak makes no warranty or
been provided to Teletrac on the representation that such
following terms and conditions: compilation can be accomplished
at all or with any degree of
(a) ADDITIONAL RESTRICTIONS success. However, if Etak in its
FOR SOURCE CODE. The Source Code discretion chooses to provide
shall be subject to all terms and support services to Teletrac
conditions applicable to Licensed regarding the QNX project, or any
Products in this Agreement, and future project, Teletrac shall
shall also be subject to the pay for such services at Etak's
following additional restrictions: then standard hourly engineering
rates (presently $**** per hour).
(b) Teletrac may use the
Source Code for the purpose of (d) Except as expressly
analysis. Teletrac may request permitted in this section 2.12
Etak to make corrections or
changes to the Source Code at
Etak's then standard hourly
engineering rates (presently
$**** per hour) within a mutually
agreeable and reasonable time
peri-
5
<PAGE>
[**** Deleted pursuant to a request for Confidential Treatment.]
Etak, Inc.
Value Added Reseller Agreement
and except under the conditions most confidential and sensitive
expressly set forth in Exhibit E, data, and shall indemnify and
Teletrac shall make no use of the hold harmless Etak from any
Source Code. Teletrac failure to do so.
specifically is prohibited from
creating any derivative products (h) Teletrac agrees that
of or from the Source Code, or only Teletrac's employees and
from modifying, altering or contractors having a need to know
correcting the Source Code, shall have access to any Source
except as necessary pursuant to Code in any form, and Teletrac
this section 2.12 and except agrees that it will implement
under the conditions expressly appropriate action by
set forth in Exhibit E. instruction, agreement or
otherwise with its employees and
(e) Only one copy of Source contractors permitted access to
Code may be in use, and that copy Source Code to satisfy its
shall be stored on a single CPU. obligations and restrictions
One additional copy of Source under this Agreement with respect
Code may be kept for archival to use, copying, modification,
purposes. Except as expressly nondisclosure, protection and
permitted above in this section security of Source Code.
2.12 (and except under the
conditions expressly set forth in (i) Teletrac agrees that
Exhibit E), Source Code shall not money damages are inadequate to
be copied, in whole or in part on protect Etak's rights under this
any medium. section 2.12 and that Etak shall
be entitled to specific
(f) Etak's copyright/ performance to protect its rights
proprietary notice shall be under this section 2.12, in
prominently included on the addition to any other remedies to
original and any and all copies which it may be entitled.
of the Source Code, and on the
medium on which Source Code is (j) SOURCE CODE IS PROVIDED
stored. "AS IS." ETAK MAKES NO EXPRESS
OR IMPLIED WARRANTY OF ANY KIND
(g) Teletrac acknowledges WITH REGARD TO THE SOURCE CODE,
that Source Code is the INCLUDING WITHOUT LIMITATION, THE
unpublished work of Etak and IMPLIED WARRANTIES OF
contains valuable trade secrets. MERCHANTABILITY AND FITNESS FOR A
Teletrac shall not publish or PARTICULAR PURPOSE. ETAK MAKES
permit others to publish Source NO REPRESENTATION OR WARRANTY
Code. Teletrac shall not THAT TELETRAC CAN SUCCESSFULLY
disclose Source Code to any USE SOURCE CODE. NO WARRANTY,
persons except as expressly INSTALLATION, TRAINING OR SIMILAR
authorized by this Agreement.
Teletrac shall take all
commercially reasonable steps to
ensure that the confidentiality
of the Source Code shall not be
compromised, at least consistent
with the precautions taken for
Teletrac's own
6
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Etak, Inc.
Value Added Reseller Agreement
SERVICES WILL BE PROVIDED BY ETAK accordance with the Schedule of
FOR SOURCE CODE, ANY EXECUTABLE Fees set forth in Exhibit A-2.
OBJECT CODE, OR ANY APPLICATION
PROGRAM OR FILE AFFECTED BY THE 3.2 SHIPMENT OF LICENSED
SOURCE CODE. PRODUCTS. Etak or Etak's
designee shall ship to Teletrac
(k) TELETRAC ACKNOWLEDGES any Licensed Products ordered by
THAT MODIFICATIONS TO SOURCE Teletrac under this Agreement
CODE, OR USE OF ANY DERIVATIVE within a commercially reasonable
PRODUCT COULD ADVERSELY AFFECT time after receipt of Teletrac's
THE PERFORMANCE OF THE UNALTERED order therefor.
PORTION OF THE SOFTWARE, AND/OR
UNALTERABLY AND IRRETRIEVABLY 3.3 ORDER PROCEDURE. All
CORRUPT TELETRAC'S DATA. orders by Teletrac shall be
TELETRAC ASSUMES ALL SUCH RISK controlled by the terms and
AND HEREBY RELEASES ETAK FROM ANY conditions of this Agreement.
OBLIGATION OR LIABILITY ARISING Any proposed variation from or
THEREFROM. ETAK SHALL IN ITS addition to these terms and
DISCRETION MAKE THE FINAL conditions appearing on any
DETERMINATION AS TO THE CAUSE OF purchase order, invoice or other
SUCH DATA CORRUPTION OR ADVERSE document submitted by Teletrac or
SOFTWARE PERFORMANCE. Etak shall be null and void,
unless specifically accepted in a
(l) Teletrac agrees to writing signed by an authorized
indemnify and hold Etak harmless officer of Etak. Purchase orders
against any and all loss or are not valid until accepted in
damage in any way arising out of writing by Etak. Shipments will
or in connection with Source Code be scheduled by Etak only upon
furnished hereunder. receipt of a duly executed
purchase order from Teletrac and
(m) Except under the upon acceptance of the purchase
conditions expressly set forth in order by Etak.
Exhibit E, upon termination or
expiration of this Agreement for 3.4 SHIPMENT TERMS. All
any reason whatsoever, Teletrac Licensed Products licensed under
shall immediately return to Etak this Agreement shall be shipped
the original and all copies of F.O.B, Teletrac's destination
the Source Code, and any location, from a facility of
derivatives thereof, and shall Etak. Etak is responsible for
certify to Etak in writing that all shipping, insurance and
it has done so and that it shall related charges, and all risk of
make no further use of such damage or loss to the Licensed
materials. Products shall pass to Teletrac
at Teletrac's facility upon
ARTICLE 3: ORDERS AND PAYMENT tender by the
TERMS
3.1 LICENSE FEES, ROYALTIES.
Teletrac shall pay Etak fees in
7
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Etak, Inc.
Value Added Reseller Agreement
carrier to Teletrac; however, ployees, agents and
Teletrac shall be responsible for representatives, in confidence
all freight charges except for and except as expressly permitted
those due to a re-shipment caused by this Agreement, shall not be
by defective media. used, duplicated or disclosed by
any of them in any form for the
3.5 PAYMENT TERMS. Teletrac use or benefit of any person or
shall pay to Etak a fixed fee in entity, nor reproduced,
the amount of ****. Teletrac transcribed, imitated or
shall make payments to Etak in simulated in whole or in part,
the amounts and on the dates set except for sublicenses to End
forth on Exhibit A-2. Etak may Users in accordance with this
refuse to ship, or may delay the Agreement. Teletrac may disclose
shipment of, any Licensed relevant aspects of the
Products on order and/or any Confidential Items to its
agreed-upon maintenance update if employees, agents or
Teletrac becomes delinquent in representatives only to the
the payment of any of its extent that such disclosure is
obligations to Etak. All reasonably necessary to
outstanding amounts which are not Teletrac's use of the
paid when due shall bear interest Confidential Items pursuant to
at the rate of the lesser of (i) this Agreement, provided that
**** percent per month; or (ii) Teletrac shall take all
the maximum allowable statutory reasonable steps to ensure that
rate at the time. All prices are the Confidential Items are not
net of any local, state or disclosed or duplicated in
federal taxes, fees, assessments contravention of this Agreement
or other levies, which shall be by its employees, agents or
the sole obligation of Teletrac. representatives, including but
Teletrac shall pay to Etak all not limited to, the execution of
applicable local, state and a written confidentiality
federal taxes and levies unless agreement by each such person.
Teletrac has presented to Etak a Teletrac shall take all other
valid and appropriate certificate reasonable steps to maintain the
of exemption from those taxes and confidentiality of the Licensed
levies. Products and to protect the
Licensed Products from
ARTICLE 4: PROTECTION OF misappropriation or misuse,
ETAK'S INTELLECTUAL PROPERTY unauthorized duplication or
distribution, including without
4.1 CONFIDENTIALITY OF THE limitation, the exercise by
LICENSED PRODUCTS. The Licensed Teletrac of at least the same
Products, including all aspects degree of care Teletrac employs
thereof used or incorporated in in protecting its own most
Derivative Products, together valuable confidential information.
with all materials and knowledge
related thereto (the
"Confidential Items"), are
obtained by Teletrac, and its
em-
8
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Etak, Inc.
Value Added Reseller Agreement
4.2 ASSISTANCE. Teletrac ARTICLE 6: WARRANTIES, UPDATES
shall notify Etak promptly if AND DISCLAIMER THEREOF
Teletrac learns of any
misappropriation of the Products 6.1 LIMITED WARRANTY BY
or use of the Products by anyone ETAK. SET FORTH BELOW IS
in any manner not expressly ETAK'S LIMITED WARRANTY FOR THE
authorized by this Agreement, and LICENSED PRODUCTS.
shall fully cooperate with any
efforts by Etak to prevent any (a) Etak warrants to
misappropriation or misuse of the Teletrac that the Software
Products. In the event of any Licensed Products (that is
violation or suspected violation Licensed Products consisting of
of any provision of Article 4 software) in the version and
hereof, Teletrac shall level that is current on the date
immediately notify Etak and of initial delivery to Teletrac
shall, at its reasonable expense, will, for ninety (90) days from
assist Etak in the enforcement of that date, substantially conform
Article 4 against any current or to the specifications contained
former employee, agent or in Etak's documentation for that
representative of Teletrac or any version, when used on the
End User to the extent Etak authorized computer hardware;
chooses to enforce this Article that the Data Licensed Products
4. However, Etak shall not be (that is Licensed Products
obligated to enforce any of its consisting of data) in the
rights hereunder. version and level that is current
on the date of initial delivery
ARTICLE 5: DEMONSTRATION to Teletrac will, for one (1)
PRODUCTS year from that date,
substantially conform to the
5.1 DEMONSTRATIONS. specifications contained in
Teletrac shall be entitled to Etak's documentation for that
demonstrate the operation and version, when used on the
capabilities of the Products to authorized computer hardware; and
any potential customer. If that the media containing the
demonstration involves the Licensed Products will be free of
installation of Products on a manufacturing defects on the date
potential or existing customer's of initial delivery to Teletrac.
equipment, such installation will
be made according to the (b) Teletrac acknowledges
requirements of Section 2.5 of that the Licensed Products are
this Agreement, except as complex products and may contain
expressly permitted otherwise some non-conformities, defects or
below in this section 5.1. errors. Etak does
5.2 DEMONSTRATION AND OTHER
NO-CHARGE COPIES. Teletrac shall
be authorized to provide
demonstration copies of products
to prospective clients and copies
at no charge to law enforcement
agencies.
9
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Etak, Inc.
Value Added Reseller Agreement
not warrant that the Licensed to correct nonconformities
Products will meet Teletrac's resulting from Teletrac's
needs or expectations, that modification of the Licensed
operations of the Licensed Products, Teletrac shall be
Products will be error-free or charged for and agrees to pay for
uninterrupted, or that all custom programming at Etak's then
nonconformities can or will be current standard hourly rate.
corrected. Teletrac must notify
Etak in writing within the (e) This Limited Warranty is
applicable warranty period set void if any non-conformity has
forth above of any claim that the resulted from accident abuse,
Licensed Products do not meet misuse, or misapplication. This
this Limited Warranty. Etak's Limited Warranty is for
SOLE OBLIGATION and Teletrac's Teletrac's exclusive benefit and
SOLE REMEDY under this Limited is non-transferable. Teletrac
Warranty is for Etak to use conclusively agrees that under
reasonable efforts to repair or all circumstances this Limited
replace the Licensed Products or Warranty fulfills its essential
to provide an avoidance procedure purpose.
at Etak's expense within a
commercially reasonable time so (f) THE EXPRESS WARRANTY
that the Licensed Products PROVIDED IN SECTIONS 6.1(a)
substantially conform to the THROUGH (f) IS A LIMITED WARRANTY
specifications contained in the AND IT IS THE ONLY WARRANTY MADE
Documentation, or at Etak's BY ETAK. ETAK MAKES AND TELETRAC
option, to refund the fees AND END USER RECEIVE NO OTHER
previously paid by Teletrac for WARRANTY, WHETHER EXPRESS OR
the Licensed Products involved. IMPLIED, AND ALL WARRANTIES OF
If Teletrac is unable to describe MERCHANTABILITY AND FITNESS FOR
the claimed non-conformity with ANY PARTICULAR PURPOSE ARE
sufficient specificity to enable EXPRESSLY EXCLUDED. THE STATED
Etak to replicate it on Etak's EXPRESS WARRANTY IS THE EXCLUSIVE
hardware at Etak's premises, then REMEDY FOR DAMAGES AND IS IN LIEU
no non-conformity shall be deemed OF ALL LIABILITIES OR OBLIGATIONS
to exist. OF ETAK. NO ORAL OR WRITTEN
ADVICE OR INFORMATION PROVIDED BY
(c) If the media containing ETAK OR ANY OF ITS AGENTS OR
the Licensed Products possess EMPLOYEES SHALL CREATE A WARRANTY
manufacturing defects, Etak will OR IN ANY WAY INCREASE THE SCOPE
provide Teletrac with a OF THIS LIMITED WARRANTY, AND
replacement copy of the Licensed TELETRAC AND END USER ARE NOT
Products within a commercially ENTITLED TO RELY ON ANY SUCH
reasonable time after receipt of ADVICE OR INFORMATION.
notice of the defective copy from
Teletrac.
