UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-23387
TELIGENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1866562
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
8065 LEESBURG PIKE
VIENNA, VIRGINIA 22182
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 762-5100
Securities registered pursuant to Section 12(b) of the Act:
11 1/2% Senior Notes due 2007
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, Class A, par value $.01 per share
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes [X] No [_].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in the definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K [X].
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant was approximately $201 million on March 20,
1998, based on the closing sales price of the registrant's Class A Common
Stock as reported on The Nasdaq Stock Market as of such date.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 20, 1998 was as follows:
Common Stock, Class A 8,163,270
Common Stock, Class B 44,426,299
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission ("SEC") in connection
with the Registrant's 1998 Annual Meeting of Stockholders, are
incorporated by reference into Part III. If the registrant does not
file a definitive proxy statement with the SEC on or before April 30,
1998, the registrant will, on or before April 30, 1998, file an
amendment to this Form 10-K containing the Part III information.
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Signatures
Index to Financial Statements
Except for any historical information contained herein, the
matters discussed in this Annual Report on Form 10-K contain certain
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors including, but not limited to, economic, key employee,
competitive, governmental and technological factors affecting the
Company's growth, operations, markets, products, services, licenses and
other factors discussed in the Company's other filings with the
Securities and Exchange Commission. These factors may cause the actual
results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Given these uncertainties, prospective investors are cautioned not to
place undue reliance on such forward-looking statements.
PART I
ITEM 1. BUSINESS
THE COMPANY
Teligent, Inc. ("Teligent" or the "Company") intends to be a
premier provider of high quality, low cost voice, data, Internet and
video telecommunications services primarily to small and medium-sized
businesses through its own fixed local wireless point-to-multipoint
broadband networks and leased long distance facilities. Teligent
anticipates offering an integrated package of services including local
and long distance telephone services, high speed data connectivity,
Internet access and videoconferencing. Teligent holds 24 GHz fixed
wireless licenses in 74 of the most populous U.S. metropolitan market
areas, covering over 50% of the nation's business telephone lines and
a population of approximately 130 million. The Company intends to
offer its integrated package of services in at least 10 market areas
by the end of 1998 and 30 by the end of 1999, and subsequently in all
of its 74 currently licensed market areas. The Company currently
provides commercial Internet access through fixed wireless point-to-
point broadband systems.
The predecessor to the Company, Associated Communications, L.L.C.,
was founded in 1996 as a limited liability company joint venture between
a subsidiary of The Associated Group, Inc. ("Associated") and an affiliate
of Telcom Ventures, L.L.C. ("Telcom Ventures"), both of which have
extensive experience in pioneering wireless telecommunications
businesses. Associated Communications, L.L.C. was subsequently renamed
Teligent, L.L.C. In September 1996, Alex J. Mandl, formerly President
and Chief Operating Officer of AT&T, joined Associated Communications,
L.L.C. as Chairman of the Board and Chief Executive Officer. On
November 26, 1997, the Company issued 6,325,000 shares of Class A
Common Stock at $21.50 per share in its initial public offering (the
"Equity Offering") and $300 million aggregate principal amount of
11 1/2% Senior Notes due 2007 (the "Senior Notes Offering"). Prior to
and as a condition to the Senior Notes Offering and the Equity Offering
(together with the Senior Notes Offering, the "Offerings"), Teligent,
L.L.C. merged with and into the Company (the "Merger") with the Company
surviving the Merger. See "Business - Certain Transactions - The
Reorganization."
The Company obtained the majority of its 24 GHz fixed wireless
licenses in November 1997 through the contribution to Teligent, L.L.C.
of the licenses by Teligent, L.L.C.'s founding members, Microwave
Services, Inc. ("MSI"), a subsidiary of Associated, and Digital
Services Corporation ("DSC"), an affiliate of Telcom Ventures. MSI
and DSC began the process of applying for fixed wireless licenses in
1993 prior to the Federal Communication Commission's ("FCC")
implementation of spectrum auctions. These licenses have been granted
by the FCC and such grants are no longer subject to any petitions,
challenges or administrative or judicial review. The Company's
licenses are the subject of other proceedings pending before the FCC.
See "Business - Government Regulation - Federal Regulation- FCC
Licensing." In addition, the Company obtained FCC licenses in
three standard metropolitan statistical areas ("SMSAs") in connection
with its acquisition of FirstMark Communications, Inc. ("FirstMark")
in October 1997 and from Teligent, L.L.C., which had acquired licenses
directly from the FCC, in November 1997. See "Business - Government
Regulation - Federal Regulation -Transfer of Control of Wireless Licenses."
In November 1997, Nippon Telegraph and Telephone Corporation
("NTT"), the world's largest telecommunications carrier, through its
indirect wholly owned subsidiary NTTA&T Investment, Inc. ("NTTA&T")
made a strategic equity investment totaling $100 million in the Company.
In connection with NTT's equity investment, the original members of
Teligent, L.L.C. made additional cash contributions to Teligent, L.L.C.
in the aggregate amount of $60.0 million. See "Business - Certain
Transactions."
Associated is a publicly traded company (Nasdaq: AGRPA and
AGRPB) principally engaged in the ownership and operation of a variety
of wireless communications assets and businesses. Telcom Ventures is
a privately held company owned by the family of Dr. Rajendra Singh, an
investor in wireless technologies and network design, and investment
partnerships formed by The Carlyle Group, a Washington, DC private
investment firm. Telcom Ventures is engaged in investing in
international wireless opportunities and developing, building and
deploying emerging wireless technologies.
Teligent believes that it is well positioned to capture revenues
in the estimated $110 billion business telecommunications market. The
Company intends to focus particularly on the estimated $47 billion
business local exchange market. Local exchange services have
historically been provided by regional monopolies known as incumbent
local exchange carriers ("ILECs") that have typically utilized
copper wire-based "legacy" networks. The ILECs' legacy networks,
faced with increasing demand from businesses for cost-effective
capacity to support bandwidth-intensive applications such as Internet
access, have created a "last mile bottleneck" in the local loop
between the customer premise and the ILEC network switch. In addition,
Teligent's market research indicates that the ILECs have been unable
to satisfy customer demands for cost-effective, flexible and
responsive service and that a significant portion of Teligent's target
customer base is currently dissatisfied with its ILEC service. The
potential revenue opportunity in this market, coupled with changes in
the regulatory environment designed to enable facilities-based
competition, have created opportunities for competitive local exchange
carriers ("CLECs"). The Company intends to alleviate this last mile
local bottleneck and gain market share by deploying technologically
advanced, high bandwidth digital wireless technology complemented by
superior customer service and competitive pricing.
Teligent expects to provide local coverage throughout its market
areas with lower capital requirements than either fiber-based or
point-to-point wireless CLECs, enabling it to offer its services to a
broader customer base more quickly and at a lower cost. Wireless
point-to-multipoint broadband networks allow transmissions between
multiple customer antennas and a single base station antenna, thereby
allowing Teligent to share the same spectrum among its customers and
reducing its capital expenditures. The Company believes that a
significant portion of small and medium-sized businesses is located in
buildings that are not economically attractive to fiber-based
providers. Teligent's capital expenditures will be largely
incremental or success-based, thereby minimizing the risk of deploying
network equipment not associated with revenues.
BUSINESS STRATEGY
Teligent's goal is to be a premier facilities-based provider of
voice, data, Internet and video telecommunication services to small
and medium-sized businesses. The Company intends to leverage its
ability to provide cost-effective, high bandwidth connectivity in
order to offer an integrated package of local and long distance
telephone service, high-speed data connectivity, Internet access and
video-conferencing. The Company is implementing the following
initiatives to achieve this objective:
Target Small and Medium-Sized Businesses. Teligent plans to
focus its primary marketing efforts on small and medium-sized
businesses with 5 to 350 telephone lines. The Company expects to
attract these customers through both a direct sales effort and
indirect sales channels by offering (i) an integrated package of
telecommunications services, (ii) competitive pricing, (iii) high
quality and responsive customer service and (iv) high bandwidth
services which may be difficult to obtain from other
telecommunications providers. Teligent also intends to selectively
pursue sales opportunities with larger businesses when its value
proposition and its service offerings are competitively advantaged.
End User Focus. Teligent intends to approach its target market
primarily by offering services directly to end users, as opposed to
positioning itself as a "carrier's carrier" offering wholesale network
capacity. By deriving the majority of its revenues from providing local
switched voice and data communications services directly to end user
customers, Teligent believes that it will (i) establish a sustainable and
broad base of its own customers, thereby minimizing the risk of generating
substantial revenues from a limited number of sources, (ii) maximize
revenues and profitability by accessing the higher priced retail
market and (iii) achieve competitive differentiation based on high
quality service that is responsive to the customer.
Develop Brand Awareness. Teligent will seek to position itself as
a high quality service provider by offering network reliability
complemented by quality customer support. The Company is designing its
marketing campaign to reflect these objectives and intends to build
its reputation by (i) working closely with its customers to develop
services tailored to their particular needs and (ii) targeting
advertising and promotion efforts in its coverage areas, gradually
expanding to mass media with market-wide and potentially nationwide
coverage. The Company also believes that its speed to market advantage
will assist its branding campaign, by enabling it to be one of the
first widely available facilities-based competitors in a market.
Achieve Market Share Via Competitive Pricing. As a new market
entrant, Teligent's strategy will be to price its services
competitively to gain market share early. For switched voice services
and other services already provided by the ILEC, the Company expects
to price at a discount. For certain data and bandwidth-intensive
services that may not be provided by competitors or for which there
may exist an underserved market demand, the Company may be able to
price its services at a premium. The Company anticipates that some
ILECs may reduce their prices as increased competition begins to erode
their market share. The Company believes that it will be able to
remain competitive if market prices decline because of its lower
expected network cost. The Company also expects to price its bundled
long distance service at a discount to market prices as a further
incentive to attract potential customers and to broaden its revenue
base.
Rapid Deployment. Teligent intends to take advantage of its
network flexibility and lower incremental capital requirements in
order to quickly roll-out and penetrate its market areas. Teligent
believes that this rapid deployment should allow it to become one of
the first significant facilities-based competitors in many parts of
its market areas. The Company believes that this rapid deployment
should enable it to establish a level of market penetration which will
further enhance the Company's relative cost advantage, attract
additional customers and further enhance its brand reputation.
Exploit Future Growth Opportunities. Teligent intends to
continue building on the capabilities of its networks to expand its
target market and service offerings. Such expansion may include
targeting residential customers in multiple dwelling units as well as
international opportunities, either through joint ventures or by
direct entry.
TELIGENT'S NETWORK ARCHITECTURE
The Company intends to deploy its own 24 GHz fixed wireless
point-to-multipoint broadband local networks to provide last mile
connectivity in its licensed market areas. Prior to commercial
deployment of the point-to-multipoint networks, and where otherwise
economically attractive, the networks may also include point-to-point
links and resold local services. The Company believes that this
flexibility will allow it to accommodate new customers quickly, as
well as expand its addressable customer base. Teligent also expects to
offer long distance service on a resale basis, and intends to connect
each local exchange network to an inter-exchange carrier's ("IXC")
point of presence.