(d) If Teletrac modifies or
attempts to modify the Licensed
Products, this Limited Warranty
shall terminate immediately. If
Etak elects, in its sole discretion,
10
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Etak, Inc.
Value Added Reseller Agreement
6.2 TELETRAC EXPRESS any portions thereof as may be
WARRANTY. Teletrac represents contained in Derivative Products)
and warrants that it possesses used within the scope of this
the financial resources, Agreement infringe any patents,
technical facilities and skill, copyrights, trade secrets or
and all other requirements other intellectual property
necessary for its timely and full rights of any third party created
performance pursuant to the terms by United States federal law or
and conditions of this Agreement. the law of any of the United
Teletrac further represents that States, provided that, after
it is an experienced, expert and Teletrac became aware of such
knowledgeable licensor of Claim, Teletrac notified Etak in
computer software and data, and writing of such Claim within
is competent to create, market sufficient time to enable Etak to
and support Derivative Products. take action to fully protect
Etak's rights without any adverse
ARTICLE 7: INDEMNIFICATION impact on Etak's position.
7.1 INDEMNIFICATION BY ETAK. (c) If, as a result of any
claim of infringement of the type
(a) Teletrac shall notify described in this Section 7.1,
Etak immediately upon learning of Etak is enjoined or otherwise
any threatened or asserted claim prevented by an administrative or
that the Licensed Products legal order from licensing or
infringe any patents, copyrights, sublicensing any Licensed
trade secrets or other Product, or Teletrac is enjoined
intellectual property rights of or otherwise prevented by an
any third party. Etak shall have administrative or legal order
the sole right to control the from using any Licensed Product,
defense and negotiation of all or if Etak believes that such
such claims, and Teletrac shall injunction is likely or that any
fully cooperate in Etak's defense Licensed Product is likely to
of all such claims. become the subject of a claim of
infringement of the intellectual
(b) Etak shall protect, property rights of any third
defend (or in Etak's discretion, party, Etak shall (at Etak's
settle), indemnify and hold option) at its expense, either
Teletrac harmless from any and (i) procure the right for
all claims, demands, liabilities, Teletrac or Teletrac's End User
obligations, deficiencies, to continue to use said Licensed
losses, damages, actions, suits, Product, (ii) replace or modify
proceedings, assessments, the Licensed Product so as to
judgments or settlements make it non-infringing but
(collectively, "Claims"), substantially functionally
including all reasonable costs
and expenses related thereto such
as attorneys' fees, that are
asserted against Teletrac or
Teletrac's End Users to the
extent that the Licensed Products
(or
11
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Etak, Inc.
Value Added Reseller Agreement
equivalent, or, if in Etak's all reasonable costs and expenses
judgment the foregoing options related thereto such as
are not available on commercially attorneys' fees, to the extent
reasonable terms or are that they:
impracticable, terminate this
Agreement and refund the (a) Arise from or are
unamortized portion of the fees connected with the development,
previously paid by Teletrac for modification, use or distribution
the use of said Licensed Product. of the Derivative Products or
Calculation of the unamortized Teletrac Products, including
portion of the fees shall be pro without limitation, any
rated over the life of the unauthorized reproduction,
Agreement. warranty violations, inadequate
installation, maintenance,
(d) Etak shall not have any defects in design, workmanship,
liability under this Article 7 to materials or otherwise, or any
the extent that a claim of misrepresentation or breach of
infringement is based upon the any covenant or agreement by
use of the Licensed Products in Teletrac relating to any of said
combination with other hardware products; or,
or products not furnished or made
by Etak, the use of the Licensed (b) Arise from or are
Products in practicing any connected with any breach by
infringing process (other than an Teletrac of any provision of this
infringing process created and Agreement; or,
used by Etak), the modification
of the Licensed Products or any (c) Are the direct or
portion thereof by anyone other indirect result of any asserted
than Etak, or application or use or proven obligations of Etak, to
of the Licensed Products in a the extent any such asserted or
manner for which they were not proven obligations of Etak (i)
designed or specified by Etak. arise in whole or in part from
any intentional misconduct,
(e) Sections 7.1(a) through negligence, omission or
7.1(e) state the entire and unperformed obligation of or by
exclusive obligation of Etak to Teletrac or Teletrac's agents or
Teletrac or Teletrac's End User employees; or (ii) are the direct
for any claim of infringement or indirect result of any claim
relating to the Licensed Products. by an End User of Teletrac
against Etak, except for such
7.2 INDEMNIFICATION BY claims as are covered by Section
TELETRAC. Teletrac shall 7.1.
protect, defend, indemnify and
hold Etak harmless from any and (d) If Etak and Teletrac are
all claims, demands, liabilities, both named as defendants in a
obligations, deficiencies, lawsuit in which it is un-
losses, damages, actions, suits,
proceedings, assessments,
judgments or settlements
(collectively, "Claims"),
including
12
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Etak, Inc.
Value Added Reseller Agreement
clear whether or to what extent OR DEMAND AGAINST TELETRAC
Etak and/or Teletrac should BY ANY OTHER PERSON, ORGANIZATION
provide indemnity under this OR ENTITY (EXCEPT AS EXPRESSLY
Article 7, then each party shall SET FORTH IN ARTICLE 7). ETAK
bear its own costs and attorneys' SHALL NOT BE LIABLE TO TELETRAC
fees until this issue is BECAUSE OF ANY EXPIRATION,
resolved. At that point, it is TERMINATION OR FAILURE TO RENEW
intended under this Article 7 OR EXTEND THIS AGREEMENT, OR FOR
that the principles of FAILURE TO TIMELY DELIVER
comparative indemnity be applied, PRODUCT. IF ETAK'S LIMITED
so that Etak and Teletrac each is WARRANTY OR LIMITATION OF
responsible for indemnity in LIABILITY SET FORTH IN THIS
proportion to its own culpability. AGREEMENT SHALL FOR ANY REASON
WHATSOEVER BE HELD UNENFORCEABLE
ARTICLE 8: LIMITATION ON ETAK OR INAPPLICABLE, TELETRAC AGREES
LIABILITY THAT ETAK'S LIABILITY SHALL NOT
EXCEED **** PERCENT (****%) OF
IN NO EVENT SHALL ETAK BE THE FEES PAID BY TELETRAC TO ETAK
LIABLE FOR ANY CLAIM OR LOSS WITH RESPECT TO THE LICENSED
INCURRED BY TELETRAC (INCLUDING PRODUCTS THAT ARE THE SUBJECT OF
WITHOUT LIMITATION COMPENSATORY, THE CLAIM.
INCIDENTAL, INDIRECT, SPECIAL,
CONSEQUENTIAL OR EXEMPLARY ARTICLE 9: RECORDS, REPORTS
DAMAGES, LOST PROFITS, LOST SALES AND AUDITS
OR BUSINESS, EXPENDITURES,
INVESTMENTS, OR COMMITMENTS IN 9.1 REQUIRED RECORDS.
CONNECTION WITH ANY BUSINESS, Teletrac shall prepare and
LOSS OF ANY GOODWILL, OR DAMAGES maintain at its expense complete
RESULTING FROM LOST DATA OR and accurate books and records
INABILITY TO USE DATA) documenting its compliance with
IRRESPECTIVE OF WHETHER ETAK HAS the terms of this Agreement. The
BEEN INFORMED OF, KNEW OF, OR books and records prepared by
SHOULD HAVE KNOWN OF THE Teletrac shall be retained for a
LIKELIHOOD OF SUCH DAMAGES, minimum of three (3) years from
EXCEPT AS EXPRESSLY PROVIDED IN the date on which this Agreement
ARTICLES 6 AND 7. THIS is terminated.
LIMITATION APPLIES TO ALL CAUSES
OF ACTION IN THE AGGREGATE, 9.2 AUDIT. During the
INCLUDING WITHOUT LIMITATION initial term hereof, any renewal
BREACH OF CONTRACT, BREACH OF periods, and for a period of one
WARRANTY, NEGLIGENCE, STRICT (1) year after expiration or
LIABILITY, MISREPRESENTATION, AND termination of this Agreement,
OTHER TORTS. TELETRAC FURTHER Etak shall have the right
AGREES THAT ETAK SHALL NOT BE
LIABLE IN ANY EVENT FOR ANY
DAMAGES INCURRED BY TELETRAC, END
USER, OR BY ANY OTHER PERSON,
ORGANIZATION OR ENTITY AS A
RESULT OF TELETRAC OR END USER'S
MISUSE OF ANY OF THE PRODUCTS.
NOR SHALL ETAK BE LIABLE FOR ANY
CLAIM
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Etak, Inc.
Value Added Reseller Agreement
at its expense and upon ARTICLE 11: TERMINATION,
reasonable notice, to examine or EFFECTS THEREOF AND REMEDIES
have examined by its authorized
representative, Teletrac's books 11.1 TERMINATION EVENTS.
and records relevant to license
agreement, sublicense agreements (a) Etak may terminate this
and third party vendor and/or Agreement immediately, without
distributor agreements to judicial action and (i) with ten
determine or verify Teletrac's (10) days' notice with
performance hereunder. opportunity to cure ff VAR
violates any of the provisions of
ARTICLE 10: TERM AND RENEWAL Articles 2 or 4; and (ii) with
thirty (30) days' notice if VAR
Unless terminated earlier commits a material breach of any
pursuant to any provision of other provision of this Agreement
Article 11, this Agreement shall or otherwise fails materially to
commence on the later date below fulfill any of its obligations
the parties' signatures, and hereunder and VAR fails to cure
shall continue in force until such breach within the thirty
February 14, 1998, at which time (30) day notice period, or if VAR
this Agreement will expire neglects or fails to conduct its
automatically, unless renewed as business in a manner that
provided in Exhibit A-2. represents fairly Etak products
Teletrac does not have or acquire and the good name, goodwill and
by execution of this Agreement, reputation of Etak.
by performance hereunder, or
otherwise, any vested right with (b) Either party hereto may
respect to the distribution of terminate this Agreement
Products or the renewal of this immediately upon written notice
Agreement. If Etak continues a to the other party without
business relationship with opportunity for cure if, whether
Teletrac after termination or voluntarily or involuntarily, any
non-renewal of this Agreement, process or proceeding of any
that relationship shall not be court is instituted against such
construed as a renewal of this party by attachment or levy or
Agreement or a waiver of execution, in insolvency or
termination, but such bankruptcy, or in receivership,
relationship shall be "at will," or if any general assignment is
terminable at any time with or made or attempted to be made for
without cause or notice by either the benefit of creditors by such
party, and all such transactions party.
shall be governed by terms
otherwise identical to the 11.2 SURVIVAL. Termination
relevant provisions of this of this Agreement for any
Agreement, unless the parties
have executed a new written
agreement superseding this
Agreement.
14
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Etak, Inc.
Value Added Reseller Agreement
reason shall not relieve Teletrac sive statement of the terms of
of its obligations to make full their agreement.
payment of the fixed fee or any
other amounts that are owed by 12.2 GOVERNING LAW;
Teletrac to Etak. In addition, JURISDICTION. This Agreement and
Sections 2.7, 2.9, 2.10, 2.11, all aspects of the relationship
Article 4, Article 7, Article 8, between Etak and Teletrac shall
Article 9, Article 10, Section be governed by and construed in
11.3, and Article 12 (other than accordance with the internal laws
Section 12.9) hereof shall of the State of California.
survive any such termination or
expiration for at least as long 12.3 PRODUCT CHANGES.
as Teletrac uses or has access to Teletrac agrees that Etak has the
the Products, but in no event right to modify any of the
less than the applicable statute Licensed Products at any time
of limitations period. whatsoever without notice or
discontinue any of the Licensed
11.3 RETURN OF INFORMATION. Products at any time whatsoever,
Promptly upon termination or with one hundred eighty (180)
expiration, Teletrac shall, at days' prior written notice to
its expense, return to Etak all Teletrac. If Etak modifies or
copies of the Products, related discontinues any Licensed
materials, and other materials Product, Etak shall have no
developed by or belonging to Etak obligation to modify, replace, or
which are in possession or make any refund with respect to
control of Teletrac. Licensed Products previously
Concurrently therewith, a duly delivered to Teletrac.
authorized officer of Teletrac
shall certify in writing to Etak 12.4 ARBITRATION. Any
that Teletrac has made every dispute arising out of, connected
reasonable effort to return all with or relating to this
such materials to Etak and that Agreement, the past, present or
to the best of Teletrac's future relationship between Etak
knowledge and information all and Teletrac, or the termination
have been returned to Etak. or non-renewal of this Agreement
or of the relationship between
ARTICLE 12: GENERAL PROVISIONS Etak and Teletrac, whether
sounding in contract, tort or
12.1 FINAL AGREEMENT; STATUS otherwise, shall be finally
OF FORMER AGREEMENTS. This resolved exclusively by
Agreement may be amended, arbitration. Such arbitration
altered, or modified only by a shall be conducted by a panel of
writing so stating its purpose, three arbitrators. To the
and signed by both parties. This greatest
Agreement and the attached
Exhibits supersede all prior and
contemporaneous agreements and
understandings between the
parties relating to their subject
matter and are the complete and
exclu-
15
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Etak, Inc.
Value Added Reseller Agreement
extent practicable, the jurisdiction, that
arbitrators shall be appointed provision shall be severed from
from a pool of arbitrators who this Agreement as to such
are stated to have experience or jurisdiction (but, to the extent
expertise in the computer permitted by law, not elsewhere),
industry. The arbitration shall and shall not affect the
proceed in accordance with the remainder hereof.
then existing California
Arbitration Act, California Code 12.7 NO WAIVER. No waiver of
of Civil Procedure Section 1280, any obligation or right of either
et seq. Any award made by the party shall be effective unless
arbitration panel, however in writing, executed by the party
constituted, shall be final, against whom it is being
binding and conclusive on all enforced. Any such waiver shall
parties for all purposes and not preclude a party from
judgment may be entered thereon exercising any other right or
by any state or federal court later exercising the same right.
having jurisdiction.
12.8 ATTORNEY FEES. If
12.5 NOTICES. Any notice, either party commits a material
request or demand is required to breach of this Agreement, such
be given or made hereunder in party shall pay to the other
writing, and may be delivered in party all reasonable costs and
person, by certified or expenses incurred by such other
registered mail, postage prepaid, party in enforcing its rights
or by overnight courier. All under this Agreement, including
notices shall be addressed to the without limitation, costs and
party and address set forth at attorneys' fees to the extent the
the end of this Agreement, unless other party substantially
and until a party provides prevails on its claims.
written notice of a new address
for receipt of notice. All 12.9 ASSIGNMENT. This
notices shall be deemed received Agreement shall inure to the
when (i) received; or (ii) when benefit of and shall be binding
delivery is first attempted by upon the parties hereto and their
the carrier at the address of respective successors, legal
record, whichever occurs first. representatives and permitted
A copy of all notices to Etak assigns, except that Teletrac
shall also be sent by Teletrac to shall not assign or transfer this
Etak's Chief Financial Officer Agreement or any part hereof
with a copy in separate envelope without Etak's prior written
to Attn: Contracts. Etak shall consent, which consent shall not
send all notices to Teletrac to be unreasonably withheld. This
Teletrac's General Counsel. restriction on assignments or
transfers shall
12.6 SEVERABILITY. If any
provision of this Agreement or
the application thereof to any
party or circumstance shall to
any extent be invalid or
unenforceable in any
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Etak, Inc.
Value Added Reseller Agreement
apply to assignments or transfers and warrant in writing that
by operation of law, as well as Teletrac has fully complied with
by contract, merger or this provision.
consolidation. Any attempted
assignment or transfer in 12.10 FORCE MAJEURE. Except
derogation of this prohibition is for payments due to Etak from
void. Notwithstanding the Teletrac pursuant to this
foregoing, Teletrac shall be Agreement, neither party shall be
permitted to assign this liable for nonperformance or
Agreement, with prior notice to delays in performance hereunder
Etak and provided that Teletrac if caused by factors beyond its
has not committed an uncured reasonable control, including
material breach of which it has without limitation, acts of God,
been given notice of any acts of public enemy, acts of
provision of this Agreement, to: government or courts of law or
(a) any company that may result equity, civil war, insurrection
from a merger, reorganization, or or riots, interruption of
consolidation by or with transportation, embargo,
Teletrac; or (b) any company to litigation or other private or
which Teletrac sells all or public proceedings, accident,
substantially all its assets or inability to procure materials,
stock; or (c) the stockholders of prohibition of import or export
Teletrac, or to any affiliate of of materials, government orders,
Teletrac or the stockholders of regulations, restrictions,
Teletrac; provided, however, that priorities or rationing, or
only one such assignment is strikes, lockouts or other labor
permitted (to any non-affiliate disputes, fires, floods,
of Teletrac), and further explosions, earthquakes or other
provided that the assignee must casualties.
be an "acceptable third party" in
Etak's judgment. An "acceptable 12.11 COMPLIANCE WITH LAWS.
third party" means a third party Teletrac acknowledges and
who is not a competitor of Etak understands that the Products may
and who will abide by all be Subject to restrictions on
proprietary rights and other exportation and reexportation
provisions of this Agreement. If pursuant to the United States
Teletrac seeks to make an Export Administration
assignment to other than an Regulations, 15 CFR Parts
"acceptable third party," then 368-399. Prior to export of any
Etak shall have the right, within Product, Teletrac represents and
thirty (30) days of receiving warrants that it will be familiar
written notice thereof from with the requirements of the
Teletrac, to terminate this Export Administration Regulations
Agreement, in which event and will comply strictly with
Teletrac shall return to Etak all those requirements in all
Products, source code and all transactions
associated documentation, all
copies thereof, all portions
thereof, and shall make no
further use thereof in any form
or manner, and an authorized
officer of Teletrac shall
certify, represent
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involving any Products supplied FOR PURPOSE OF ANY PUBLIC
by Etak hereunder. Teletrac DISCLOSURE PROVISION UNDER ANY
shall comply with all applicable FEDERAL, STATE OR LOCAL LAW, IT
laws and regulations, and IS AGREED THAT THESE PRODUCTS ARE
maintain all required licenses TRADE SECRET AND PROPRIETARY
and permits. COMMERCIAL PRODUCTS AND NOT
SUBJECT TO DISCLOSURE.
12.12 GOVERNMENT RIGHTS. If
any Product is used in any 12.13 NO JOINT RELATIONSHIP.
fashion, directly or indirectly, Teletrac and Etak are independent
in connection with foreign or contractors and neither has nor
domestic government contracting shall have any power, nor will
or subcontracting, including either represent that either has
without limitation, Teletrac's any power to bind the other
performance of any government party, or to assume or create any
contracts or subcontracts, then obligation or responsibility,
Teletrac shall ensure that the express or implied, on behalf of
government entity receives the other party or in the other
nothing more than the right to party's name. This Agreement
use the Products pursuant to a shall not be construed as
sublicense agreement equivalent constituting Teletrac and Etak as
to that allowed under section 2.4 employees, agents, partners,
of this Agreement. Teletrac joint venturers, franchisers or
shall inform any government franchisees, to create any other
entity or prime contractor with form of legal association or
which it is contracting exactly arrangement which might impose
how it intends to use the liability upon Etak or Teletrac
Products in connection with its for any act or failure to act of
government contracts, that such the other.
Products are proprietary to Etak
and that Teletrac has no right to
grant to the government entity or
prime contractor any rights in
the Products. THE SOFTWARE IS A
"COMMERCIAL ITEM", AS THAT TERM
IS DEFINED AT 48 C.F.R 2.101 (OCT
1995) CONSISTING OF "COMMERCIAL
COMPUTER SOFTWARE" AND "COMMERCIAL
COMPUTER DOCUMENTATION," AS SUCH
TERMS ARE USED IN 48 C.F.R. 12.212
(SEPT. 1995). CONSISTENT WITH
48 C.F.R. 12.212 AND 48 C.F.R.
227.7202-1 THROUGH 227.7202-4
(JUNE 1995), ALL U.S. GOVERNMENTAL
END USERS ACQUIRE THE SOFTWARE
WITH ONLY THOSE LICENSE RIGHTS
SET FORTH HEREIN. THE PRODUCTS
ARE COPYRIGHT -C- 1984-1997 BY ETAK.
UNPUBLISHED. ALL RIGHTS RESERVED
UNDER THE COPYRIGHT LAWS OF THE
UNITED STATES.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
latest day and year written below.
Teletrac, Inc. Etak, Inc.
a Delaware corporation a California corporation
2323 Grand, Suite 1100 1430 O'Brien Drive
Kansas City, Missouri 64108-2670 Menlo Park, California 94025
(816) 474-0055 (415) 328-3825
Fax: (816) 474-3475
By: /s/ Steven D. Scheiwe By: /s/ Steven T. Dodds
---------------------- -------------------------
Name: Steven D. Scheiwe Name: Steven T. Dodds
--------------------- ------------------------
Title: Secretary Title: VP of Product Marketing
-------------------- & Sales
-----------------------
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EXHIBIT A-1
LICENSED PRODUCT AND SERVICES
STANDARD - RELEASED LICENSED PRODUCT:
A. SOFTWARE
****
B. DATA
****
NON-STANDARD/NON-RELEASED LICENSED PRODUCT
A. SOFTWARE
****
B. DATA
N/A
SOURCE CODE
****
SERVICES
Teletrac shall be entitled to **** hours of telephone technical support at
no additional charge. Etak support services can be reached via telephone
at 1-800-765-0555. For any support requested by Teletrac in excess of this
time, Teletrac shall pay to Etak an amount equal to Etak's then current
support rate (current rate of $****/hour; minimum 1 hour).
A-1(1)
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EXHIBIT A-2
DERIVATIVE PRODUCT, SCHEDULE OF FEES, AND ROYALTIES
The terms set forth in this Exhibit A-2 supersede any prior Schedule of Fees and
Royalties agreed to between the parties, and apply only to the Derivative
Product set forth below in Section 1 below. A new Exhibit A-2 must be submitted
for each Derivative Product to be covered under this Agreement.
1. DERIVATIVE PRODUCT TO WHICH THIS SCHEDULE APPLIES:
Teletrac Radiolocation software employing the **** through **** mHz
frequency range only in the United States and the Teletrac network and
Teletrac points of interest (icons).
2. FEES PAYABLE:
For those items listed in Exhibit A-1, Teletrac shall pay to Etak a fixed
fee in the amount of **** dollars ($****). These fees exclude escrow fees
or engineering fees.
$ **** payable upon signature
$ **** payable on 04/14/97
$ **** payable on 07/14/97
$ **** payable on 10/14/97
RENEWAL OPTION. Providing that Teletrac is not in any material breach of
this Agreement, including but not limited to making timely payment of all
fees due Etak, Teletrac shall have the right to renew this Agreement for an
additional term of one (1) year by providing Etak with written notice no
later than November 14, 1997 of its intent to renew. Payment of fees for
the renewal term shall be as follows:
$ **** payable on 02/14/98
$ **** payable on 05/14/98
$ **** payable on 08/14/98
$ **** payable on 11/14/98
CUSTOM DATA MERGING OPTION. Etak will provide custom data merging services
for adjoining ECAs at the rate of **** Dollars ($****) per ECA merged. For
example, the price to merge two (2) adjoining ECAs is $**** and $**** for
each additional ECA merged to the original two.
3. STANDARD DATA UPDATES:
A-2(1)
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Providing that Teletrac is not in any material breach of this Agreement,
including but not limited to making timely payment of all fees due Etak,
Teletrac shall be entitled to receive quarterly updates of Etak's standard
MapAccess data for the geographic areas provided for in Exhibit A-1 as they
are generally released by Etak.
Teletrac shall be entitled to receive updates of Etak's standard US
MapAccess data as they are generally released by Etak. Etak typically
provides full sets for the US updates in January with modifications/deltas
typically provided in April, July and October.
Teletrac shall be entitled to receive updates of Etak's custom merged ECA's
for Los Angeles, CA; Houston, TX; Miami, FL; Detroit, MI; Chicago, IL;
Dallas, TX. Etak will provide these updates no sooner than ninety (90)
days after contract execution. Etak will not provide updates of these
custom merged ECAs after initial delivery.