The network equipment will use digital wireless technology to
deliver high quality voice, data and videoconferencing services that
Teligent believes will provide comparable performance to that of fiber
optic-based systems. The Company's networks will also incorporate
encryption and authentication to increase privacy and reduce the
potential for fraud. Each market area is expected to be served by a
voice switching and data routing center. The Company will use a
combination of wired and wireless facilities to connect the center to
the base stations distributed throughout the market area. The base
stations will transmit to and receive signals from wireless equipment
at a customer premise (the "customer premise equipment," or,
"CPE"), allowing transmissions between multiple customer antennas
and a single base station antenna. The customer premise equipment
includes two components: (i) an integrated radio/antenna unit
installed either on the roof, an exterior wall or inside a window of
the customer's building and (ii) the indoor customer interface
equipment installed within the building which is connected to the
internal building wiring. The radio/antenna unit will communicate with
the base station via microwave signal operating within the 24 GHz
band. The base stations will have an average service radius of
approximately three miles (five kilometers), depending on a number of
factors such as power levels used, customer density, local weather
environment and network design. A base station will have the
capability to support customers within a 360-degree coverage area,
depending on line of sight. The modular design of the CPE is intended to
make equipment installation easier and ensure short service activation
intervals.
The Company's point-to-multipoint hardware and network capacity
is expected to be shared among all the customers within the coverage
area of a base station sector. A key feature of the Company's network
architecture will be the future capability to allocate and share
network capacity on an as-needed basis. In the future, Teligent's
system is intended to dynamically allocate spectral bandwidth, and
therefore capacity, among the several customers served by a base
station sector based on individual customer demand enabling a customer
to instantaneously increase or decrease the capacity required.
Traffic between base station sites and the Company's switching
centers will be carried over a backhaul network that will be a
combination of Company-owned wireless microwave links as well as fiber
optic transmission facilities, where appropriate.
Additionally, as customers are added and the backhaul capacity
requirements increase, some of the wireless links initially deployed
may be replaced with additional fiber-based facilities. In such cases,
the wireless equipment may be redeployed elsewhere in the network, in
order to reduce stranded assets.
Teligent expects to deploy digital voice switches and data
switches in each of its principal market areas. Such voice and data
switches will consist of traditional circuit-based systems as well as
more advanced packet and cell-based switching systems. These switching
systems will be engineered to provide interconnection of customer
traffic with other local exchange networks, long distance networks and
the Internet, as well as with other locations the customer may have
within the Teligent network.
The Company plans to have a central Network Operation Center
("NOC") which will monitor its networks 24 hours a day, seven days a
week and provide real-time alarm, status and performance information.
The Company intends to build a back-up NOC facility to further enhance
network reliability. The NOC will provide customers remote circuit
provisioning to ensure service availability. At the NOC, the network
will be managed and maintained on an end-to-end basis using an
integrated Network Management System ("NMS"). The NMS will allow the
Company to monitor various network elements to ensure consistent and
reliable performance. This monitoring capability will be designed to
allow the Company to plan for and conduct preventative maintenance
activities in order to avoid network outages and to respond promptly
to any network disruption that might occur. Teligent's NOC will be
designed to permit enhancements such as providing end customers with
the capability to manage their segments of the network.
DEPLOYMENT STRATEGY
Teligent intends to build out and commercialize its networks based
upon the following strategy:
Integrated Market Research and Base Station Site Optimization.
Within each market area, Teligent will conduct market research and
identify and target specific geographic areas with favorable customer
characteristics. Such areas need not be contiguous or centrally
located since Teligent's stand-alone base stations are intended to be
able to serve geographically dispersed pockets of businesses.
Base Station Site Construction. The Company intends to determine
which potential base station sites offer the best lines of sight, gain
access to those sites on a cost-effective basis and prepare
installation to coincide with customer activations.
Initiate Sales. As base station sites are identified, Teligent's
sales force will target those buildings accessible by line of sight,
prioritize buildings based upon their revenue potential, and then
begin selling Teligent's voice and data services within each building.
This should allow the Company to deploy CPE in most cases only after
signing a customer.
Customer Premise Equipment Installation. When Teligent acquires
customers in a building, two additional sets of equipment will be
deployed. First, a radio/antenna unit (and related equipment) will be
installed on the roof of the customer's building, which will transmit
and receive all of that building's communications back and forth from
a base station site. Due to the small size of the radio/antenna unit
(less than two feet long) and ease of installation, the Company
believes customer installation can be accomplished within
approximately three to five days. Second, equipment will be deployed
at each customer's premise to connect their phone system, PBX or
computer network to the radio on the roof. The Company may, however,
selectively utilize unbundled local loops on an opportunistic basis to
complement the Company's core wireless local loop deployment strategy.
Leverage Capital Deployed. Teligent plans to maximize the return
on its infrastructure in two ways. First, the sales force will be
encouraged to acquire additional customers in "on net" buildings,
which have already installed customer units. Additionally, the Company
will seek to sell incremental products to existing customers.
SALES AND MARKETING
Overview. Teligent plans to address its initial target markets
as a high quality and lower cost single source provider of telephony
services. To develop the market potential of its fixed local wireless
network, the Company has organized its operations into two geographic
regions. Each region has its own Division President in charge of
operations, field service, site acquisition, proactive customer
service and sales and marketing. Teligent believes that the reputation
and quality of its senior management will afford it a critical
advantage in attracting the highest quality sales people as it builds
its sales force throughout its market areas. The extent of sales
activity in each market will depend upon a number of factors including
(i) number of license areas, (ii) geographic size of license areas,
(iii) end user density within licensed areas and (iv) competitive
landscape. In order to gain market share, the Company intends to
competitively price its service by leveraging the network cost
advantages which it expects to achieve as it acquires customers.
Sales Force/Customer Care. Teligent's goal is to complement its
full array of services for small- and medium-sized businesses with a
level of customer service and sales professionalism significantly
higher than that of its principal competitors. The Company seeks to
recruit salespeople with successful experience in competitive
telephony businesses, including individuals with backgrounds in CLECs,
competitive long distance, telecommunications equipment and data
services. The salespeople will have performance incentives through a
structure that ties a significant portion of their compensation to the
actual revenue they produce. In addition, salespeople will be
encouraged to maximize penetration in "on net" buildings. The sales
force will be trained to sell the Company's full product line of
local, long distance, Internet and data services.
This ability to bundle multiple services is intended to attract
customers looking for a single point of contact for their
telecommunications needs. Teligent will emphasize responsive,
proactive service allowing small and medium-sized businesses access to
seven day, 24 hour in-house technical support.
Marketing. The Company plans to supplement its direct sales
force through various marketing plans, including direct mail,
partnership marketing (in specific buildings or associated properties)
and targeted advertising and promotional efforts in Teligent's
coverage areas. In addition, the Company intends to use alternate or
indirect channels of distribution, including an active sales agent
program.
The Company is in the process of creating a centralized marketing
group responsible for developing the Teligent product line and for
ensuring that each of its components and overall package of services
are competitive. Teligent's initial focus is on local exchange service,
but the Company expects that where demand exists, it will bundle additional
product lines, such as resold long distance and Internet access, with its
local service.
Teligent intends to offer multiple product service packages to
business customers. By offering services both as a bundled package
and on a component basis (i.e., local, long distance or Internet
access, individually), Teligent intends to capitalize upon the
potential revenue opportunities in the marketplace. Teligent believes
that this flexible sales strategy should help reduce switching
barriers for those customers who may initially be reluctant to switch
all of their services and vendors at once or for those who have
existing contracts.
SERVICE OFFERINGS
The Company intends to deploy its networks on an initial basis to
support a comprehensive and fully integrated product line that is
designed to meet the broad telecommunications needs of small and
medium-sized business customers. These services will typically
include the basic telephone services, including local and long
distance, and data services that customers have today. Over time, the
Company also expects to offer high-speed data connectivity required
for new applications, such as high-speed Internet access, multimedia,
virtual workgroups, application and document sharing, and two-way
videoconferencing. Teligent intends to address customer demand for
bundled service offerings to provide the convenience of dealing with a
single telecommunications provider.
Teligent intends to provide its local retail services to end
users using its own broadband wireless local networks. However, the
Company will also consider providing its local retail product offering
on a case by case basis using other telecommunications carriers'
transport facilities, such as unbundled local loops from ILECs or
facilities from other CLECs where it can use such facilities to
penetrate the market more quickly and/or cost efficiently. As the
Company extends its wireless local service to such buildings, it
intends to migrate any such customers to its own facilities.
The Company began deployment efforts in Dallas, TX, Los Angeles,
CA and Washington, DC during the fourth quarter of 1997. The Company
currently provides commercial Internet access through fixed wireless
point-to-point broadband systems.
END USER SERVICES
The Company plans to offer an integrated package of services
including local and long distance services (domestic and
international) as well as Internet services, frame relay, voice mail,
conference bridges, videoconferencing, advanced fax management,
integrated single number service, call screening, call forwarding and
other advanced telecommunications services.
Local Exchange Services. Teligent intends to provide a complete
range of local exchange services by developing and implementing its
own nationwide network of central office class switches and related
hardware and software. These services are expected to include basic
local services, access to long distance and intra-LATA switched and
dedicated lines, direct inward dialing, Digital PBX, Centrex and
custom calling services.
Long Distance. As a complement to its local exchange services,
Teligent also plans to offer long distance services as part of a
product bundle to its customers through resale agreements with
national long distance companies. These long distance services will
include domestic intrastate, interstate and international calling,
toll-free services (800, 888), calling card, and conference call
bridging and other enhanced services. When the Company's coverage area
spans multiple LATAs, it plans to use its own facilities to provide
inter-LATA long distance service.
Internet and Data Services. The Company intends to offer
transport for Internet services from the customer premise to an
Internet access point in each city, using the high bandwidth capacity
of its 24 GHz networks. It also intends to offer Internet access
through resale, partnership or outsourcing, as a part of a bundled
offering under the Teligent brand name. These Internet services are
expected to include routing, addressing, domain name service
("DNS"), registration services, network security and fire walls,
intranet services, e-mail, news servers, hosting and peering.
Dedicated Private Line. Teligent intends to provide local
dedicated data access circuits as well as the long distance portion of
those circuits on a resale basis. These lines, which link customers'
LANs together to create MANs and WANs, are used by banks, billing
clearinghouses, advertising agencies, hospitals and other businesses
to exchange large data files as well by any business to connect
offices for file sharing, e-mail and workgroup applications.
WHOLESLAE SERVICES
Although not its core strategy, after penetrating a market
area, the Company may sell excess capacity to generate additional
revenue and increase local network utilization. The marketplace demand
for telecommunications services is experiencing substantial growth as a
result of the increased acceptance and reliance on the Internet by
business users as well as the emergence of bandwidth intensive
applications such as videoconferencing, Internet telephony, and large
data file transfers. The Company may also offer wireless backhaul
services to connect the cell sites of cellular and PCS companies
to their mobile switching centers.
24 GHz WIRELESS LICENSES
The Company is licensed by the FCC to operate point-to-point and
point-to-multipoint 24 GHz fixed wireless systems in 74 SMSAs,
covering over 700 municipalities in the United States, including 320-
400 MHz of spectrum in 27 of the 35 most populous market areas in the
United States, and at least 80 MHz of spectrum in 47 other major
market areas. The following chart lists the Company's license areas in
descending order of size based on the estimated 1994 population of the
market (based on U.S. Census Bureau data and Claritas Inc. data), the
Company's licensed spectrum bandwidth in each market area and the
estimated 1994 number of business employees in each market area (based
on American Business Information Inc. data).