4. ADVERTISEMENTS
Teletrac shall not place any advertising by third parties in or onto
Derivative Products unless Etak and Teletrac first agree in writing upon a
mutually acceptable arrangement concerning the revenue or potential revenue
of such advertising.
5. CONFIDENTIALITY
Neither party shall discuss or disclose the terms of the Agreement or this
Exhibit with any third party, other than its legal counsel and accountant,
without prior written consent from the other party, which consent shall not
be unreasonably withheld.
Teletrac, Inc. Etak, Inc.
a Delaware corporation a California corporation
2323 Grand, Suite 1100 1430 O'Brien Drive
Kansas City, Missouri 64108-2670 Menlo Park, California 94025
(816) 474-0055 (415) 328-3825
Fax: (816) 474-3475
By:_____________________________ By:__________________________
Name:___________________________ Name:________________________
A-2(2)
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Title:__________________________ Title:
Date:___________________________ Date:________________________
A-2(3)
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EXHIBIT B
ETAK END USER LICENSE AGREEMENT
SAMPLE ONLY - DO NOT USE
1. GRANT OF LICENSE. Licensor grants User a non-transferable, non-exclusive
five (5) year license to use the software, data and/or documentation as
defined in the attached quotation (the "Products"), solely for internal use
by User's business, only with one central processing unit at any one time.
User may not copy, reverse engineer, translate, port, modify or make
derivative works of the Products. User may not rent, disclose, publish,
sell, assign, lease, sublicense, market, or transfer the Products or use them
in any manner not expressly authorized by this Agreement. User shall not
derive or attempt to derive the source code or structure of all or any
portion of the Products by reverse engineering, disassembly, decompilation or
any other means. User shall not use the Products to operate a service bureau
or for any other use involving the processing of data of other persons or
entities. User may not use the data Products with any software other than
the software Products provided to User under this license agreement.
User does not receive any, and Licensor retains all, ownership rights in the
Products. The Products are copyrighted and may not be copied, even if
modified or merged with other Products. User shall not alter or remove any
copyright notice or proprietary legend contained in or on the Products.
Licensor's supplier shall be a third party beneficiary of Licensor's rights
under this Agreement, but is not a party hereto and shall have no obligation
hereunder.
2. LIMITED WARRANTY AND LIABILITY. Licensor warrants that the Products in
the version and level that is current on the date of initial shipment to User
will, for ninety (90) days from that date, substantially conform to
Licensor's specifications, when used in a computer environment approved by
Licensor. The Products are complex and may contain some non-conformities,
defects or errors. Licensor does not warrant that the Products will meet User
needs or expectations, that operations of the Products will be error-free or
uninterrupted, or that all nonconformities can or will be corrected.
User must notify Licensor within the 90-day warranty period of any warranty
claim. Licensor's SOLE OBLIGATION and User's SOLE REMEDY under this Limited
Warranty is for Licensor, at Licensor's option, to
B(1)
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use reasonable efforts to repair or replace the Products or to provide an
avoidance procedure within a commercially reasonable time so that the
Products substantially conform to the specifications contained in Licensor's
documentation, or, in Licensor's sole discretion, to refund the amount of the
initial license fee previously paid by User for the non-conforming Product
unit(s).
This Limited Warranty is void if any non-conformity has resulted from accident,
abuse, misuse, misapplication, or modification by someone other than Licensor.
This Limited Warranty is non-transferable.
THE EXPRESS WARRANTY IN THIS SECTION 2 IS A LIMITED WARRANTY AND IT IS THE ONLY
WARRANTY MADE BY LICENSOR. LICENSOR MAKES AND USER RECEIVES NO OTHER WARRANTY,
WHETHER EXPRESS OR IMPLIED, AND ALL WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR ANY PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED. THE STATED EXPRESS WARRANTY
IS THE EXCLUSIVE REMEDY FOR DAMAGES AND IS IN LIEU OF ALL LIABILITIES OR
OBLIGATIONS OF LICENSOR.
IN NO EVENT SHALL LICENSOR BE LIABLE FOR ANY DAMAGES, CLAIM OR LOSS INCURRED BY
USER (INCLUDING WITHOUT LIMITATION COMPENSATORY, INCIDENTAL, DIRECT, INDIRECT,
SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, LOST PROFITS, LOST SALES OR
BUSINESS, EXPENDITURES, INVESTMENTS, OR COMMITMENTS IN CONNECTION WITH ANY
BUSINESS, LOSS OF ANY GOODWILL, OR DAMAGES RESULTING FROM LOST DATA OR INABILITY
TO USE DATA) IRRESPECTIVE OF WHETHER LICENSOR HAS BEEN INFORMED OF, KNEW OF, OR
SHOULD HAVE KNOWN OF THE LIKELIHOOD OF SUCH DAMAGES, EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 2. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE
AGGREGATE, INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT, BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION, AND OTHER TORTS. IF LICENSOR'S
LIMITED WARRANTY OR LIMITATION OF LIABILITY SET FORTH IN THIS AGREEMENT SHALL
FOR ANY REASON WHATSOEVER BE HELD UNENFORCEABLE OR INAPPLICABLE, USER AGREES
THAT LICENSOR'S LIABILITY SHALL NOT EXCEED FIFTY PERCENT (50%) OF THE LICENSE
FEES PAID BY USER TO ETAK WITH RESPECT TO THE PRODUCT UNIT(S) AT ISSUE. Some
states do not allow the exclusion or limitation of incidental or consequential
damages or the limitation of duration of an implied warranty, so the limitation
or exclusion herein may not apply to User. This warranty shall not be
applicable to the extent that any provision of this warranty Is prohibited by
any federal, state or local law which cannot be preempted. This warranty gives
User specific legal rights, and User may also have other rights which vary from
state to state.
3. MISCELLANEOUS. This is the exclusive Agreement between Licensor and User
regarding its subject matter. User may not assign any part
B(2)
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of this Agreement without Licensor's prior written consent. This Agreement
shall be governed by the internal laws of California. User shall pay any
taxes on the Products or transactions, except for those based on Licensor's
annual net income.
If any provision of this Agreement is declared invalid or unenforceable, the
remaining provisions of this Agreement shall remain in effect. Any notice
under this Agreement shall be delivered by U.S. certified mail, return
receipt requested, or by overnight courier to Licensor at the address below.
U.S. GOVERNMENT RESTRICTED RIGHTS
If any Product is used in any fashion, directly or indirectly, in connection
with foreign or domestic government contracting or subcontracting, including
without limitation, USER's performance of any government contracts or
subcontracts, then USER shall ensure that the government entity receives
nothing more than RESTRICTED RIGHTS to use the Products pursuant to a
sublicense agreement equivalent to that allowed under section 2.4 of this
Agreement. USER shall inform any government entity or prime contractor with
which it is contracting exactly how it intends to use the Products in
connection with its government contracts, that such Products are proprietary
to Etak and that Licensee has no right to grant to the government entity or
prime contractor any rights in the Products. THE SOFTWARE IS A "COMMERCIAL
ITEM", AS THAT TERM IS DEFINED AT 48 C.F.R 2.101 (OCT. 1995) CONSISTING OF
"COMMERCIAL COMPUTER SOFTWARE" AND "COMMERCIAL COMPUTER DOCUMENTATION," AS
SUCH TERMS ARE USED IN 48 C.F.R. 12.212 (SEPT 1995). CONSISTENT WITH 48
C.F.R. 12.212 AND 48 C.F.R. 227.7202-1 THROUGH 227.7202-4 (JUNE 1995), ALL
U.S. GOVERNMENTAL END USERS ACQUIRE THE SOFTWARE WITH ONLY THOSE LICENSE
RIGHTS SET FORTH HEREIN. FOR PURPOSE OF ANY PUBLIC DISCLOSURE PROVISION
UNDER ANY FEDERAL, STATE OR LOCAL LAW, IT IS AGREED THAT THESE PRODUCTS ARE
TRADE SECRET AND PROPRIETARY COMMERCIAL PRODUCTS AND NOT SUBJECT TO
DISCLOSURE.
(company) Etak, Inc.
a (state) corporation a California corporation
(address) 1430 O'Brien Drive
(state, city, zip) Menlo Park, California 94025
(phone) (415) 328-3825
By:_____________________________ By:____________________________
Name:___________________________ Name:__________________________
Title:__________________________ Title:_________________________
B(3)
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Date:___________________________ Date:__________________________
B(4)
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EXHIBIT C
COMPUTER CONFIGURATIONS ON WHICH
TELETRAC MAY USE THE PRODUCTS
An environment is a combination of processor type, compiler and operating
system.
ENVIRONMENT:
****
TOOLS TO BE USED:
****
****
C(1)
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EXHIBIT D
PREFERRED ESCROW AGREEMENT
Account Number ______________
This Agreement is effective _______________, 19___ among Data Securities
International, Inc. ("DSI"), Etak, Inc. ("Depositor") and Teletrac, Inc.
("Preferred Beneficiary"), who collectively may be referred to in this
Agreement as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
license agreement, development agreement, and/or other agreement regarding
certain proprietary technology of Depositor (referred to in this Agreement as
"the license agreement").
B. Depositor desires to avoid disclosure of its proprietary technology
except under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical
to Preferred Beneficiary in the conduct of its business and, therefore,
Preferred Beneficiary needs access to the proprietary technology under
certain limited circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with
DSI to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the license
agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 OBLIGATION TO MAKE DEPOSIT. Upon the signing of this Agreement by the
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Attachment
A. If Attachment A is applicable, it is to be prepared and signed by
Depositor and Preferred Beneficiary. DSI shall have no obligation with
respect to the preparation, signing or delivery of Attachment A.
1.2 IDENTIFICATION OF TANGIBLE MEDIA. Prior to the delivery of the deposit
materials to DSI, Depositor shall conspicuously label for
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identification each document, magnetic tape, disk, or other tangible media
upon which the deposit materials are written or stored. Additionally,
Depositor shall complete Attachment B to this Agreement by listing each such
tangible media by the item label description, the type of media and the
quantity. The Attachment B must be signed by Depositor and delivered to DSI
with the deposit materials. Unless and until Depositor makes the initial
deposit with DSI, DSI shall have no obligation with respect to this
Agreement, except the obligation to notify the parties regarding the status
of the deposit account as required in Section 2.2 below.
1.3 DEPOSIT INSPECTION. When DSI receives the deposit materials and the
Attachment B, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Attachment B. In addition to the
deposit inspection, Preferred Beneficiary may elect to cause a verification
of the deposit materials in accordance with Section 1.6 below.
1.4 ACCEPTANCE OF DEPOSIT. At completion of the deposit inspection, if DSI
determines that the labeling of the tangible media matches the item
descriptions and quantity on Attachment B, DSI will date and sign the
Attachment B and mail a copy thereof to Depositor and Preferred Beneficiary.
If DSI determines that the labeling does not match the item descriptions or
quantity on the Attachment B, DSI will (a) note the discrepancies in writing
on the Attachment B; (b) date and sign the Attachment B with the exceptions
noted; and (c) provide a copy of the Attachment B to Depositor and Preferred
Beneficiary. DSI's acceptance of the deposit occurs upon the signing of the
Attachment B by DSI. Delivery of the signed Attachment B to Preferred
Beneficiary is Preferred Beneficiary's notice that the deposit materials have
been received and accepted by DSI.
1.5 DEPOSITOR'S REPRESENTATIONS. Depositor represents as follows:
a. Depositor lawfully possesses all of the deposit materials deposited
with DSI;
b. With respect to all of the deposit materials, Depositor has the right
and authority to grant to DSI and Preferred Beneficiary the rights as
provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance; and
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d. The deposit materials consist of the proprietary information and other
materials identified either in the license agreement or Attachment A,
as the case may be.
1.6 VERIFICATION. Preferred Beneficiary shall have the right, at Preferred
Beneficiary's expense, to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to
DSI, then only DSI, or at DSI's election an independent person or company
selected and supervised by DSI, may perform the verification.
1.7 DEPOSIT UPDATES. Unless otherwise provided by the license agreement,
Depositor shall update the deposit materials within 60 days of each release
of a new version of the product which is subject to the license agreement.
Such updates will be added to the existing deposit. All deposit updates
shall be listed on a new Attachment B and the new Attachment B shall be
signed by Depositor. Each Attachment B will be held and maintained
separately within the escrow account. An independent record will be created
which will document the activity for each Attachment B. The processing of all
deposit updates shall be in accordance with Sections 1.2 through 1.6 above.
All references in this Agreement to the deposit materials shall include the
initial deposit materials and any updates.
1.8 REMOVAL OF DEPOSIT MATERIALS. The deposit materials may be removed
and/or exchanged only on written instructions signed by Depositor and
Preferred Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 CONFIDENTIALITY. DSI shall maintain the deposit materials in a secure,
environmentally safe, locked receptacle which is accessible only to
authorized employees of DSI. DSI shall have the obligation to reasonably
protect the confidentiality of the deposit materials. Except as provided in
this Agreement, DSI shall not disclose, transfer, make available, or use the
deposit materials. DSI shall not disclose the content of this Agreement to
any third party. If DSI receives a subpoena or other order of a court or
other judicial tribunal pertaining to the disclosure or release of the
deposit materials, DSI will immediately notify the parties to this Agreement.
It shall be the responsibility of Depositor and/or Preferred Beneficiary to
challenge any such order; provided, however, that DSI does not waive its
rights to present its position with respect to any
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such order. DSI will not be required to disobey any court or other judicial
tribunal order. (See Section 7.5 below for notices of requested orders.)
2.2 STATUS REPORTS. DSI will issue to Depositor and Preferred Beneficiary a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request
of any party to this Agreement.
2.3 AUDIT RIGHTS. During the term of this Agreement, Depositor and Preferred
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 TITLE TO MEDIA. Depositor hereby transfers to DSI the title to the media
upon which the proprietary information and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 RIGHT TO MAKE COPIES. DSI shall have the right to make copies of the
deposit materials as reasonably necessary to perform this Agreement. DSI
shall copy all copyright, nondisclosure, and other proprietary notices and
titles contained on the deposit materials onto any copies made by DSI. With
all deposit materials submitted to DSI, Depositor shall provide any and all
instructions as may be necessary to duplicate the deposit materials including
but not limited to the hardware and/or software needed.
3.3 RIGHT TO SUBLICENSE UPON RELEASE. As of the effective date of this
Agreement, Depositor hereby grants to DSI a non-exclusive, irrevocable,
perpetual, and royalty-free license to sublicense the deposit materials to
Preferred Beneficiary upon the release, if any, of the deposit materials in
accordance with Section 4.5 below. Except upon such a release, DSI shall not
sublicense or otherwise transfer the deposit materials.
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 RELEASE CONDITIONS. As used in this Agreement, "Release Conditions"
shall mean the following:
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a. Depositor's failure to carry out obligations imposed on it pursuant to
the license agreement; or
b. Depositor's failure to continue to do business in the ordinary course.
4.2 FILING FOR RELEASE. If Preferred Beneficiary believes in good faith that
a Release Condition has occurred, Preferred Beneficiary may provide to DSI
written notice of the occurrence of the Release Condition and a request for
the release of the deposit materials. Upon receipt of such notice, DSI shall
provide a copy of the notice to Depositor, by certified mail, return receipt
requested, or by commercial express mail.
4.3 CONTRARY INSTRUCTIONS. From the date DSI mails the notice requesting
release of the deposit materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred
or has been cured. Upon receipt of Contrary Instructions, DSI shall send a
copy to Preferred Beneficiary by certified mail, return receipt requested, or
by commercial express mail. Additionally, DSI shall notify both Depositor
and Preferred Beneficiary that there is a dispute to be resolved pursuant to
the Dispute Resolution section (Section 7.3) of this Agreement. Subject to
Section 5.2, DSI will continue to store the deposit materials without release
pending (a) joint instructions from Depositor and Preferred Beneficiary, (b)
resolution pursuant to the Dispute Resolution provisions, or (c) order of a
court.
4.4 RELEASE OF DEPOSIT. If DSI does not receive Contrary Instructions from
the Depositor, DSI is authorized to release the deposit materials to the
Preferred Beneficiary or, if more than one beneficiary is registered to the
deposit, to release a copy of the deposit materials to the Preferred
Beneficiary. However, DSI is entitled to receive any fees due DSI before
making the release. This Agreement will terminate upon the release of the
deposit materials held by DSI.
4.5 USE LICENSE FOLLOWING RELEASE. Unless otherwise provided in the license
agreement, upon release of the deposit materials in accordance with this
Article 4, Preferred Beneficiary shall have a non-exclusive, nontransferable,
irrevocable right to use the deposit materials for the sole purpose of
continuing the benefits afforded to Preferred Beneficiary by the license
agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.
D(5)
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ARTICLE 5 -- TERM AND TERMINATION
5.1 TERM OF AGREEMENT. The initial term of this Agreement is for a period of
one year. Thereafter, this Agreement shall automatically renew from
year-to-year unless (a) Depositor and Preferred Beneficiary jointly instruct
DSI in writing that the Agreement is terminated; or (b) the Agreement is
terminated by DSI for nonpayment in accordance with Section 5.2. If the
deposit materials are subject to another escrow agreement with DSI, DSI
reserves the right, after the initial one year term, to adjust the
anniversary date of this Agreement to match the then prevailing anniversary
date of such other escrow arrangements.
5.2 TERMINATION FOR NONPAYMENT. In the event of the nonpayment of fees owed
to DSI, DSI shall provide written notice of delinquency to all parties to
this Agreement. Any party to this Agreement shall have the right to make the
payment to DSI to cure the default. If the past due payment is not received
in full by DSI within one month of the date of such notice, then DSI shall
have the right to terminate this Agreement at any time thereafter by sending
written notice of termination to all parties. DSI shall have no obligation
to take any action under this Agreement so long as any payment due to DSI
remains unpaid.
5.3 DISPOSITION OF DEPOSIT MATERIALS UPON TERMINATION. Upon termination of
this Agreement by joint instruction of Depositor and Preferred Beneficiary,
DSI shall destroy, return, or otherwise deliver the deposit materials in
accordance with Depositor's instructions. Upon termination for nonpayment,
DSI may, at its sole discretion, destroy the deposit materials or return them
to Depositor. DSI shall have no obligation to return or destroy the deposit
materials if the deposit materials are subject to another escrow agreement
with DSI.
5.4 SURVIVAL OF TERMS FOLLOWING TERMINATION. Upon termination of this
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5).
b. The obligations of confidentiality with respect to the deposit
materials.
c. The licenses granted in the sections entitled Right to Sublicense Upon
Release (Section 3.3) and Use License Following Release (Section 4.5),
if a release of the deposit materials has occurred prior to
termination.
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d. The obligation to pay DSI any fees and expenses due.
e. The provisions of Article 7.
f. Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
6.1 FEE SCHEDULE. DSI is entitled to be paid its standard fees and expenses
applicable to the services provided. DSI shall notify the party responsible
for payment of DSI's fees at least 90 days prior to any increase in fees.
For any service not listed on DSI's standard fee schedule, DSI will provide a
quote prior to rendering the service, if requested.
6.2 PAYMENT TERMS. DSI shall not be required to perform any service unless
the payment for such service and any outstanding balances owed to DSI are
paid in full. All other fees are due upon receipt of invoice. If invoiced
fees are not paid, DSI may terminate this Agreement in accordance with
Section 5.2. Late fees on past due amounts shall accrue at the rate of one
and one-half percent per month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 RIGHT TO RELY ON INSTRUCTIONS. DSI may act in reliance upon any
instruction, instrument, or signature reasonably believed by DSI to be
genuine. DSI may assume that any employee of a party to this Agreement who
gives any written notice, request, or instruction has the authority to do so.
DSI shall not be responsible for failure to act as a result of causes beyond
the reasonable control of DSI.
7.2 INDEMNIFICATION. DSI shall be responsible to perform its obligations
under this Agreement and to act in a reasonable and prudent manner with
regard to this escrow arrangement. Provided DSI has acted in the manner
stated in the preceding sentence, Depositor and Preferred Beneficiary each
agree to indemnify, defend and hold harmless DSI from any and all claims,
actions, damages, arbitration fees and expenses, costs, attorney's fees and
other liabilities incurred by DSI relating in any way to this escrow
arrangement.
7.3 DISPUTE RESOLUTION. Any dispute relating to or arising from this
Agreement shall be resolved by arbitration under the Commercial Rules of the
American Arbitration Association. Unless otherwise agreed by
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Depositor and Preferred Beneficiary, arbitration will take place in San
Diego, California, U.S.A. Any court having jurisdiction over the matter may
enter judgment on the award of the arbitrator(s). Service of a petition to
confirm the arbitration award may be made by First Class mail or by
commercial express mail, to the attorney for the party or, if unrepresented,
to the party at the last known business address.
7.4 CONTROLLING LAW. This Agreement is to be governed and construed in
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 NOTICE OF REQUESTED ORDER. If any party intends to obtain an order from
the arbitrator or any court of competent jurisdiction which may direct DSI to
take, or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's obligation,
DSI be paid in full for any past due fees and be paid for the
reasonable value of the services to be rendered pursuant to such
order; and
c. Ensure that DSI not be required to deliver the original (as opposed to
a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other duties.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 ENTIRE AGREEMENT. This Agreement, which includes the Exhibits described
herein, embodies the entire understanding among the parties with respect to
its subject matter and supersedes all previous communications,
representations or understandings, either oral or written. No amendment or
modification of this Agreement shall be valid or binding unless signed by all
the parties hereto, except that Attachment A need not be signed by DSI,
Attachment B need not be signed by Preferred Beneficiary and Attachment C
need not be signed.
8.2 NOTICES. All notices, invoices, payments, deposits and other documents
and communications shall be given to the parties at the addresses specified
in the attached Attachment C. It shall be the responsibility of the parties
to notify each other as provided in this Section in the event of a change of
address. The parties shall have
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the right to rely on the last known address of the other parties. Unless
otherwise provided in this Agreement, all documents and communications may be
delivered by First Class mail.
8.3 SEVERABILITY. In the event any provision of this Agreement is found to
be invalid, voidable or unenforceable, the parties agree that unless it
materially affects the entire intent and purpose of this Agreement, such
invalidity, voidability or unenforceability shall affect neither the validity
of this Agreement nor the remaining provisions herein, and the provision in
question shall be deemed to be replaced with a valid and enforceable
provision most closely reflecting the intent and purpose of the original
provision.
8.4 SUCCESSORS. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall
have no obligation in performing this Agreement to recognize any successor or
assign of Depositor or Preferred Beneficiary unless DSI receives clear,
authoritative and conclusive written evidence of the change of parties.
Etak, Inc. Teletrac, Inc.
Depositor Preferred Beneficiary
By:_____________________________ By:__________________________
Name:___________________________ Name:________________________
Title:__________________________ Title:_______________________
Date:___________________________ Date:________________________
Data Securities International, Inc.
By:________________________________
Name:______________________________
Title:_____________________________
Date:______________________________
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ATTACHMENT A TO EXHIBIT D
MATERIALS TO BE DEPOSITED
Account Number ____________________
Depositor represents to Preferred Beneficiary that deposit materials delivered
to DSI shall consist of the following:
****
Etak, Inc. Teletrac, Inc.
Depositor Preferred Beneficiary
By:_____________________________ By:__________________________
Name:___________________________ Name:________________________
Title:__________________________ Title:_______________________
Date:___________________________ Date:________________________
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ATTACHMENT B TO EXHIBIT D
DESCRIPTION OF DEPOSIT MATERIALS
Account Number______________________________________________________
Depositor Company Name: Etak, Inc.
DEPOSIT TYPE: _______ Initial ______ Supplemental
ENVIRONMENT:
Host System CPU/OS_______________ Version___________ Backup_________
Source System CPU/OS_____________ Version___________ Compiler ______
Special Instructions:_______________________________________________
DEPOSIT COPYING REQUIREMENT:
Hardware needed:____________________________________________________
Software needed/Instructions:_______________________________________
DEPOSIT MATERIALS:
Attachment B Name____________________________ Version_______________
Item label description Media Quantity
**** **** ****
For Depositor, I certify that the For DSI, I certify that the
above described deposit materials deposit inspection has been
have been transmitted to DSI: completed (any exceptions are
noted above):
By_______________________________ By____________________________
Print Name_______________________ Print Name____________________
Date_____________________________ Date of Acceptance____________
ISE__________ EX. B#__________
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Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
ATTACHMENT C TO EXHIBIT D
DESIGNATED CONTACT
Account Number_____________________
Notices, deposit material returns Invoices to Depositor should be
and communications to Depositor addressed to:
should be addressed to:
Company Name: Mgr. Contract Company Name: Mgr. Contract
Administration Administration
Address: 1430 O'Brien Drive Address: 1430 O'Brien Drive
Menlo Park, CA 94025 Menlo Park, CA 94025
____________________ ____________________
Designated Contact: Angela Gomez Designated Contact: Angela Gomez
Telephone: (415) 617-4446 Telephone: (415) 617-4446
Facsimile: (415) 617-4456 Facsimile: (415) 617-4456
Notices and communications to Invoices to Preferred Beneficiary
Preferred Beneficiary should be should be addressed to:
addressed to:
_________________________________
Company Name:____________________ _________________________________
Address:_________________________ _________________________________
_________________________ _________________________________
_________________________ Contact:_________________________
Designated Contact:______________ _________________________________
Telephone:_______________________ _________________________________
Facsimile:_______________________ _________________________________
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
Contracts, deposit materials and Invoice inquiries and fee
notices to DSI should be remittances to DSI should be
addressed to: addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
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EXHIBIT E
SOURCE CODE ADDENDUM
Etak, Inc. ("Etak") and Teletrac ("USER") agree that USER shall have
access to and use of certain Etak Software "Software") source code in
accordance with the terms and conditions of this Addendum ("Addendum").