<TABLE>
<CAPTION>
Business
SMSA Bandwidth Employees In
Rank Market Areas (MHz) Population Market Area
<S> <C> <C> <C> <C>
1 New York, NY 400 9,434,000 3,597,000
2 Los Angeles, CA 400 9,132,000 3,229,000
3 Chicago, IL 400 7,538,000 3,113,000
4 Philadelphia, PA 320 4,913,000 1,701,000
5 Detroit, MI 400 4,322,000 1,517,000
6 Dallas, TX 400 4,302,000 1,729,000
7 Houston, TX 400 3,925,000 1,471,000
8 Washington, DC 400 3,850,000 1,693,000
9 San Francisco, CA 320 3,814,000 1,629,000
10 Boston, MA 400 3,194,000 1,436,000
12 Atlanta, GA 400 3,015,000 1,236,000
13 San Diego, CA 320 2,674,000 908,000
15 Minneapolis, MN 400 2,586,000 1,271,000
17 St. Louis, MO 400 2,473,000 893,000
18 Baltimore, MD 320 2,435,000 762,000
19 Phoenix, AZ 400 2,309,000 894,000
20 Seattle, WA 400 2,135,000 894,000
21 Pittsburgh, PA 400 2,100,000 665,000
22 Denver, CO 80 2,069,000 890,000
23 Miami, FL 400 2,058,000 768,000
24 Tampa, FL 400 2,016,000 698,000
26 Cleveland, OH 320 1,848,000 803,000
27 Portland, OR 320 1,573,000 618,000
28 San Jose, CA 240 1,541,000 643,000
29 Cincinnati, OH 240 1,510,000 578,000
30 Kansas City, MO 320 1,509,000 643,000
31 Sacramento, CA 320 1,482,000 442,000
32 Milwaukee, WI 320 1,469,000 660,000
33 San Antonio, TX 320 1,402,000 435,000
35 Indianapolis, IN 320 1,333,000 551,000
36 Columbus, OH 160 1,302,000 586,000
37 Salt Lake City, UT 80 1,214,000 499,000
38 Orlando, FL 80 1,206,000 573,000
39 Buffalo, NY 80 1,201,000 442,000
40 New Orleans, LA 80 1,178,000 469,000
41 Hartford, CT 80 1,154,000 540,000
43 Nashville, TN 80 1,060,000 508,000
44 Norfolk, VA 80 1,040,000 321,000
45 Rochester, NY 80 1,038,000 444,000
46 Memphis, TN 80 1,034,000 470,000
47 Jacksonville, FL 80 1,009,000 433,000
48 Oklahoma City, OK 80 977,000 434,000
49 Greensboro, NC 80 963,000 486,000
50 Louisville, KY 80 931,000 414,000
51 West Palm Beach, FL 80 931,000 316,000
<CAPTION>
Business
SMSA Bandwidth Employees In
Rank Market Areas (MHz) Population Market Area
<S> <C> <C> <C> <C>
52 Las Vegas, NV 80 931,000 445,000
53 Birmingham, AL 80 905,000 386,000
54 Austin, TX 80 884,000 396,000
55 Honolulu, HI 80 881,000 344,000
56 Dayton, OH 80 864,000 389,000
57 Albany, NY 80 851,000 377,000
58 Charlotte, NC 80 840,000 467,000
60 Richmond, VA 80 792,000 369,000
61 Tulsa, OK 80 788,000 321,000
62 Raleigh, NC 80 788,000 385,000
63 Fresno, CA 80 734,000 240,000
65 Tucson, AZ 80 717,000 280,000
66 Allentown, PA 80 713,000 269,000
68 Ventura, CA 80 694,000 223,000
69 Syracuse, NY 80 681,000 298,000
70 Akron, OH 80 680,000 284,000
71 Greenville, SC 80 674,000 301,000
72 El Paso, TX 80 663,000 209,000
75 Omaha, NE 80 631,000 304,000
78 Wilmington, DE 80 609,000 291,000
79 Albuquerque, NM 80 592,000 272,000
80 Springfield, MA 80 581,000 235,000
82 Baton Rouge, LA 80 562,000 218,000
84 Charleston, SC 80 545,000 197,000
86 New Haven, CT 80 528,000 227,000
87 Stockton, CA 80 522,000 165,000
97 Newport News, VA 80 470,000 170,000
120 Santa Barbara, CA 80 378,000 134,000
135 Trenton, NJ 80 330,000 165,000
----------- ----------
TOTAL 130,027,000 51,663,000
=========== ==========
</TABLE>
COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY
LOCAL TELECOMMUNICATIONS MARKET
Competition from ILECs. The local telecommunications market is
intensely competitive for newer entrants and currently is dominated by
the Regional Bell Operating Companies ("RBOCs") and other ILECs. The
Company has not begun to market its point-to-multipoint wireless local
broadband services to potential customers on a widespread basis and is
currently providing point-to-point services on a limited basis. The
Company has not obtained significant market share in any of the areas
where it offers its services or intends to offer services, nor does it
expect to do so in the near future given the size of the local
telecommunications market, the intense competition therein and the
diversity of customer requirements. In each market area in which the
Company is authorized to provide services, the Company competes or
will compete with several other service providers and technologies.
Many of the Company's competitors have long-standing relationships
with customers and suppliers in their respective industries, greater
name recognition and significantly greater financial, technical and
marketing resources than the Company. The Company expects to compete
on the basis of local service features, quality, price, reliability,
customer service and rapid response to customer needs while bundling
local resold long distance and Internet access. The Company faces
significant competition from ILECs, such as the RBOCs. The ILECs have
long standing relationships with their customers, have significant
name recognition and financial resources, have the potential to
subsidize competitive services with revenues from a variety of
business services, and benefit from existing state and federal
regulations that favor the ILECs over the Company in certain respects.
Regulatory decisions and recent legislation, such as the
Telecommunications Act of 1996 (the "Telecommunications Act"), have
reduced barriers to entry into new segments of the industry. In
particular, the Telecommunications Act, among other things, (i)
enhances local exchange competition by preempting laws prohibiting, or
that have the effect of prohibiting, competition in the local exchange
market, by requiring ILECs to provide fair and equal standards for
interconnection, by requiring ILECs to unbundle their facilities and
services, and by requiring ILECs to make certain services available
for resale and (ii) permits an RBOC to compete in the inter-LATA long
distance service market outside of its local territory immediately,
and within its local service territory on a state-by-state basis once
certain market-opening requirements are implemented and entry is
determined to be in the public interest. The Company believes that
these requirements of the Telecommunications Act promote greater
competition and will help provide opportunities for broader entrance
into the local exchange markets. However, as ILECs face increased
competition, regulatory decisions are likely to provide them with
increased pricing flexibility, which in turn may result in increased
price competition. There can be no assurance that such increased price
competition will not have a material adverse effect on the Company's
business, financial condition and results of operations. Nor can there
be any assurance that substantial local exchange competition will
develop in the near future.
A number of companies are developing enhancements to increase the
performance of ILECs' copper wire based legacy networks. These
generally consist of digital subscriber line products, such as ADSL,
HDSL and VDSL. There can be no assurance that the Company will be able
to compete effectively with these enhancements.
Competition from New 24 GHz and Other Fixed Wireless Service
Providers. The Company also faces potential competition from new
entrants to the 24 GHz fixed wireless market, including ILECs, CLECs
and other leading telecommunications companies. The FCC issued an Order
(the "Relocation Order") on March 14, 1997 providing for the relocation of
certain fixed wireless licensees in the 18 GHz band to a reallocated portion
of the 24 GHz band. In the Relocation Order, the FCC announced that it
will conduct a rulemaking proceeding to devise rules for the issuance
of licenses for up to five 80 MHz channels in the 24 GHz spectrum band
in each market except for those licenses already issued to the Company
and other previous 18 GHz licensees. See "Business - Government
Regulation." The grant of additional fixed wireless authorizations by
the FCC in the 24 GHz band could result in increased competition and
diminish the value of the Company's existing fixed wireless
authorizations. The Company believes that any additional 24 GHz
licenses will be made available through an auction. The Company
believes that, assuming that additional authorizations are made
available by the FCC, additional entities having greater resources
than the Company could acquire authorizations at auctions from the FCC
to provide telecommunications services in the 24 GHz band. See
"Business - Government Regulation."
The Company will also face competition from other terrestrial
fixed wireless services, including Multichannel Multipoint
Distribution Service ("MMDS"), 28 GHz Local Multipoint Distribution
Service ("LMDS") and 38 GHz wireless communications systems, 2.8 GHz
Wireless Communications Service ("WCS"), FCC Part 15 unlicensed
wireless radio devices, and other services that use existing point-to-
point wireless channels on other frequencies. Additionally, other
companies have filed applications for global broadband satellite
systems proposed to be used for broadband voice and data services. If
developed, these systems could also present significant competition to
the Company.
The Company faces competition from entities which offer, or are
licensed to offer, 38 GHz services, such as Advanced Radio
Telecommunications, Inc. ("ART"), WinStar Communications, Inc.
("WinStar") and BizTel, Inc. ("BizTel"). Teligent could also face
competition in certain aspects of its existing and proposed businesses
from competitors providing wireless services in other portions of the
radio spectrum, such as CAI Wireless Systems Inc. a provider of
wireless Internet access services, and CellularVision, a provider of
wireless television services which, in the future, also may provide
wireless Internet access and other local telecommunications services.
In many instances, these service providers hold licenses for other
frequencies (such as 28 GHz) that enable them to provide comparable
telecommunications services to those of the Company in geographic
areas that encompass or overlap the Company's market areas.
Additionally, some of these entities include among their stockholders
major telecommunications entities, such as Ameritech with respect to
ART, and Teleport Communications Group, Inc. ("Teleport") with
respect to BizTel. Teleport has acquired BizTel and AT&T has
announced its agreement to acquire Teleport, subject to FCC and other
regulatory approvals. Due to the relative ease and speed of deployment
of fixed wireless-based technologies, the Company could face intense
price competition from these and other wireless-based service
providers. The Company believes that additional entities having
greater resources than the Company could acquire licenses to provide
38 GHz, MMDS, LMDS, WCS, DEMS or other fixed wireless services.
The FCC conducted auctions for 28 GHz LMDS licenses in all
markets for the provision of high capacity, wide-area fixed wireless
point-to-multipoint systems. In addition, the FCC has adopted rules to
auction geographical wide area licenses for the operation of fixed
wireless point-to-point and point-to-multipoint communications
services in the 38 GHz band, although many 38 GHz licenses have
already been issued nationwide. The 28 GHz LMDS auction concluded in
March 1998 and the 38 GHz auction is expected to occur later in 1998.
The Company initially filed an application for and participated in the
early rounds of the LMDS auction, but withdrew from the auction
without acquiring any licenses. The MMDS service, also known
as "wireless cable," also currently competes for metropolitan
wireless broadband services. At present, wireless cable licenses are
used primarily for the distribution of video programming and have only
a limited capability to provide two-way communications needed for
wireless broadband telecommunications services, but there can be no
assurance that this will continue to be the case. The FCC has
initiated a proceeding to determine whether to provide wireless cable
operators with greater technical flexibility to offer two-way
services. Cellular, PCS and other mobile service providers may also
offer fixed services over their licensed frequencies. Finally, the FCC
has allocated a number of spectrum blocks for use by wireless devices
that do not require site or network licensing. A number of vendors
have developed such devices that may provide competition to the
Company, in particular for certain low data-rate transmission
services.