1. DELIVERY OF SOURCE. Upon execution of this Addendum by both parties,
Etak shall deliver to USER source code for Etak Software ("Source"), as
specified in Attachment A to this Addendum. USER shall be entitled to retain
and use Source only if USER continues to fully comply with all of USER's
obligations under the USER Agreement.
2. LICENSE. Etak hereby grants to USER, subject to the terms and conditions
of this Addendum, a nontransferable, non-exclusive license to (i) load Source
on a single CPU at USER's primary business facility in the United States; and
(ii) permit up to three (3) "Designated Employees" of USER to access and use
Source for the sole purpose of "porting" Source to a specified single target
"platform." The single target platform is specified in Attachment A.
"Designated Employee" shall mean a full-time employee of USER who has signed
a non-disclosure agreement with respect to use, confidentiality, security and
other restrictions regarding Source that is consistent with this Addendum.
USER shall indicate on Attachment A the name and title of the Designated
Employees. "Porting" shall mean using Source to create object code that is
executable on the target platform and that duplicates the functionality of
Source (the "Ported Code"). "Platform" shall mean a combination of hardware
and operating system. Upon termination of this Addendum, USER shall return
Source and all copies thereof to Etak and shall certify in writing that USER
has done so and that USER shall make no further use of Source.
Etak also hereby grants to USER, subject to the terms and conditions of this
Addendum, a non-transferable, non-exclusive license (valid as long as the
USER Agreement is in effect) to sublicense the Ported Code to End Users as a
Licensed Product under the terms and conditions of the USER Agreement, as
modified by this Addendum. However, USER shall not sublicense the Ported
Code separately, but only in combination with application software created by
USER. All Ported Code shall be considered a Derivative Product under the
terms of the USER Agreement. USER agrees to provide to Etak a complete and
correct copy of the Ported Code and the "makefile file" used to create the
Ported Code, as well as all associated documentation used in the Porting,
promptly upon creation thereof. However, Etak agrees that it will not
provide a copy of the Ported Code to any third party unless Etak has first
generally released the Ported Code as an Etak Product, in which case Etak may
provide the Ported Code
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to any third party in accordance with Etak's standard distribution practices.
USER agrees not to use Source for any purpose except as specifically
permitted above in this Section 2. By way of example, and not by way of
limitation, USER shall not reverse engineer, analyze, or modify Source
(except for modifications that are necessary to create operational Ported
Code), nor shall USER rent, disclose, publish, sell, assign, lease,
sublicense, market, or transfer Source to any third party. USER shall not
ship, load or use Source outside the United States. Etak shall provide to
USER source code only for Etak Software as specified in Attachment A, and not
for any other Etak software.
3. PROTECTION OF SOURCE. USER acknowledges that Source is the unpublished,
copyrighted work of Etak, contains valuable trade secrets, and Etak reserves
all rights in the Source not expressly granted to USER by this Addendum.
USER shall not publish or permit others to publish Source. No title to or
ownership of Source is hereby transferred to USER. USER's rights shall at
all times be subject to the use, non-disclosure and other restrictions
contained in this Addendum
USER agrees that Source shall not be duplicated, copied, manufactured or
reproduced in any manner, except for a single archival backup copy. USER
agrees to mark the original and the archival copy with a human-readable
legend stating (i) "CONFIDENTIAL TO AND PROPERTY OF ETAK, INC."; (ii)
"SUBJECT TO USE RESTRICTIONS IN ETAK, INC. LICENSE AGREEMENT"; and (iii)
"COPYRIGHT ETAK, INC. 1984-1997." USER shall not remove or alter such marking.
Source, including all aspects thereof, together with all materials and
knowledge related thereto (the "Confidential Items"), are obtained by USER,
and its employees, agents and representatives, in confidence and in trust and
except as expressly permitted by this Addendum, shall not be used, duplicated
or disclosed by any of them in any form for the use or benefit of any person
or entity, nor reproduced, transcribed, imitated or simulated in whole or in
part. USER shall take all reasonable steps to ensure that the Confidential
Items are not disclosed or duplicated in contravention of this Addendum, to
maintain the confidentiality of Confidential Items and to protect
Confidential Items from misappropriation or misuse, unauthorized duplication
or distribution, including without limitation the exercise by USER of at
least the same degree of care USER employs in protecting its own most
valuable confidential information. USER shall notify Etak promptly if USER
learns of any misappropriation of the Confidential Items or use of the
Confidential Items by anyone in any manner not expressly authorized by this
Addendum, and shall fully
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cooperate with any efforts by Etak to prevent any misappropriation or misuse
of Confidential Items.
USER agrees that money damages are inadequate to protect Etak's rights under
this Addendum and that Etak shall be entitled to specific performance to protect
its rights hereunder, in addition to any other remedies to which it may be
entitled.
4. DISCLAIMER OF WARRANTIES, LIABILITY.
4.1 SOURCE IS PROVIDED "AS IS" AND "WITH ALL FAULTS." ETAK MAKES NO EXPRESS OR
IMPLIED WARRANTY OF ANY KIND WITH REGARD TO THE SOURCE, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND TITLE. ETAK MAKES NO REPRESENTATION OR WARRANTY THAT USER CAN
SUCCESSFULLY USE SOURCE. NO WARRANTY, INSTALLATION, TRAINING OR SIMILAR
SERVICES WILL BE PROVIDED BY ETAK FOR SOURCE. THE ENTIRE RISK OF PERFORMANCE
AND USE OF SOURCE IS ASSUMED BY USER, WITH USER'S EXPRESS UNDERSTANDING THAT USE
OF SOURCE COULD ADVERSELY AFFECT THE FUNCTIONING OF SOFTWARE OR CORRUPT DATA.
NO ORAL OR WRITTEN ADVICE OR INFORMATION PROVIDED BY ETAK OR ANY OF ITS AGENTS
OR EMPLOYEES SHALL CREATE A WARRANTY AND USER IS NOT ENTITLED TO RELY ON ANY
SUCH ADVICE OR INFORMATION. IF USER REQUESTS, ETAK WILL PROVIDE REASONABLE
CONSULTING SERVICES REGARDING THE SOURCE AT ETAK'S THEN STANDARD TIME AND
MATERIALS RATES.
4.2 IN NO EVENT SHALL ETAK BE LIABLE FOR ANY CLAIM OR LOSS INCURRED BY USER
(INCLUDING WITHOUT LIMITATION COMPENSATORY, INCIDENTAL INDIRECT, SPECIAL,
CONSEQUENTIAL OR EXEMPLARY DAMAGES, LOST PROFITS, LOST SALES OR BUSINESS,
EXPENDITURES, INVESTMENTS, OR COMMITMENTS IN CONNECTION WITH ANY BUSINESS, LOSS
OF ANY GOODWILL, OR DAMAGES RESULTING FROM LOST DATA OR INABILITY TO USE DATA)
IRRESPECTIVE OF WHETHER ETAK HAS BEEN INFORMED OF, KNEW OF, OR SHOULD HAVE KNOWN
OF THE LIKELIHOOD OF SUCH DAMAGES. THIS LIMITATION APPLIES TO ALL CAUSES OF
ACTION IN THE AGGREGATE, INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT, BREACH
OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION, AND OTHER TORTS.
USER FURTHER AGREES THAT ETAK SHALL NOT BE LIABLE IN ANY EVENT FOR ANY DAMAGES
INCURRED BY USER OR BY ANY OTHER PERSON, ORGANIZATION OR ENTITY AS A RESULT OF
USER'S MISUSE OF SOURCE. NOR SHALL ETAK BE LIABLE FOR ANY CLAIM OR DEMAND
AGAINST USER BY ANY OTHER PERSON, ORGANIZATION OR ENTITY. ETAK SHALL NOT BE
LIABLE TO USER BECAUSE OF ANY EXPIRATION, TERMINATION OR FAILURE TO RENEW OR
EXTEND THIS ADDENDUM, OR FOR FAILURE TO TIMELY DELIVER SOURCE. IF ETAK'S
WARRANTY DISCLAIMER OR LIMITATION OF LIABILITY SET FORTH IN THIS ADDENDUM SHALL
FOR ANY REASON WHATSOEVER BE HELD UNENFORCEABLE OR INAPPLICABLE, USER AGREES
THAT ETAK'S LIABILITY SHALL NOT EXCEED THE FEE PAID BY USER TO ETAK IN
ACCORDANCE WITH SECTION 1 OF THIS ADDENDUM.
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4.3 USER shall protect, defend, indemnify and hold Etak harmless from any and
all claims, demands, liabilities, obligations, deficiencies, losses, damages,
actions, suits, proceedings, assessments, judgments or settlements (including
all reasonable costs and expenses related thereto such as attorneys' fees), that
arise from or are connected with the USER's use of possession of Source or
Ported Code, or, arise from or are connected with any breach by USER of any
provision of this Addendum.
5. TERMINATION. This Addendum shall continue in full force and effect for
the term of the USER Agreement and shall terminate immediately upon
termination of the USER Agreement for any reason. In addition, either party
may terminate this Addendum if the other party fails, neglects or refuses to
comply with the terms of this Addendum.
6. MISCELLANEOUS.
6.1 USER's receipt of any Source shall be deemed conclusive evidence of
USER's agreement that such materials are governed by this Addendum. USER
acknowledges that Etak has made no commitment and has no obligation to
release Source for any future upgrades, enhancements or releases of Software,
or for any other software.
6.2 The terms and conditions of Article 11, "Miscellaneous" of the USER
Agreement are incorporated herein by reference. In the event of any
conflict, the terms and conditions of this Addendum shall govern the use of
Source and the parties' rights and obligations related thereto.
6.3 Except as expressly modified by this Addendum, the USER Agreement remains
in full force and effect in accordance with its terms. USER cannot use
Source in any manner to violate the terms and conditions of the USER
Agreement.
6.4 All of USER's obligations under this Addendum shall survive the
termination of this Addendum or the USER Agreement.
Teletrac, Inc. Etak, Inc.
a Delaware corporation a California corporation
2323 Grand, Suite 1100 1430 O'Brien Drive
Kansas City, Missouri 64108-2670 Menlo Park, California 94025
(816) 474-0055 (415) 328-3825
By:_____________________________ By:__________________________
Name:___________________________ Name:________________________
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Title:__________________________ Title:_______________________
Date:___________________________ Date:________________________
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ATTACHMENT A TO EXHIBIT E
I. Description of Etak Software Source
****
II. Single Target Platform or Specified Single Operating System
****
III. Designated Employees Who Will Access Source
Name:__________________ Title:_____________________
Name:__________________ Title:_____________________
Name:__________________ Title:_____________________
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of August 6, 1997, between Teletrac, Inc., a Delaware
corporation (the "PLEDGOR") and Norwest Bank Minnesota, National Association, as
collateral agent (the "COLLATERAL AGENT"), for the holders of the Notes (as
defined herein). Capitalized terms used but not otherwise defined herein shall
have the meanings given to such terms in the Indenture (as defined herein).
W I T N E S S E T H:
WHEREAS, the Pledgor, the Collateral Agent and the Trustee (as defined
in the Indenture) have entered into that certain Indenture dated as of August 6,
1997 (as amended, restated, supplemented or otherwise modified from time to
time, the "INDENTURE"), pursuant to which the Pledgor is issuing $105,000,000
aggregate principal amount of 14% Senior Notes due 2007 (the "NOTES"), which are
to be issued, together with warrants to purchase shares of Class A Common Stock,
par value $0.01, of Holdings, as Units;
WHEREAS, the Pledgor has agreed, pursuant to the Indenture and the
Purchase Agreement dated July 31, 1997 by and among the Pledgor, Teletrac
Holdings, Inc. ("Holdings"), Donaldson, Lufkin & Jenrette Securities Corporation
and TD Securities (USA) Inc., to (i) purchase a portfolio of Government
Securities initially consisting of those securities listed on Exhibit A hereto
(together with any replacement or substitute securities, the "PLEDGED
SECURITIES") in an amount sufficient, upon receipt of the scheduled interest and
principal payments in respect of the Pledged Securities, in the opinion of a
nationally recognized firm of independent certified public accountants selected
by the Pledgor, to provide for payment in full of the first six semi-annual
scheduled interest payments due on the Notes, and (ii) place the Pledged
Securities in the Pledge Account (as defined herein) held by the Collateral
Agent for the benefit of the holders of the Notes;
WHEREAS, the Pledgor is to be the sole legal and beneficial owner of
the Pledged Securities; and
WHEREAS, to secure the payment and performance by the Pledgor of its
obligations under the Indenture and the Notes (collectively, the "OBLIGATIONS"),
the Pledgor has agreed to pledge to the Collateral Agent for its benefit and for
the ratable benefit of the holders of the Notes a security interest in the
Pledged Securities and the Pledge Account and to execute and deliver this Pledge
Agreement.