Other Competitors. The Company will also face both local and
long distance competition from AT&T and other IXCs. The Company may
face competition from electric utilities (several of whom have secured
the necessary authorizations to provide local telephone service and
are reportedly in various stages of perfecting and implementing their
business plans), ILECs operating outside their current local service
areas, other IXCs such as MCI and Sprint, and other providers. These
entities provide transmission services using technologies that may
enjoy a greater degree of market acceptance than the Company's
wireless broadband technology in the provision of last mile broadband
services. Moreover, the consolidation of telecommunications companies
and the formation of business alliances within the telecommunications
industry, which are expected to accelerate as a result of the passage
of the Telecommunications Act, could give rise to significant new or
stronger competitors to the Company. There can be no assurance that
the Company will be able to compete effectively in any of its markets.
The Company's Internet access services also are likely to face
significant competition from other ISPs as well as from cable
television operators deploying cable modems, which provide high speed
data capability over installed coaxial cable television networks and
there can be no assurance that such competition will not be
significant. Although cable modems currently are not widely available
and do not provide for data transfer rates that are as rapid as those
which can be provided by the Company's services, the Company believes
that the cable industry may support the deployment of cable modems to
residential cable customers through methods such as price subsidies.
Notwithstanding the cable industry's interest in rapid deployment of
cable modems, the Company believes that in order to provide broadband
capacity to a significant number of business and government users,
cable operators will be required to spend significant time and capital
in order to upgrade their existing networks to a more advanced hybrid
fiber coaxial network architecture. However, there can be no assurance
that cable modems will not emerge as a source of competition to the
Company's Internet business. Further, Internet access services based
on existing technologies such as ISDN and, in the future, on such
technologies as ADSL and HDSL will likely provide additional sources
of competition to the Company's Internet access services.
Additionally, the Company believes that many ILECs and CLECs already
are promoting other Internet access services.
LONG DISTANCE TELECOMMUNICATIONS MARKET
The long distance market has relatively insignificant barriers to
entry, numerous entities competing for the same customers and a high
(and increasing) average churn rate as customers frequently change
long distance providers in response to the offering of lower rates or
promotional incentives by competitors. The Company will compete with
major carriers such as AT&T, MCI, Sprint and WorldCom (which has
agreed to acquire MCI, subject to receipt of necessary government
approvals), as well as other national and regional long distance
carriers and resellers, many of whom own substantially all of their
own facilities and are able to provide services at costs lower than
the Company's expected costs since the Company will generally lease
its access facilities. The Company believes that the RBOCs also will
become significant competitors in the long distance telecommunications
industry after 1998. See "Business - Government Regulation." ISPs
also will compete in this market. The Company believes that the
principal competitive factors affecting its market share will be
pricing, customer service, accurate billing, clear pricing policies
and, to a lesser extent, variety of services. The ability of the
Company to compete effectively will depend upon its ability to
maintain high quality, market-driven services at prices generally
perceived to be equal to or below those charged by its competitors. To
maintain its competitive posture, the Company believes that it must be
in a position to reduce its prices in order to meet reductions in
rates, if any, by others. Any such reductions could adversely affect
the Company. In addition, ILECs have been obtaining additional pricing
flexibility. This may enable ILECs to grant volume discounts to larger
long distance companies, which also would put the Company's long
distance business at a disadvantage in competing with larger
providers.
VENDOR EVALUATION
The Company has the ability to source key network components from
a number of equipment vendors. The Company has initiated a process of
evaluating competing products of several vendors. In July 1997, the
Company issued a Request for Proposal for the Company's 24 GHz
telecommunications network, including radio access and transmission
equipment, switching and network management products and services. The
Company received and has evaluated proposals from several
telecommunication infrastructure integrators and manufacturers. After
this evaluation, the Company selected Northern Telecom, Inc.
("Nortel") as its preferred vendor and systems integrator and
entered into a Network Products Purchase Agreement with Nortel. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - Vendor
Financing." Additionally, in support of this effort, the Company has
entered into agreements with manufacturers specializing in radio
access and transmission equipment to provide technology trials of 24 GHz
point-to-multipoint equipment.
INTELLECTUAL PROPERTY
The Company uses the name "Teligent" as its primary business
name and servicemark. It is the owner of U.S. Reg. No, 1,893,005 -
TELIGENT, which was originally issued on May 9, 1995 to Creative
Integrated Systems, Inc. for various items of communication equipment,
based on use in commerce since January 6, 1994. The Company has
licensed Creative Integrated Systems, Inc. to continue using the mark
in connection with communications equipment.
On April 7, 1997, the Company filed applications to register its
name and logo design in the United States Patent and Trademark Office
for "land based and satellite communications services." First action
on the applications is expected in 1998. The Company reasonably
believes that the applications will mature to registration, but there
is no assurance until the registrations actually issue.
The Company relies upon a combination of licenses,
confidentiality agreements and other contractual covenants, to
establish and protect its technology and other intellectual property
rights. The Company currently has no patents or patent applications
pending. There can be no assurance that the steps taken by the Company
will be adequate to prevent misappropriation of its technology or
other intellectual property or that the Company's competitors will not
independently develop technologies that are substantially equivalent
or superior to the Company's technology. Moreover, although the
Company believes that its business as currently conducted does not
infringe upon the valid proprietary rights of others, there can be no
assurance that third parties will not assert infringement claims
against the Company or that, in the event of an unfavorable ruling on
any such claim, a license or similar agreement to utilize technology
relied upon by the Company in the conduct of its business will be
available to the Company on reasonable terms.
GOVERNMENT REGULATION
OVERVIEW
The Company's fixed wireless broadband services are subject to
regulation by federal, state and local governmental agencies. The
Company has obtained all authorizations and approvals necessary and
appropriate to conduct its operations as currently conducted and
believes that it is in compliance with all laws, rules and regulations
governing its current operations. Nevertheless, changes in existing
laws and regulations, including those relating to the provision of
wireless local telecommunications services via 24 GHz fixed wireless
licenses and/or the future granting of 24 GHz fixed wireless
authorizations, or any failure or significant delay in obtaining
necessary future regulatory approvals, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
At the federal level, the FCC has jurisdiction over the use of
the electromagnetic spectrum (i.e., wireless services) and has
exclusive jurisdiction over all interstate telecommunications
services, that is, those that originate in one state and terminate in
another state. State regulatory commissions have jurisdiction over
intrastate communications, that is, those that originate and terminate
in the same state. Municipalities and other local jurisdictions may
regulate limited aspects of the Company's business by, for example,
imposing zoning and franchise requirements and requiring installation
permits. The Company also is subject to taxation at the federal and
state levels and may be subject to varying taxes and fees from local
jurisdictions.
FEDERAL LEGISLATION
The Telecommunications Act. The Telecommunications Act, enacted
on February 8, 1996, substantially departs from prior legislation in
the telecommunications industry by establishing local exchange
competition as a national policy through the removal of state
regulatory barriers to competition and the preemption of laws
restricting competition in the local exchange market. The
Telecommunications Act, among other things, mandates that ILECs (i)
permit resale of their services and facilities on reasonable and
nondiscriminatory terms and at wholesale rates, (ii) allow customers
to retain the same telephone number ("number portability") when they
switch local service providers, (iii) permit interconnection by
competitors to an ILEC's network at any technically feasible point
that is at least equal in quality to that which the local exchange
carrier provides to itself and pursuant to reasonable and
nondiscriminatory rates and terms, (iv) unbundle their network
services and facilities at any technically feasible point and permit
competitors and others to use these facilities at cost-based and
nondiscriminatory rates and (v) ensure that an end user does not have
to dial any more digits to reach customers of local competitors than
to reach the ILEC's customers to the extent technically feasible
("dialing parity"). The Telecommunications Act also allows RBOCs to
provide in-region inter-LATA services on a state-by-state basis once
certain market-opening requirements are implemented and entry is
determined to be in the public interest. The provisions of the
Telecommunications Act are designed to ensure that RBOCs take
affirmative steps to level the playing field for their competitors so
that others can compete effectively before the RBOC secures in-region
long-distance entry. The FCC, in consultation with the United States
Department of Justice and the states, is given jurisdiction to
determine whether to approve applications for long distance entry.
There can be no assurance, however, that the states and the FCC will
implement the Telecommunications Act in a manner favorable to the
Company and its customers.
Under the Telecommunications Act, states have begun and, in a
number of cases, completed regulatory proceedings to determine the
pricing of unbundled network elements and services, and the results of
these proceedings will determine whether it is economically attractive
to use these elements.
The RBOCs, but not other ILECs, have an added incentive to open
their local exchange networks to facilities-based competition because
Section 271 of the Telecommunications Act provides for the removal of
the current ban on RBOC provision of in-region inter-LATA toll service
and equipment and manufacturing only after meeting certain
requirements. This ban will be removed only after the RBOC
demonstrates to the FCC, which must consult with the Department of
Justice and the relevant state commissions, that the RBOC has (i) met
the requirements of the Telecommunications Act's 14-point competitive
checklist and fully implemented an approved interconnection agreement
with one or more unaffiliated, facilities-based competitors providing
business and residential service somewhere in the state (or that by a
date certain no such competitors have "requested" interconnection as
defined in the Telecommunications Act and the RBOC is offering all of
the elements in the competitive checklist); (ii) demonstrated that it
will provide in-region inter-LATA toll services through a separate
affiliate, which is required for three years, unless extended by the
FCC; and (iii) demonstrated that entry is consistent with the public
interest.
FEDERAL REGULATION
The Telecommunications Act Regulations. The Telecommunications
Act in some sections is self-executing, but in most cases the FCC must
issue regulations that identify specific requirements before the
Company and its competitors can proceed to implement the changes the
Telecommunications Act prescribes. The Company actively monitors all
pertinent FCC proceedings and has participated in some of these
proceedings. The outcome of these various ongoing FCC rulemaking
proceedings or judicial appeals of such proceedings could materially
affect the Company's business, financial condition and results of
operations.
As required by the Telecommunications Act, the FCC adopted, in
August 1996, new rules implementing the interconnection and resale
provisions of the Telecommunications Act (the "Interconnection
Order") which are intended to remove or minimize regulatory, economic
and operational impediments to full competition for local services,
including switched local exchange service. A number of parties filed
an appeal against the Interconnection Order in Federal court seeking
to vacate certain of the rules adopted therein. In a July 18, 1997
decision, the United States Court of Appeals for the Eighth Circuit
vacated significant portions of the Interconnection Order, including
its provisions governing the pricing of local telecommunications
services and unbundled network elements, its unbundling requirements
and its "pick and choose" provision (which enabled a
telecommunications carrier to demand any term of an ILEC's
interconnection contract with another carrier). The Eighth Circuit
also issued an October 14, 1997 decision that vacated an FCC rule that
obligated ILECs, under certain circumstances, to provide combinations
of network elements, rather than provide them individually. This
decision may make it more difficult or expensive for competitors to
use combinations of ILEC elements. Because the Company does not
anticipate widespread use of combinations of elements, the decision
should not have a material adverse effect on its operations. Moreover,
because the decision may increase the cost and decrease the efficiency
of ILEC network element-based competitive approaches, the Company
believes that the decision may comparatively advantage the Company's
entry strategy, which does not heavily rely on the use of ILEC network
elements. The FCC, numerous IXCs and various other parties filed
petitions for certiorari with the U.S. Supreme Court, which accepted
the case for review on January 26, 1998. The Supreme Court is not
expected to issue a decision before the end of 1998. Some of the same
parties and certain other parties also have asked the FCC to
reconsider these and other regulations implementing the
Telecommunications Act. Although the Company believes that the final
outcome of the Eighth Circuit cases, including any further proceedings
or a Supreme Court appeal, will not have a material adverse affect on its
operations, there can be no certainty in this regard.
On December 31, 1997, a United States District Court judge in
Texas held unconstitutional certain sections of the Telecommunications
Act, including Section 271, which prohibits an RBOC from providing
long distance service that originates (or in certain cases terminates)
in one of its in-region states until the RBOC has satisfied certain
statutory conditions in that state and has received the approval of
the FCC. This decision would permit the three RBOCs that are parties
to the case immediately to begin offering widespread in-region long
distance services. Unless overturned on appeal, this decision could
have a material adverse effect on the Company. The District Court has
granted the request of the FCC and certain IXCs for a stay and the FCC
and certain IXCs have filed appeals of the decision with the United
States Court of Appeals for the Fifth Circuit. Although there can be
no assurance as to the outcome of this litigation, the Company
believes that significant parts of the District Court decision may be
reversed or vacated on appeal. To date, three RBOCs have filed a total
of four applications with the FCC for in-region long distance
authority, but the FCC has denied each application. Several entities
have sought reconsideration or appeal of these decisions.
In July 1996, the FCC released rules to permit both
residential and business customers to retain their telephone numbers
when switching from one local service provider to another (known as
"number portability"). RBOCs are required to implement number portability
in the top 100 markets by March 31, 1998 and to complete it by
December 31, 1998. In smaller markets, RBOCs must implement number
portability within six months of a request commencing December 31, 1998.
Other ILECs are required to implement number portability only in those of
the top 100 markets where the feature is required by another ILEC. Various
waivers to extend the implementation date have been filed by other RBOCs,
ILECs, and CLECs. Non-RBOC ILECs are not required to implement number
portability in any additional markets until December 31, 1998, and then only
in markets where the feature is requested by another ILEC.
In addition pursuant to the Telecommunications Act, the FCC
issued new regulations in 1997 regarding the implementation of the
universal service program and the assessment of access charges on
carriers obtaining access to local exchange networks. Both the access
charge and universal service regimes were substantially revised. As a
result of these changes, the costs of business and multiple
residential lines are expected to increase. Several parties have
sought FCC reconsideration or appealed various parts of the new FCC
rules, including the revenue basis on which universal service
contributions are determined. The Company is unable to predict the
final formula for universal service contribution or its own level of
contribution.
FCC Licensing. The Communications Act of 1934 (the
"Communications Act") imposes certain requirements relating to
licensing, common carrier obligations, reporting and treatment of
competition. Under current FCC rules, the recipient of an
authorization for fixed wireless microwave facilities, including the
Company is required to construct facilities to place the station "in
Operation" within 18 months of the date of grant of the
authorization. In the event that the recipient fails to comply with
the construction deadline, the license is terminated absent an
extension of the deadline. Except for those facilities for which the
18-month deadline has not passed, the Company or its predecessor-in-
license constructed facilities in each of their licensed markets to
satisfy this construction deadline. In addition, if a station does not
transmit operational traffic for a consecutive period of twelve months
at any time after construction is complete, or if removal of equipment
or facilities renders the station incapable of providing service, the
license is subject to forfeiture, absent a waiver of the FCC's rules.
The FCC's current policy is to align the expiration dates of all fixed
wireless licenses of a particular service such that they mature
concurrently and, upon expiration, to renew all such licenses for ten
years. The initial term of most currently outstanding fixed wireless
licenses, including the Company's licenses, expires on January 1,
2001. While FCC custom and practice establishes a presumption in favor
of granting the renewal of licenses to licensees, such presumption
requires that the licensee substantially comply with its regulatory
obligations during its license period. The FCC's failure to renew one
or more licenses could have a material adverse effect on the Company's
business, financial condition and results of operations.
Under the terms of its licenses, the Company is classified as a
common carrier, and as such is required to offer service on a non-
discriminatory basis at just and reasonable rates to anyone reasonably
requesting such service. Although the Communications Act prohibits the
Company from unjustly or unreasonably discriminating among its
customers, the statute, as currently interpreted by the FCC, does
permit the Company to reasonably classify its customers and reasonably
differentiate among such classifications. Under the FCC's streamlined
regulation of non-dominant interstate carriers, the Company, as a
non-dominant carrier, is not subject to rate regulation but is required to
maintain tariffs for its interstate common carrier service. The FCC has
recently issued regulations pursuant to which the Company does not need
to file tariffs setting forth its rates, terms, and conditions of service
for interstate exchange access service ("permissive detariffing") and is
currently conducting a rulemaking in which it has proposed prohibiting
tariff filing for such services ("mandatory detariffing"). The
Company's provision of intrastate services, including local exchange
service if the Company should offer it, is subject to regulation by
each state in which the Company provides intrastate services. The
Company has also obtained a "Section 214" authorization from the FCC
authorizing it to provide international facilities-based and resale
telecommunications services between the U.S. and virtually any other
country. The Company must maintain-and currently does have-tariffs
on file with the FCC governing its provisions of interstate and
international telecommunications services.
Transfer of Control of Wireless Licenses. MSI and DSC contributed
their fixed wireless licenses to Teligent, L.L.C., the predecessor
of the Company. In connection with the acquisition of FirstMark, the
Company acquired additional licenses in three SMSAs. The assignment or
transfer of control of licenses issued by the FCC is subject to the
prior consent of the FCC, which consent generally turns on a number
of factors including the identity, background and the legal and
financial qualifications of the assignee and the satisfaction of
certain other regulatory requirements. The FCC granted the
application for the transfer of control of FirstMark's fixed wireless
licenses to Teligent, L.L.C. in July 1997. The FCC granted the applications
to assign the MSI and DSC licenses to Teligent, L.L.C. in October 1997
and transferred control over all such licenses to the Company in November
1997. There were no petitions to deny filed against the FirstMark transfer
of control application or the MSI and DSC assignment applications and
the FCC grant thereof has become final.
Relocation of Licenses to 24 GHz. The FCC issued an Order (the
"Relocation Order") on March 14, 1997 providing for the relocation
of certain fixed wireless licensees in the 18 GHz band to a
reallocated portion of the 24 GHz band, pursuant to a request of the
National Telecommunications and Information Administration ("NTIA")
acting on behalf of the Department of Defense. The Relocation Order
provided for the relocation of these licenses from 100 MHz over 5
channels in the 18 GHz band to 400 MHz over 5 corresponding channels
in the 24 GHz band. On June 24, 1997, the FCC issued a subsequent
order (the "Modification Order") that implemented the Relocation
Order by modifying the affected 18 GHz licenses, including those held
by the Company, to authorize operations at 24 GHz. Pursuant to the
Relocation Order, those 18 GHz fixed wireless operators in the
Washington, DC and Denver, CO areas (including the Company's
Washington, DC, Baltimore, MD and Denver, CO facilities) were required
to relocate to corresponding channels in the 24 GHz band no later than
June 5, 1997. The 18 GHz fixed wireless licensees in all other areas
must relocate to corresponding channels in the 24 GHz band no later
than January 1, 2001. Although the Company is permitted to continue
operations in the 18 GHz band outside of the Washington, DC and
Denver, CO areas until that date, its intention generally is to
convert all of its facilities to 24 GHz band operation as soon as
possible.
The FCC implemented this relocation without notice and comment
procedures in order to give effect to NTIA's request on behalf of the
Department of Defense to protect national security satellite
operations from harmful interference from 18 GHz license stations. A
number of parties have filed petitions with the FCC seeking a number
of remedies including either partial or full reconsideration or review
of one or both of these orders and modification or revocation of the
Company's licenses. These parties argued, among other things, that the
FCC decision should be reversed because the FCC's allocation of 400
MHz of 24 GHz spectrum for licenses was unnecessary and that the FCC
should not have so relocated the fixed wireless licensees without
conducting prior notice and comment rulemaking proceedings. The
Company filed timely responses with the FCC opposing the petitions and
continues to buildout its networks as permitted under its licenses,
the Relocation Order and the Modification Order. In addition, one of
these parties, DirecTV, has filed a petition for rulemaking with the
FCC requesting that the FCC grant permission for DirecTV and others to
construct and operate broadcast satellite uplink facilities in certain
areas on a portion of the 24 GHz band allocated and granted to the
former 18 GHz fixed wireless licensees. The Company has filed a timely
opposition to this rulemaking petition.
The Company cannot determine how the FCC will resolve the
petitions for reconsideration or review of the Relocation Order and
the Modification Order and the DirecTV rulemaking petition. Thus, any
construction or operation at 24 GHz prior to the final resolution of
these petitions is at the Company's risk and expense. If the
Relocation Order or Modification Order was subsequently modified or
reversed, such a modification or reversal could have a material
adverse effect on the Company's business, financial condition and
results of operations. In particular, it cannot be determined whether,
under a modified license relocation, the Company's equipment would be
rendered unusable or usable only after significant expense and delay.
Grant of the DirecTV rulemaking petition could materially and
adversely affect the Company's business, financial condition and
results of operations. If implemented, DirecTV's proposals could
result in the construction and operation of satellite uplink
facilities on 24 GHz frequencies currently allocated to fixed wireless
services, which could interfere with the Company's operations in the
vicinity of these satellite uplink facilities. In addition, in the
Relocation Order the FCC announced that it will commence a rulemaking
proceeding to address future fixed wireless licensing in the 24 GHz
band, which may include proposals to auction available spectrum and to
adopt service rules for 24 GHz operations. There can be no assurance
that the Company's point-to-point and point-to-multipoint equipment as
currently designed will comply with the service rules ultimately
adopted by the FCC.
The FCC's decisions upon reconsideration will be subject to
judicial appeal to a U.S. court of appeals. There can be no assurance
that the FCC will be able to defend any such litigation successfully.
The court may affirm the Relocation Order or any order made by the FCC
upon reconsideration, vacate and remand the matter to the FCC for
initiation of a rulemaking proceeding, or make any other ruling. If
the matter is remanded, the FCC could decide this issue in the same
way or it could make a different decision, which may be adverse to the
Company. Failure by the court to affirm the terms of the Relocation
Order or the Modification Order could have a material adverse effect
on the Company's business, financial condition and results of
operations.
Uncertainty during an appeal period regarding the Company's
prospects and the implications of the result of such litigation may
disrupt the Company's relationships with actual and potential
customers, equipment vendors, lenders or other parties, which could
have a material adverse effect on the Company's business, financial
condition and results of operations.
Teledesic. On September 6, 1996, Teledesic Corporation
("Teledesic") filed a petition seeking the dismissal of then-pending
applications for additional transmission (nodal) stations in seven
licensed MSI fixed wireless markets, and the rescission of existing
licenses, then held by or belonging to MSI or DSC. In its petition,
Teledesic claimed that its then-proposed satellite system was
incompatible with existing licensed terrestrial networks in the 18 GHz
band, that the FCC's initial grants of the fixed wireless licenses to
MSI and DSC was inappropriate, and that MSI and DSC had failed to
construct and operate their licensed facilities in compliance with the
FCC's rules. The Company, MSI and DSC opposed Teledesic's petition in
their respective pleadings filed with the FCC.
In November and December 1996, the FCC inspected each of the MSI
and DSC fixed wireless facilities and determined that the companies
had complied with all applicable construction and operational
requirements. In letters dated April 2, 1997, and April 8, 1997, the
FCC notified MSI and DSC, respectively, that the FCC "concluded its
Inquiry" and "determined not to take any further action" in
connection with the investigation. Moreover, on February 24, 1997, the
Company, MSI and DSC entered into an agreement pursuant to which
Teledesic agreed to withdraw its petition and reimburse MSI, DSC and
the Company, respectively, for some of the costs related to the
relocation of their 18 GHz fixed wireless systems to the 24 GHz band,
conditioned upon the FCC's relocation of 18 GHz fixed wireless
licensees to the 24 GHz band.