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby agree as follows:
1. PLEDGE AND GRANT OF SECURITY INTEREST.
The Pledgor hereby pledges to the Collateral Agent for the ratable
benefit of the holders of the Notes, and grants to the Collateral Agent for the
ratable benefit of the holders of the Notes, a continuing first priority
security interest in and to (i) all of the Pledgor's right, title and interest
in the Pledged Securities and the Pledge Account, (ii) all certificates or other
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evidence of ownership representing the Pledged Securities and the Pledge
Account, and (iii) all products and proceeds of any of the Pledged Securities,
including without limitation, all dividends, interest, principal payments, cash,
options, warrants, rights, instruments, subscriptions and other property or
proceeds from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of the Pledged
Securities (collectively, the "COLLATERAL").
2. SECURITY FOR OBLIGATIONS.
This Pledge Agreement and the Collateral secure the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of the first six semi-annual scheduled interest
payments due on the Notes.
3. DELIVERY OF COLLATERAL; PLEDGE ACCOUNT; INTEREST; SUBSTITUTION
OF COLLATERAL.
(a) All certificates or instruments representing or evidencing the
Pledged Securities shall be delivered to and held by or on behalf of the
Collateral Agent pursuant hereto and shall be in suitable form for transfer and
delivery, or shall be accompanied by instruments of transfer or assignment, duly
executed in blank all in form and substance satisfactory to the Collateral Agent
or shall be delivered to the Collateral Agent through the book-entry facilities
of the applicable depositary.
(b) Concurrently with the execution and delivery of this Pledge
Agreement, the Collateral Agent shall establish an account entitled the
"TELETRAC PLEDGE ACCOUNT" for the deposit of the Pledged Securities (the "PLEDGE
ACCOUNT") at its office at Sixth and Marquette, Minneapolis, Minnesota
55479-0069. Subject to the other terms and conditions of this Pledge Agreement,
all funds or other property accepted by the Collateral Agent pursuant to this
Pledge Agreement shall be held in the Pledge Account for the ratable benefit of
the holders of the Notes, and the proceeds of any such Pledged Securities shall
remain on deposit in the Pledge Account until withdrawn in accordance with this
Agreement. If and to the extent the Pledged Securities comprise certificated
securities (as defined in Section 8-102 of the Uniform Commercial Code in the
State of New York), such securities shall be registered in the name of the
Collateral Agent and its custodian, as collateral agent for the benefit of the
holders of the Notes, and possession thereof shall be maintained by the
Collateral Agent within the State of New York.
(c) All interest earned on or other distributions or amounts paid
with respect to any Collateral shall be retained in the Pledge Account and may
be reinvested from time to time pending disbursement pursuant to the terms
hereof.
(d) Pending disbursement of funds from the Pledge Account pursuant
to the terms hereof, the Collateral Agent may reinvest any interest or other
amounts received in respect of the Pledged Securities in money market deposit
accounts issued or offered by an Eligible Institution, which may be Norwest Bank
Minnesota, National Association; provided that any monies so reinvested and the
securities acquired thereby shall be (i) held as Collateral in the Pledge
Account, (ii) subject in all respects to the security interest created hereby
and (iii) otherwise subject to the terms hereof.
-2-
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4. DISBURSEMENTS.
(a) Not less than five Business Days prior to the date of any of
the first six semi-annual scheduled interest payments due on the Notes, the
Pledgors may direct the Collateral Agent in writing to transfer from the Pledge
Account to the Trustee in its capacity as Paying Agent, funds necessary to
provide for payment in full or of any portion of the next scheduled interest
payment on the Notes. Upon receipt of such written request, the Collateral
Agent shall take such action as is necessary to provide for the payment of such
interest payment on the Notes directly to the Trustee as Paying Agent from
proceeds of the Pledged Securities held in the Pledge Account.
(b) If the Pledgor elects to pay any of the first six semi-annual
scheduled interest payments (or portion thereof) on the Notes from a source of
funds other than the Pledge Account (the "PLEDGOR'S FUNDS"), then the Pledgor
may on at least two Business Days' prior written notice and, after payment in
full of such interest payment, direct the Collateral Agent in writing to release
to the Pledgor or as it may direct an amount of funds from the Pledge Account
less than or equal to the amount of Pledgor's Funds so expended. Upon receipt
of such written direction from the Pledgor, together with the certificate
described in the following sentence, the Collateral Agent shall take such action
as is necessary to provide for the payment to the Pledgor or its designee of the
amount requested from the Pledge Account. Prior to any release of funds to the
Pledgor or its designee from the Pledge Account pursuant to this Section 4(b),
the Pledgor shall deliver to the Collateral Agent an Officer's Certificate
stating that such use of the Pledgor's Funds has been duly authorized by all
necessary corporate action or bylaws, does not contravene or constitute a
default under any provision of applicable law, regulation or the certificate of
incorporation or bylaws, of the Pledgor, or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Pledgor, and does
not result in the creation or imposition of any Lien on any asset of the
Pledgor.
(c) If at any time the amount of Pledged Securities exceeds 100% of
the amount sufficient, in the opinion of a nationally recognized firm of
independent certified public accountants selected by the Pledgor, to provide for
payment in full of the first six semi-annual scheduled interest payments due on
the Notes (or, in the event any interest payments have been made on the Notes,
an amount sufficient to provide for payment in full of all interest payments
then remaining up to and including the first six semi-annual scheduled interest
payments), then, in such event, the Pledgor may direct the Collateral Agent in
writing to release to the Pledgor or as it directs an amount less than or equal
to such excess. Upon receipt of such written direction from the Pledgor,
together with the opinion of a nationally recognized firm of independent
certified public accountants with respect to the value of the Pledged
Securities, the Collateral Agent shall take such action as is necessary to
provide for the payment to the Pledgor or its designee of the amount requested
from the Pledge Account.
(d) Upon payment in full of the first six semi-annual scheduled
interest payments on the Notes, the security interest in the Collateral
evidenced by this Pledge Agreement shall terminate and be of no further force
and effect. Furthermore, upon release of any Collateral from the Pledge Account
in accordance with the terms of this Pledge Agreement, the security interest
evidenced by this Pledge Agreement in the Collateral so released shall terminate
and be of no further force and effect.
-3-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES.
The Pledgor hereby represents and warrants that:
(a) The execution, delivery and performance by the Pledgor of this
Pledge Agreement has been duly authorized by the Pledgor and does not contravene
or constitute a default under any provision of applicable law, regulation or the
certificate of incorporation or bylaws of the Pledgor, or of any judgment,
injunction, order, decree or any material agreement or instrument binding upon
the Pledgor, and does not result in the creation of imposition of any Lien on
any asset of the Pledgor, except for the security interests granted under this
Pledge Agreement.
(b) No financing statement covering the Pledged Securities is on
file in any public office, other than financing statements filed pursuant to
this Pledge Agreement.
(c) Upon the delivery to the Collateral Agent of the certificates,
if any, representing the Pledged Securities, any filing of financing statements
required by the Uniform Commercial Code (the "UCC") and notation on the records
of the Collateral Agent that it holds the Pledged Securities as pledgee, the
pledge of the Collateral pursuant to this Pledge Agreement constitutes a valid
and perfected first priority security interest in and to the Collateral,
securing the payment and performance of the Obligations for the ratable benefit
of the holders of the Notes, enforceable as such against all creditors of the
Pledgor and any persons purporting to purchase any of the Collateral from the
Pledgor.
(d) No consent of any other person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body, is required either (i) for the pledge by the
Pledgor of the Collateral pursuant to this Pledge Agreement or for the
execution, delivery or performance of this Pledge Agreement by the Pledgor
(except for any filings and notations necessary to perfect the security interest
created hereby in the Collateral) or (ii) for the exercise by the Collateral
Agent of the rights provided for in this Pledge Agreement or the remedies in
respect of the Collateral pursuant to this Pledge Agreement.
(e) The pledge of the Collateral pursuant to this Pledge Agreement
is not prohibited by any applicable law or government regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation, Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System).
6. FURTHER ASSURANCES.
The Pledgor agrees to promptly take such actions and to execute and
deliver or cause to be executed and delivered, or use its best efforts to
procure, such stock or bond powers, proxies, assignments, instruments and such
other or different writings as the Collateral Agent may reasonably request, all
in form and substance satisfactory to the Collateral Agent, deliver any
instruments to the Collateral Agent and take any other actions that are
necessary or, in the opinion of the Collateral Agent, desirable, to perfect,
continue the perfection of, confirm and assure the first priority of the
Collateral Agent's security interest in the Collateral, to protect the
Collateral against the rights, claims or interests of third persons, or to
otherwise effect the purposes of this Pledge Agreement. Notwithstanding the
foregoing, the Collateral Agent shall
-4-
<PAGE>
have no duty or obligation to ensure the maintenance or perfection of any
security interest hereunder.
7. COVENANTS.
The Pledgor covenants and agrees with the Collateral Agent and the
holders of the Notes from the after the date of this Pledge Agreement until the
earlier of payment in full in cash of (A) each of the first six semi-annual
scheduled interest payments due on the Notes under the terms of the Indenture or
(B) all Obligations due and owing under the Indenture and the Notes in the event
such Obligations become due and payable prior to the payment of the first six
semi-annual scheduled interest payments on the Notes, as follows:
(a) The Pledgor agrees that it (i) will not sell or otherwise
dispose of, or grant any option or other interest with respect to, any of the
Collateral, (ii) will not create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the Liens created pursuant to this
Pledge Agreement, and (iii) will at all times be the sole beneficial owner of
the Collateral.
(b) The Pledgor agrees that it will not (i) enter into any
agreement or understanding that purports to or may restrict or inhibit the
Collateral Agent's rights or remedies hereunder, including, without limitation,
the Collateral Agent's right to sell or otherwise dispose of the Collateral, or
(ii) with regard to the Collateral, fail to pay or discharge any tax, assessment
or levy of any nature due with respect thereto later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment.
8. POWER OF ATTORNEY.
(a) The Pledgor hereby appoints and constitutes the Collateral
Agent as the Pledgor's attorney-in-fact to exercise to the fullest extent
permitted by law all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default:
(i) collection of proceeds of any Collateral;
(ii) conveyance of any item of Collateral to any purchaser thereof
as specified herein;
(iii) giving of any notices or recording of any Liens pursuant to
Section 6 hereof;
(iv) making any payments or taking any acts pursuant to Section 9
hereof; and
(v) paying or discharging taxes or Liens levied or placed upon the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole
discretion, and any such payments made by the Collateral Agent shall become
Obligations of the Pledgor to the Collateral Agent, due and payable immediately
upon demand.
(b) The Collateral Agent's authority under this Section 8 shall
include, without limitation, the authority to endorse and negotiate any checks
or instruments representing proceeds of Collateral in the name of the Pledgor,
execute and give receipt for any certificate of
-5-
<PAGE>
ownership or any document constituting Collateral, transfer title to any item of
Collateral, to the extent permitted by applicable law, sign the Pledgor's name
on all financing statements or any other documents deemed necessary or
appropriate by the Collateral Agent to preserve, process or perfect the security
interest in the Collateral, and to file the same, and to prepare, sign the
Pledgor's name and file any notice of Lien, and to take any other actions
arising from or incident to the powers granted to the Collateral Agent in this
Pledge Agreement. This power of attorney is coupled with an interest and shall
be irrevocable by the Pledgor.
9. COLLATERAL AGENT MAY PERFORM.
If the Pledgor fails to perform any agreement contained herein, the
Collateral Agent may, but shall not be obligated to, itself perform or cause
performance of such agreement, and the reasonable expenses incurred by or on
behalf of the Collateral Agent in connection therewith shall be payable by the
Pledgor under Section 13 hereof.
10. NO ASSUMPTION OF DUTIES; REASONABLE CARE.
The rights and powers granted to the Collateral Agent hereunder are
being granted in order to preserve and protect the security interest of the
Collateral Agent and the holders of Notes in and to the Collateral granted
hereby and shall not be interpreted to, and shall not, impose any duties on the
Collateral Agent in connection therewith other than those imposed under
applicable law.