In their petitions for reconsideration of the Relocation Order,
a number of parties raised substantially similar arguments to those
initially raised by Teledesic against the validity of the licenses now
held by, and the constructed fixed wireless facilities now owned by,
the Company. The Company, MSI and DSC have opposed those claims.
On March 21, 1997, Teledesic withdrew its petition against MSI's
pending applications and MSI's and DSC's licenses.
Alien Ownership. Under the Communications Act, the FCC may, if
it finds the public interest will be served, refuse to grant common
carrier licenses to (or may revoke the licenses of) an entity directly
or indirectly controlled by non-U.S. citizens or by a corporation, the
capital stock of which is more than 25% owned or voted by non-U.S.
citizens or companies. The Communications Act also prohibits any
entity, more than 20% of whose capital stock is owned or voted by non-
U.S. citizens or companies, from receiving a license for common
carrier services. Since February 9, 1998, the FCC rules have provided
for a rebuttable presumption that greater than 25% indirect ownership
or control of a common carrier licensee by citizens or companies from
a country that is a signatory to the Telecommunications Annex to the
World Trade Organization General Agreement on Trade in Services ("WTO
Agreement") serves the public interest. The 20% restriction on direct
foreign ownership will still apply. The Company is not aware of alien
ownership of its outstanding stock that would cause it to be in
violation of the Communications Act. However, a significant amount of
the Company's and Associated's common stock is held in nominee name
and, accordingly, the Company is not aware of the citizenship of the
actual beneficial owners of such shares. With regard to investors
from countries that are not signatories to the WTO Agreement, the FCC
continues to apply an "effective competitive opportunities"
("ECO") test in the exercise of its statutory discretion to permit
indirect alien ownership of more than a 25% interest in a common
carrier licensee. Under this ECO test, if U.S. investors are permitted
to own an interest greater than 25% in a communications carrier
offering similar services in the alien investor's home market and such
market satisfies certain other open competition criteria, the FCC will
generally permit that alien to own an equivalent interest in a U.S.-
licensed common carrier. Other factors, such as the promotion of
competition in the U.S. market and U.S. national security concerns,
may affect this determination.
STATE REGULATION
Many of the Company's services will be classified as intrastate
services subject to state regulation. All of the states where the
Company operates, or will operate, require some degree of state
regulatory commission approval to provide certain intrastate services.
In most states, intrastate tariffs are also required for various
intrastate services, although the Company is not typically subject to
price or rate of return regulation for tariffed intrastate services.
The Company has received state authorization to provide facilities-
based local services in California, Colorado, the District of
Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas,
Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, Ohio,
Texas, Virginia and Wisconsin. In summary, the Company has obtained
state authorization in 45 markets and has applied for State
authorization in the remaining 29 markets where it holds FCC licenses.
The Telecommunications Act requires each state to remove
barriers to entry and barriers to competition for ILEC competitors.
While no assurance can be given as to how quickly and how effectively
each state will act to implement this legislation, many state
authorization processes are being streamlined and the authorization
time frames shortened considerably. Not all states have a streamlined
process and in some jurisdictions the Company may experience delays.
Under the Telecommunications Act, if a request is made by the
Company, ILECs have a statutory duty to negotiate interconnection and
access arrangements in good faith for the Company's provision of local
service. The Company has reached comprehensive negotiated
interconnection agreements with Ameritech (Illinois and Wisconsin),
Bell Atlantic (D.C., Maryland and Virginia), BellSouth (Florida and
Georgia), GTE (California, Florida, Texas and Virginia), Pacific Bell
(California) and Southwestern Bell (Texas). The Company is in the
process of negotiating comprehensive interconnection agreements with
Bell Atlantic (Delaware, Massachusetts, New Jersey, New York and
Pennsylvania), Sprint (Florida) and US West (Colorado).
During these negotiations, the Company or the ILEC may submit
disputes to the state regulatory commissions for mediation and, after
the expiration of the statutory negotiation period set forth in the
Telecommunications Act, the parties may submit outstanding disputes to
the states for arbitration. To date the Company has not submitted any
disputes to the states for mediation or arbitration. The Company has
been working with state regulatory commissions, as well as the FCC and
other governmental entities, to encourage the adoption of rules
facilitating rooftop and building access for competitive carriers.
LOCAL REGULATION
The Company will need to interact with local governments in a
variety of ways. How diverse local governments will exercise
traditional functions, including zoning, permitting and management of
rights of ways, and address the expansion of telecommunications
competition and varying means of entry in particular, is uncertain.
The kinds and timing of approvals required to install antennas and
conduct other aspects of the Company's business varies among local
governments and may also vary with the specific technology or
equipment configuration used by the Company.
While the Telecommunications Act permits local governments to
manage rights of way, the scope of that authority, including the
circumstances when fees can be charged and the amount of such charges,
has already been the subject of numerous disputes between
telecommunications carriers and such local governments. In addition,
some local governments have been requiring substantial filings and
review before telecommunications carriers can operate in their
licensed areas and have also required the payment of significant
franchise fees or taxes. Some of these disputes involving licensing of
telecommunications carriers, antenna siting, and rights of way are in
litigation and more administrative and court litigation is likely. The
prohibition of entry barriers set forth in the Telecommunications Act
and the FCC's power to preempt such barriers have been implicated in
such litigation. On December 12, 1997, Teligent accepted under protest
a franchise with the City of Dallas, which is similar to other Dallas
franchises agreed to by other CLECs. On the same date, Teligent filed
a Complaint for Declaratory Judgment against the City of Dallas in the
United States District Court for the Northern District of Texas
alleging that Teligent does not own, construct, install or maintain
facilities located in public rights of way, and that the City of
Dallas is therefore prohibited both by federal and state law from
barring Teligent's competitive entry into the Dallas market unless
Teligent first accepts a franchise. There can be no assurance as to
the outcome of the litigation. The FCC has recently preempted, and
thereby prevented enforcement of, certain state and local regulations
that had the effect of inhibiting local competition. Any inability or
unwillingness by the FCC to preempt additional state and local
regulations in a timely fashion could have a material adverse impact
on the Company.
CERTAIN TRANSACTIONS
THE REORGANIZATION
Immediately prior to the consummation of the Offerings,
Teligent, L.L.C. merged with and into the Company with the Company
surviving the merger (the "Reorganization"). The Company was
organized in September 1997 for the purpose of succeeding to the
business of Teligent, L.L.C. In connection with the Reorganization,
the Company's Certificate of Incorporation and By-laws were amended in
their entirety. As a result of the Reorganization, all of Teligent,
L.L.C.'s member interests were converted into and became shares of
common stock of the Company, as follows: (i) the interest of MSI was
converted into 21,436,689 shares of Series B-1 Common Stock; (ii) the
interest of Telcom Ventures was converted into 17,206,210 shares of
Series B-2 Common Stock; (iii) the interest of NTTA&T was converted
into 2,313,360 shares of Series B-3 Common Stock (further described
below); and (iv) the interest of the former sole stockholder of
FirstMark (the "FirstMark Sole Stockholder") was converted into
1,831,410 shares of Class A Common Stock. In each case, the number of
shares of common stock received by each member of Teligent, L.L.C.
pursuant to the Reorganization was proportionate to such member's
percentage interest in Teligent, L.L.C. immediately prior to the
Reorganization. The Company received no additional consideration in
connection with such conversion of member interests into shares of
common stock pursuant to the Reorganization.
THE ADDITIONAL SPONSOR EQUITY CONTRIBUTIONS
In connection with the Strategic Equity Investment (see "The
Strategic Equity Investment" immediately below), the original members
of Teligent, L.L.C. made additional cash contributions to Teligent,
L.L.C. in the aggregate amount of $60 million (the "Additional
Sponsor Cash Contribution"). In addition, on November 7, 1997,
Associated agreed to contribute to Teligent, Associated Communications
of Los Angeles ("ACLA"), a wireless competitive access provider,
and, in consideration of such agreement, received an approximate 1%
increase in its member interest in Teligent, L.L.C.
THE STRATEGIC EQUITY INVESTMENT
NTT Purchase Agreement. The Company and NTT entered into the NTT
Purchase Agreement on September 30, 1997, providing for NTT to make
the Strategic Equity Investment in two stages. At the First Closing,
which occurred on November 13, 1997, NTT, through NTTA&T, purchased
for $40 million a 5% member interest in Teligent, L.L.C. (calculated
as of the date of the NTT Purchase Agreement after giving pro forma
effect to the consummation of the FirstMark Acquisition and the
Additional Sponsor Equity Contributions, but before giving effect to
the consummation of the Equity Offering and the conversion of
existing equity incentive awards into stock options in connection with
the Reorganization, which as a result of the Reorganization was
converted into 2,313,360 shares of Series B-3 Common Stock). At the
Second Closing, which occurred on November 26, 1997, NTT, through
NTTA&T, purchased for $60 million 3,470,040 shares of Series B-3
Common Stock representing a 7.5% equity interest in the Company.
After giving effect to the Equity Offering, NTT's equity interest in
the Company became 11.0%.
Immediately prior to the consummation of the Equity Offerings,
the Company entered into a Stockholders Agreement with NTTA&T and the
other stockholders of the Company (other than the FirstMark Sole
Stockholder) as of such time, which provides for certain rights and
obligations with respect to the ownership and governance of the
Company. See "Item 13. Certain Relationships and Related
Transactions-Stockholders Agreement." The Stockholders Agreement
also provides for certain rights and obligations of the parties
thereto relating to the Company's compliance with the foreign
ownership restrictions under the Communications Act of 1934 and the
rules, regulations and decisions of the FCC.
Registration Rights Agreement. In connection with the Strategic
Equity Investment, Teligent and NTTA&T entered into a Registration
Rights Agreement (the "Registration Rights Agreement"). The
Registration Rights Agreement provides that NTTA&T may demand
registration (each, a "Demand Registration") of the shares of common
stock received by NTTA&T pursuant to the Reorganization ("NTT
Registrable Securities") at any time after the six month anniversary
after the consummation of the Equity Offering (subject to a maximum
of three Demand Registrations in total), provided such demand is (i)
made by holders of at least 20% of the outstanding NTT Registrable
Securities or (ii) with respect to NTT Registrable Securities the
aggregate offering price of which, net of underwriting discounts and
commissions, is not less than $20 million. Upon such request, the
Company is required to use its reasonable best efforts to register
under The Securities Act of 1933, as amended (the "Securities Act"),
subject to certain holdback periods, NTT Registrable Securities held
by the requesting holders and any other holders who desire to sell
common stock pursuant to such Demand Registration. In addition, the
Registration Rights Agreement provides that, subject to certain
limitations, holders of NTT Registrable Securities may participate in
any registration of common stock by the Company under the Securities
Act (other than on Form S-4 or S-8 under the Securities Act) (each, a
"Piggyback Registration). Holders of NTT Registrable Securities
also have the right, subject to certain holdback periods and other
limitations, after the six month anniversary of the consummation of
the Equity Offering to demand that the Company effect a registration
on Form S-3 under the Securities Act, if available, (a "Form S-3
Registration") of all or part of their NTT Registrable Securities, so
long as the anticipated aggregate offering price for such NTT
Registrable Securities is in excess of $10 million.
Under the Registration Rights Agreement, the Company is required
to pay all registration expenses (other than underwriting discounts
and commissions and fees and disbursements of counsel of the selling
stockholders) with respect to all required Demand Registrations and
Form S-3 Registrations and up to three Piggyback Registrations. Under
the Registration Rights Agreement, the Company is required to
indemnify the selling stockholders, and the Company may request as a
condition to effecting any registration indemnification from the
selling stockholders, against certain liabilities in respect of any
registration statement covered by the agreement. NTTA&T is permitted
under the Registration Rights Agreement to assign its rights
thereunder to any person to which it transfers no less than 20% of the
NTT Registrable Securities. The Registration Rights Agreement
terminates with respect to particular NTT Registrable Securities when
(i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and
such securities have been disposed of under such registration
statement, (ii) such securities have been transferred pursuant to Rule
144, (iii) such securities have been otherwise transferred or disposed
of, and new certificates therefor not bearing a legend restricting
further transfer shall have been delivered by the Company, and
subsequent transfer or disposition of them does not require
registration or qualification under the Securities Act or any similar
state law then in force, or (iv) such securities have ceased to be
outstanding.
Technical Services Agreement. Pursuant to the NTT Purchase
Agreement and in satisfaction of a condition to the First Closing, the
Company entered into a technical services agreement (the "TSA") with
NTT America, Inc., a wholly owned subsidiary of NTT ("NTT America"),
whereby NTT America will provide certain technical services to the
Company relating to network design and implementation. The term of the
TSA commenced on December 1, 1997, and terminates on the fifth
anniversary of the commencement date, unless extended or earlier
terminated as provided therein (the "Term"). After the initial five-
year period, the Term is automatically extended for additional one-
year periods unless either party gives notice of termination within
sixty days prior to the then applicable termination date. Under the
TSA, during the first two years of the Term (the "Initial Phase"),
the Company is required to pay NTT America a fee in the amount of $4
million per year. The TSA provides that the fees payable by the
Company to NTT America during each of the remaining three years of the
Term shall be negotiated annually based upon the scope of technical
services to be provided under an annual work plan (the "Work Plan")
to be prepared by the Company and NTT America. The parties have the
right to terminate the TSA in the event they cannot agree on any
annual Work Plan or the fees payable therefor.
THE FIRSTMARK ACQUISITION
In October 1997, pursuant to the Company's acquisition of
FirstMark, the Company acquired all of the stock of FirstMark for an
aggregate purchase price of approximately $10.5 million in cash and a
5% member interest in Teligent, L.L.C. FirstMark held licenses for
fixed wireless channels in the 24 GHz band (which were relocated from
the 18 GHz band) in the Los Angeles and San Francisco, CA and New
York, NY markets. See "Business - Government Regulation - Federal
Regulation - Transfer of Control of Wireless Licenses."
VENDOR FINANCING
The Company has entered into the Network Products Purchase
Agreement with Nortel for the purchase of certain telecommunications
system equipment, software and services to be purchased by the
Company. The Company has also entered into the Financing Commitment
Letter with Nortel setting forth the anticipated terms and conditions
under which Nortel will provide the Nortel Loans which will be used to
finance the purchase of the equipment and provide working capital. The
Financing Commitment Letter expires May 31, 1998. The Company is
currently negotiating a credit facility with a consortium of banks
under which the Company will finance all purchases made under the
Network Products Purchase Agreement. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
EMPLOYEES
As of March 20, 1998, the Company had a total of 474 employees.
ITEM 2. PROPERTIES
Teligent's principal executive offices are located at Vienna,
Virginia and consist of approximately 75,000 square feet held under a
lease, which expires on March 1, 2002. The Company has entered into a
lease, expiring in 2008, for a network operating center consisting of
approximately 50,000 square feet of space located in Herndon, Virginia.
The Company will lease and has been leasing space in and around each
of its licensed areas that is necessary to house switches, other
equipment and personnel. The Company believes that these facilities
are adequate for its needs at the present time. See Note 10 to the
Financial Statements for additional information regarding future
minimum lease commitments.
ITEM 3. LEGAL PROCEEDINGS
Other than the license and regulatory proceedings described
under "Business - Government Regulation," the Company is not
currently a party to any legal proceedings, which, individually or in
the aggregate, the Company believes will have a material adverse
effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this
Annual Report on Form 10-K, there were no matters submitted to a vote
of security holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Teligent has authorized two classes of Common Stock, Class A Common
Stock and Class B Common Stock. The Company's Class A Common Stock was
initially offered to the public on November 21, 1997 and is listed on
The Nasdaq Stock Market under the symbol "TGNT." Teligent's Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"), is
not traded on any exchange. As of March 20, 1998, there were three
stockholders of record of the Class B Common Stock. The following table
sets forth for the periods indicated the high and low sales price
information of the Class A Common Stock as reported on The Nasdaq
National Market System. Such transactions reflect inter-dealer
quotations, without retail markup, markdown or commission and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK
------------
HIGH LOW
---- ---
<S> <C> <C>
November 21, 1997 to December 31, 1997 $27 $21 1/2
</TABLE>
As of March 20, 1998, the last sale price of the Class A Common
Stock as reported on The Nasdaq National Market was $33.00 per share.
As of March 20, 1998 there were 111 record holders of Teligent's Class
A Common Stock, which number does not include stockholders who
beneficially own shares held in street name by brokers.
Teligent has not paid any cash dividends on its Common Stock in
the past and does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The terms of the indentures relating
to the Company's 11 1/2% Senior Notes due 2007 and the Company's 11 1/2%
Discount Notes due 2008 restrict the ability of the Company to pay
dividends on Common Stock, as further described in Management's
Discussion and Analysis of Financial Condition and Results of
Operations, as well as in Note 13 to the Company's Financial Statements
included in Item 14 elsewhere in this Annual Report on Form 10-K.
On November 21, 1997, the Commission declared effective the
Company's Registration Statement on Form S-1 (Registration No. 333-37381)
relating to the Equity Offering, pursuant to an Underwriting Agreement
dated November 20, 1997 (the "Underwriting Agreement") between Teligent
and Merrill Lynch & Co., Salomon Brothers Inc., Bear Stearns & Co. Inc.
and Goldman, Sachs & Co., as representatives of the Underwriters named
therein (the "Underwriters"). The Equity Offering was consummated on
November 26, 1997. The shares of Class A Common Stock were offered to
the public at $21.50 per share or an aggregate offering price of $136.0
million. Proceeds to the Company, after deducting underwriting discounts
and commissions but before deducting expenses estimated at $1.5 million,
was $125.7 million. The expenses incurred in connection with the
offering were attributable to legal and accounting fees, printing costs
and other filing and offering costs. The Company has used the proceeds
of the Equity Offering, together with proceeds from the Senior Notes
Offering, to fund capital expenditures and general working capital
requirements.
On February 20, 1998, the Company completed an offering (the
"Discounted Notes Offering") pursuant to Rule 144A under the Securities
Act, of $440 million 11 1/2% Senior Discount Notes due 2008 (the "Discount
Notes"). The Discount Notes carry zero-coupon interest until March 1,
2003, after which the Discount Notes pay interest at 11 1/2% payable March
1 and September 1 through March 1, 2008. The Discount Notes were sold at
an aggregate price of $250.7 million, and the Company received
approximately $243.1 million net proceeds, after deductions for offering
expenses. The Discount Notes were purchased by Merrill Lynch, Pierce,
Fenner & Smith Incorporated; Goldman, Sachs & Co.; Salomon Brothers Inc.;
and TD Securities USA Inc.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31,
1997 and 1996 and for the year ended December 31, 1997 and the periods
from March 5, 1996 (date of inception) to December 31, 1997 and 1996
were derived from the Company's audited financial statements and should
be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's audited
financial statements and the related notes thereto, included elsewhere in
this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
March 5, 1996
Year Ended (date of inception) to
December 31, December 31,
------------ ------------
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
(in thousands, except share and per share data)
Statement of Operations Data:
Revenues $ 3,311 $ 4,697 $ 1,386
Cost and expenses:
Cost of services 4,785 6,410 1,625
Sales, general and administrative 43,466 53,048 9,583
Stock-based compensation 84,043 86,821 2,778
Depreciation and amortization 6,454 6,618 164
------- ------- ------
Total costs and expenses 138,748 152,897 14,150
------- ------- ------
Operating loss (135,437) (148,200) (12,764)
Interest and other income 3,242 3,252 10
Interest expense (5,859) (6,739) (879)
------- ------- ------
Net loss $ (138,054) $ (151,687) $ (13,633)
======= ======= ======
Other Data:
Net loss per share outstanding $ (2.94) $ (3.25) $ (0.29)
Weighted average common
shares outstanding 46,950,860 46,638,160 46,257,709
Modified EBITDA (1) $ (41,940) $ (50,762) $ (8,822)
Cash used in operating
activities (34,428) (40,474) (6,047)
Cash used in investing
activities (114,587) (118,296) (3,709)
Cash provided by financing
activities 572,613 583,671 11,058
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
(in thousands)
Balance Sheet Data:
Cash and cash equivalents $ 424,901 $ 1,303
Working capital (deficit) 441,316 (6,978)
Property and equipment, net 8,186 3,545
Total assets 596,380 5,145
Long-term debt, less current portion 300,000 --
Stockholders' equity (deficit) 274,146 (3,575)
</TABLE>
(1) Modified EBITDA consists of earnings before interest, taxes,
depreciation, amortization, non-cash charges for stock-based
compensation and for the amortization of notes receivable from
Executive. While not a measure under generally accepted accounting
principles ("GAAP"), EBITDA (earnings before interest, taxes,
depreciation and amortization) is a measure commonly used in the
telecommunications industry and is presented to assist in understanding
the Company's operating results. Although EBITDA should not be construed
as a substitute for operating income determined in accordance with GAAP,
it is included herein to provide additional information with respect to
the ability of the Company to meet future debt service, capital
expenditures and working capital requirements. See the Financial
Statements and the notes thereto. As all companies and analysts do not
calculate these non-GAAP measurements in the same manner, the amount may
not be comparable to other calculations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for any historical information contained herein, the
matters discussed in this Annual Report on Form 10-K contain certain
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors including, but not limited to, economic, key employee,
competitive, governmental and technological factors affecting the
Company's growth, operations, markets, products, services, licenses and
other factors discussed in the Company's other filings with the
Securities and Exchange Commission. These factors may cause the actual
results, performance or achievements of the Company, or industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-
looking statements.
GENERAL
The following discussion and analysis is based upon the financial
statements of the Company from its inception on March 5, 1996 to
December 31, 1997 and should be read in conjunction with the Financial
Statements and notes thereto contained elsewhere in this Annual Report
on Form 10-K.
OVERVIEW
Teligent intends to capitalize on a convergence of technological,
regulatory and market developments to capture revenues in the estimated
$110 billion business telecommunications market. Teligent's goal is to
be a premier facilities-based provider of telecommunications solutions
to small and medium-sized businesses. The Company intends to provide
cost-effective, high bandwidth connectivity in order to offer an integrated
package of local and long distance telephone service, high-speed data
connectivity, Internet access and videoconferencing.
The Company's business commenced on March 5, 1996, and the
Company has generated only nominal revenues from operations to date.