11. INDEMNITY.
The Pledgor shall indemnify, defend and hold harmless the Collateral
Agent and its directors, officers, agents and employees from and against all
claims, actions, obligations, losses, liabilities and expenses, including costs,
fees and disbursements of counsel, the costs of investigations, and claims for
damages, arising from the Collateral Agent's performance under this Pledge
Agreement, except insofar as the same may have been caused by the bad faith,
gross negligence or willful misconduct of such indemnified person. The
obligations of the Pledgor under this Section 11 shall survive the resignation
or removal of the Collateral Agent and the termination of this Agreement.
12. REMEDIES UPON EVENT OF DEFAULT.
If an Event of Default shall have occurred:
(a) The Collateral Agent shall have and may exercise with reference
to the Collateral any or all of the rights and remedies of a secured party under
the UCC in effect in the State of New York, and as otherwise granted herein or
under any other applicable law or under any other agreement now or hereafter in
effect executed by the Pledgor, including, without limitation, the right and
power to sell, at public or private sale or sales, or otherwise dispose of, or
otherwise utilize the Collateral and any part or parts thereof, in any manner
authorized or permitted under said UCC after default by a debtor, and to apply
the proceeds thereof toward payment of any costs and expenses and attorneys'
fees and expenses thereby incurred by the Collateral Agent and toward payment of
the Obligations in such order or manner as the Collateral Agent may elect.
Specifically, and without limiting the foregoing, the Collateral Agent shall
have the right to take possession of all or any part of the Collateral or any
security therefor and of all books, records, papers and documents of the Pledgor
or in the Pledgor's possession or control relating to the Collateral that are
not already in the Collateral Agent's possession, and for such
-6-
<PAGE>
purpose may enter upon any premises upon which any of the Collateral or any
security therefor or any of said books, records, papers and documents are
situated and remove the same therefore without any liability for trespass or
damages thereby occasioned. To the extent permitted by law, the Pledgor
expressly waives any notice of sale or other disposition of the Collateral and
all other rights or remedies of the Pledgor or formalities prescribed by law
relative to sale or disposition of the Collateral or exercise of any other right
or remedy of the Collateral Agent existing after Default or Event of Default
hereunder. To the extent any such notice is required and cannot be waived, the
Pledgor agrees that if such notice is given in the manner provided in Section 17
hereof at least three days before the time of the sale or disposition, such
notice shall be deemed reasonable and shall fully satisfy any requirement for
giving of said notice. The Collateral Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale. The Pledgor further
agrees to use its best efforts to do or cause to be done all such other acts as
may be necessary to effect the intention of this Section 12.
(b) All rights to marshalling of assets of the Pledgor, including
any such right with respect to the Collateral, are hereby waived by the Pledgor.
The Pledgor shall not contest or support any other person in contesting the
validity or priority of the security interests created under this Pledge
Agreement.
13. FEES AND EXPENSES.
The Pledgor shall, upon demand, pay to the Collateral Agent the amount
of the fees (which shall be in an amount previously agreed by the Pledgor and
the Collateral Agent) and any and all reasonable expenses (including, without
limitation, the reasonable fees, expenses and disbursements of counsel, experts
and agents retained by the Collateral Agent) that the Collateral Agent may incur
in connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent and the holders of the Notes
hereunder, or (iv) the failure by the Pledgor to perform or observe any of the
provisions hereof.
14. SECURITY INTEREST ABSOLUTE.
All rights of the Collateral Agent and the holders of the Notes, and
the security interests created hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Obligations; or
(d) any other circumstances that might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the
Obligations or of this Pledge Agreement.
-7-
<PAGE>
15. CONTINUING SECURITY INTEREST; TERMINATION.
(a) This Pledge Agreement shall create a continuing security
interest in and to the Collateral and shall, unless otherwise provided in the
Indenture or in this Pledge Agreement, remain in full force and effect until the
earlier of the payment in full in cash of (i) each of the first six semi-annual
scheduled interest payments due on the Notes under the terms of the Indenture
and (ii) all Obligations due and owing under the Indenture and the Notes in the
event such Obligations become payable or are otherwise discharged prior to the
payment of the first six semi-annual scheduled interest payments on the Notes.
This Pledge Agreement shall be binding upon the Pledgor, its successors and
assigns, and shall inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent and the
holders of the Notes and their respective successors, transferees and assigns.
(b) This Pledge Agreement shall terminate upon the earlier of
payment in full in cash of (i) each of the first six semi-annual scheduled
interest payments due on the Notes under the terms of the Indenture and (ii) all
Obligations due and owing under the Indenture and the Notes in the event such
obligations become payable or are otherwise discharged prior to the payment of
the first six semi-annual scheduled interest payments on the Notes. At such
time, the Collateral Agent shall, at the written request of the Pledgor,
reassign and redeliver to the Pledgor all of the Collateral hereunder that has
not been sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms of this Pledge Agreement and the Indenture. Such
reassignment and redelivery shall be without warranty (either express or
implied) by or recourse to the Collateral Agent, except as to the absence of any
prior assignments by the Collateral Agent of its interest in the Collateral, and
shall be at the expense of the Pledgor.
16. AUTHORITY OF THE COLLATERAL AGENT.
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by the
terms hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent may perform any of its duties hereunder or in connection with
the Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. None of the Collateral Agent, any director, officer, employee,
attorney or agent of the Collateral Agent nor the holders of the Notes shall be
liable to the Pledgor for any action taken or omitted to be taken by it or them
hereunder, except for its or their own bad faith, gross negligence or willful
misconduct, nor shall the Collateral Agent be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Collateral Agent and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper Person or Persons.
(b) The Pledgor acknowledges that the rights and responsibilities
of the Collateral Agent under this Pledge Agreement with respect to any action
taken by the Collateral Agent or the exercise or non-exercise by the Collateral
Agent of any option, right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Pledge Agreement shall, as
between the Collateral Agent and the holders of the Notes, be governed by the
Indenture and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Collateral Agent and the Pledgor,
the Collateral Agent shall be conclusively presumed to be acting as agent for
the holders of the Notes with full and valid authority so to act or refrain from
acting, and the Pledgor shall not be obligated or entitled to make any inquiry
respecting such authority.
-8-
<PAGE>
(c) The Collateral Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Collateral Agent. The Collateral Agent shall not be deemed to have knowledge of
an Event of Default under the Indenture unless informed in writing by any
Pledgor or the holder of any Note.
(d) The Collateral Agent shall not be required to exercise any
remedies hereunder unless requested in writing to do so by the holders of a
majority in principal amount of the outstanding Notes and only if furnished with
indemnity satisfactory to the Collateral Agent. The Collateral Agent may
consult with counsel and shall not be liable for any action taken in good faith
in reliance upon advice of counsel, except for gross negligence or willful
misconduct. The Collateral Agent makes no representation or warranty and shall
have no responsibility concerning the value or validity of the Collateral or the
validity or perfection of the pledge thereof.
(e) The Collateral Agent may at any time on 30 days notice to the
Pledgor and the holders of the Notes resign hereunder. Upon any such
resignation, the Pledgor shall promptly appoint another financial institution to
act as Collateral Agent hereunder and such resignation shall become effective
upon the acceptance of the appointment by the successor.
(f) The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which an ordinary person accords its own property, it being understood that
neither the Collateral Agent nor the holders of the Notes shall have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not any such Person has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against any
parties with respect to any Collateral.
17. NOTICES.
Any communication, notice or demand to be given hereunder shall be
duly given hereunder if given in the form and manner required by the Indenture,
and delivered to any recipient's address as set forth in the Indenture, or in
such other form and manner or to such other address as shall be designated by
any party hereto to each other party hereto in a written notice delivered in
accordance with the terms of the Indenture.
18. NO WAIVER; CUMULATIVE RIGHTS.
No failure on the part of the Collateral Agent to exercise and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Collateral Agent
or any right, remedy or power hereunder preclude any other or future exercise of
any other right, remedy or power. Each and every right, remedy and power hereby
granted to the Collateral Agent or allowed it by law or other agreement shall be
cumulative and not exclusive, and may be exercised by the Collateral Agent from
time to time.
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<PAGE>
19. BENEFITS OF PLEDGE AGREEMENT.
Nothing in this Pledge Agreement, whether express or implied, shall
give to any Person other than the parties hereto and their successors hereunder,
and the holders of the Notes, any benefit or any legal or equitable right,
remedy or claim under this Pledge Agreement.
20. APPLICABLE LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. TO INDUCE THE COLLATERAL AGENT TO ENTER
INTO THIS PLEDGE AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT
TO THE COLLATERAL AGENT'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS
THAT IN ANY MANNER ARISE OUT OF OR IN CONNECTION WITH OR ARE IN ANY WAY RELATED
TO THIS PLEDGE AGREEMENT SHALL BE LITIGATED IN COURTS LOCATED WITHIN THE COUNTY
OF NEW YORK, STATE OF NEW YORK. THE PLEDGOR HEREBY CONSENTS TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF
NEW YORK. THE PLEDGOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL TO THE PLEDGOR'S NOTICE
ADDRESS SPECIFIED HEREIN. THE PLEDGOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BETWEEN THE PLEDGOR AND THE
COLLATERAL AGENT IN ACCORDANCE WITH THIS PARAGRAPH. EACH OF THE PLEDGOR AND THE
COLLATERAL AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING THAT IN ANY MANNER ARISES OUT
OF OR IN CONNECTION WITH OR IS IN ANY WAY RELATED TO THIS PLEDGE AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
(b) THE PROVISIONS OF THIS SECTION 20 ARE A MATERIAL INDUCEMENT FOR
THE COLLATERAL AGENT ENTERING INTO THIS PLEDGE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY. THE PLEDGOR HEREBY ACKNOWLEDGES THAT IT HAS REVIEWED THE
PROVISIONS OF THIS SECTION 20 WITH INDEPENDENT COUNSEL.
21. EXECUTION IN COUNTERPARTS.
This Pledge Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute one and the same instrument.
22. SETTLEMENT.
Amounts, if any, held in the Pledge Account pending settlement of
purchase of the Pledged Securities shall constitute Collateral hereunder, shall
be held by the Collateral Agent for the benefit of the Holders of the Notes and
a portion thereof equal to the aggregate price paid for such Pledged Securities
shall be released by the Collateral Agent (without further direction or
instruction required from any other party hereto) against delivery of such
Pledged Securities, and any excess funds remaining in the Pledge Account after
giving effect to such settlement shall be promptly forwarded to the Pledgor.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TELETRAC, INC.
By: /s/ James A. Queen
-------------------------------
Name: James A. Queen
Title: Chief Executive Officer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ Raymond S. Havarstock
-------------------------------
Name: Raymond S. Havarstock
Title: Vice President
<PAGE>
<TABLE>
<CAPTION>
August 5, 1997
GOVERNMENT SECURITIES PORTFOLIO
-------------------------------
PROPOSED TELETRAC, INC. INTEREST RESERVE
Bond Interest Interest Payment
Name Cusip Face Cost Maturity Payment Date Amount
---- ----- ---- ---- -------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1. USTN 5% 1/31/98 912827W57 $6,972,000.00 $6,960,253.70 1/31/98 Feb. 1, 1998 (Sun.) $7,145,833.33
2. USTN 5.25% 7/31/98 912827L67 $6,984,000.00 $6,964,879.40 7/31/98 Aug. 1, 1998 (Sat.) $7,350,000.00
3. USTN 5% 1/31/99 912827N65 $6,838,000.00 $6,766,647.00 1/31/99 Feb. 1, 1999 (Mon.) $7,350,000.00
4. USTN 5.875% 7/31/99 9128273B6 $6,578,000.00 $6,583,273.13 7/31/99 Aug. 1, 1999 (Sun.) $7,350,000.00
5. USTN 7.75% 1/31/00 912827S60 $6,158,000.00 $6,418,836.50 1/31/00 Feb. 1, 2000 (Tues.) $7,350,000.00
6. USTN 6.125% 7/31/00 912827U67 $6,210,000.00 $6,239,489.10 7/31/00 Aug. 1, 2000 (Tues.) $7,350,000.00
------------ ------------ ------------
$39,933,378.83
Price Cushion 25,000.00
---------
TOTAL $39,740,000.00 $39,958,378.83 $43,895,833.33
============= ============= =============
</TABLE>
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE REGISTRANT
Teletrac, Inc.
Teletrac License, Inc.
<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 on Form S-1.
Kansas City, Missouri, /s/ Arthur Andersen LLP
September 3, 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-1 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".
Coopers & Lybrand
Newport Beach, California
September 3, 1997