Prior to the transfer by MSI and DSC of their fixed wireless licenses
to the Company in October 1997, revenues and cash flows associated
with customers using the fixed wireless licenses were accounted for by
MSI and DSC. Accordingly, Teligent's historic revenues principally
reflect certain management and administration services to MSI and DSC
in connection with the development, construction and operation of
their 18 GHz and subsequently 24 GHz fixed wireless networks. The
Company's primary activities have focused on the acquisition of
licenses and authorizations, the acquisition of building access
rights, the hiring of management and other key personnel, the raising
of capital, the acquisition of equipment, the development of operating
systems and the negotiation of interconnection agreements.
The Company has experienced significant operating and net
losses and negative operating cash flow to date and expects to
continue to experience operating and net losses and negative operating
cash flow until such time as it develops a revenue-generating customer
base sufficient to fund operating expenses. After the Company
initiates service in a significant number of markets, the Company
expects to achieve positive operating margins over time by increasing
the number of revenue-generating customers and providing additional
capacity for its customers without significantly increasing related
capital expenditures, costs of building access rights and other
operating costs. Over time, the Company believes that its cost
structure will be further enhanced as the majority of its network
deployment costs will consist of electronics, which tend to decline in
price through time as economies of scale are achieved. The Company
expects that operating and net losses and negative operating cash flow
will increase significantly as the Company implements its growth
strategy. See "--Liquidity and Capital Resources."
FACTORS AFFECTING FUTURE OPERATIONS
The Company's primary activities to date have focused on the
Acquisition of licenses and authorizations, the acquisition of building
access rights, the hiring of management and other key personnel, the
raising of capital, the acquisition of equipment, the development of
operating systems and the negotiating of interconnection agreements.
The Company's ability to provide commercial service on a widespread basis
and to generate revenues and positive operating cash flow will depend
on its ability to, among other things, (i) develop its operational and
support systems, (ii) acquire appropriate building access for its
operations, (iii) obtain state authorizations to operate as a CLEC and
an IXC in its market areas and any other required local authorizations,
(iv) commercialize its 24 GHz point-to-multipoint technology on a market-
by-market basis, (v) attract and retain an adequate customer base,
(vi) raise additional capital, (vii) attract personnel and (viii) enter
into an implement interconnection agreements with ILECs. Given the
Company's limited operating history, there can be no assurance that it
will be able to achieve these goals, generate sufficient revenues to make
principal and interest payments on its indebtedness, or compete successfully
in the telecommunications industry.
Although fixed wireless point-to-point technology has been in use
for a significant period of time, two-way point-to-multipoint technology
has only been deployed on a limited basis, and not at the 24 GHz frequency
(other than in connection with the Company's trial locations). The Company
has selected point-to-multipoint technology because the Company believes it
will offer several advantages over other technologies. However, the
Company's point-to-multipoint technology has not been tested on a commercial
basis and may not perform as expected or provide the advantages expected by
the Company.
REVENUES
Target Market and Penetration. Teligent's wireless licenses
cover approximately 3.7 million U.S. businesses and 26.7 million
business lines in 74 of the most populous U.S. metropolitan market
areas. The Company intends to focus its marketing efforts on small and
medium-sized businesses with 5 to 350 telephone lines. Teligent's
market research indicates that a significant portion of its target
customer base is currently dissatisfied with its ILEC service. To
address this market opportunity, Teligent plans to initially focus its
sales efforts on business customers whose needs are not well served by
fiber-based services and whose bandwidth needs are not adequately met
by copper-based services.
The Company has compiled geographic databases of commercial
buildings, business establishments and multi-tenant units. These
databases will be used to optimize network deployment as well as
target sales and marketing efforts in order to maximize capital
efficiency. In addition, by using this data, the Company plans to
measure its performance by market segment as it grows and then use
this analysis to optimize deployment of its network in the future.
Service Offering. Teligent initially intends to derive the
majority of its revenues from local switched voice and data
communications services directly provided to end user customers.
Teligent also intends to offer an integrated package of local and long
distance telephone services, value-added services, high speed data
connectivity, Internet access and videoconferencing. As a result of
regulatory constraints, local and long distance services have
historically been purchased separately. Due to changes in the
regulatory environment, the Company believes business customers will
increasingly seek to purchase local and long distance service from the
same provider. Where economically attractive, the Company may also
enter into arrangements through which other carriers could resell
Teligent's services to their own customers.
Pricing. Teligent's pricing structures will vary according to
service. Switched voice service revenues will typically consist of two
types of charges: a fixed charge for access to the network and
additional charges based on actual usage. Data service revenues will
more commonly consist solely of fixed charges as the result of the
current industry practice of providing service on a dedicated basis.
In the future, the Company believes that its wireless local networks
will be able to offer advanced functions, which would enable data
services to be provided on an as-needed basis instead of on a
dedicated basis. As a result, Teligent expects to be able to price its
data services on a usage basis, which may prove more economical and
attractive to potential customers than dedicated pricing, enabling
Teligent to differentiate itself in the marketplace.
As a new market entrant, Teligent's strategy will be to price its
services competitively to gain market share early. For switched voice
services and other services already provided by the ILEC, the Company
expects to price at a discount. For certain data and bandwidth-
intensive services that may not be provided by competitors or for
which there may exist an underserved market demand, the Company may be
able to price its services at a premium. The Company anticipates that
some ILECs may reduce their prices as increased competition begins to
erode their market share. The Company believes that it will be able to
remain competitive if market prices decline because of its lower
expected network cost. The Company also expects to price its bundled
long distance service at a discount to market prices as a further
incentive to attract potential customers and to broaden its revenue
base.
Churn. Similar to other telecommunications providers, the
Company expects to encounter customer churn as its customer base
grows. The Company believes that it will be able to mitigate churn
through its competitive pricing, ability to provide last mile local
loop service through its own networks, which will enhance its ability
to ensure high quality service by minimizing its reliance on the ILEC
for maintenance or equipment upgrades, and its bundled service
offering. In the event of customer churn, the Company's customer
premise equipment will be able to be redeployed at other customer
premises thereby reducing the risk of stranded assets.
NETWORK RELATED COSTS
In addition to the capital expenditures described below,
additional costs are required to operate and maintain the networks,
including: real estate leases for switching centers, base station
sites and customer sites; preparation, installation, operation and
maintenance of switching centers, base station sites and individual
customer radio links, as well as customer premise equipment; leasing
of backhaul facilities between base station sites and switching
centers; network operation center facility expense; the cost to
interconnect and terminate traffic with other network providers;
software licensing fees; and network design and base station
configuration planning.
Site Leases. Site lease costs, particularly customer rooftop
lease costs, may represent a substantial ongoing operating expense.
Teligent has developed a detailed strategy to minimize these costs.
First, as part of its sales strategy, the Company will focus its
marketing efforts in targeted buildings where site leases are being or
have already been acquired. Multiple customers located in the same
building can therefore share a single rooftop antenna, as opposed to
having individual customers dispersed across multiple buildings, each
of which would require an individual antenna and a rooftop lease.
Second, Teligent is exploring alternative approaches to building
access.
Base Station Sites. Base station sites will primarily be
located on rooftops of existing buildings. The Company anticipates
that it will be able to utilize existing structures more frequently
than PCS and cellular providers, which cover areas that Teligent does
not intend to prioritize, such as highways and residential streets,
where there may be a lack of suitable existing structures. Rather, the
Company expects that most of its target customers will be located in
business districts which contain existing commercial buildings
suitable for base station sites, thereby minimizing site construction
costs.
Installation and Maintenance. The Company will require a
significant number of network installation and maintenance personnel
for each market. As the Company's customer base grows, so will its
utilization of switching centers, the base station to switch transport
network and base station sites, all of which require regular
maintenance. While certain customer premise maintenance will be simple
enough for customers to perform themselves, Company technicians will
still be required to perform customer site maintenance and service
changes.
Base Station to Switch Transport. Traffic between base station
sites and the Company's switching centers will be carried over a
combination of Company-owned wireless microwave links as well as
hybrid fiber optic transmission facilities, where appropriate.
Additionally, as customers are added and the base station to switch
transport capacity requirements increase, some of the wireless links
initially deployed may be replaced with additional fiber-based
facilities. In such cases, the wireless equipment may be redeployed
elsewhere in the network, in order to reduce stranded assets.
Interconnection Costs. Because the vast majority of local
telecommunications users are currently served by ILECs, local calls
originating on Teligent's network will most likely be to other parties
served by an ILEC. In such cases, Teligent will be required to pay
interconnection fees to connect calls to subscribers on the ILEC's
network. Additionally, the Company expects to lease capacity from
other network providers to carry much of its long distance and
Internet traffic. As a facilities-based local access provider,
Teligent will earn access charges for long distance services it
provides to local customers on its network, thereby significantly
enhancing its operating margins. The Company believes that this will
become an added competitive advantage as it expands its revenue base
by providing an increasing portion of long distance services.
COST OF OPERATIONS
Teligent will incur operating costs common to all
telecommunications providers including customer service and technical
support, information systems, billing and collections, general
management and overhead expense, office leases, bad debt expense and
administrative functions. Those functional areas driven by headcount,
such as customer service, will increase gradually as required by
customer demand. Other areas, particularly information and billing
systems, may require significant upfront capital expenditures and
operating costs to the extent that the Company purchases or creates
its own infrastructure. Because Teligent lacks any legacy systems,
the Company believes that it has the opportunity to develop systems
that provide greater functionality and flexibility than many existing
operators.
The Company's experienced management team has demonstrated past
success in building and managing each of these functional areas.
Company management is currently designing, developing and hiring the
necessary staff for all of its operational departments. Management
anticipates that centralized staff and operations will decrease as a
portion of the Company's operating expenses over time. As the Company
commercializes more markets and the customer base grows, the number of
market-specific workers is expected to grow to represent the majority
of the Company's employees. However, certain functions such as
customer service call centers, network operations monitoring and
billing and site planning are likely to remain centralized in order to
achieve economies of scale.
The success of the Company depends, in large part, upon the
continuing contributions of its key technical, marketing, sales and
management personnel. The Company's future success is also dependent
upon its continuing ability to attract and retain other highly
qualified personnel. Competition for such personnel is intense,
and the Company's inability to attract and retain additional key
employees could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance
that such key personnel will continue to be employed by the Company or
that the Company will be able to attract and retain qualified personnel
in the future.
Sales and Marketing Costs. Teligent intends to employ a
significant direct sales force to focus on the end user. The
salespeople will have performance incentives through a structure that
will link a significant portion of each person's compensation to the
actual revenue produced by that individual. Particularly in the first
few years, the sales force will target the specific geographic areas
covered by newly constructed base station sites. As the network's
geographic coverage expands, Teligent expects it will broaden its
marketing and advertising activities. In addition, to enhance
profitability and maximize benefits of network architecture,
salespeople will be encouraged to maximize penetration in "on net"
buildings that already have installed CPE. The Company also intends to
use alternate or indirect channels of distribution, including a sales
agent program.
Software and Development Costs. The Company expects to incur
significant costs for rights to the software used within the wireless
local loop, switching and network management portions of its network.
The Company will incur significant software-related costs as it builds
and maintains its advanced information systems to support functions
such as billing and customer care.
Stock-based Compensation. The Company granted Company
Appreciation Rights ("CARs") to Alex Mandl and Appreciation Units to
employees and directors (collectively "Equity Awards"). See note 4
to the financial statements, "Stock-based Compensation." These
Equity Awards were considered to be variable awards due to certain
provisions thereof, and therefore gave rise to compensation expense.
In connection with the Offerings, the Equity Awards were converted,
effective as of the consummation of the Offerings, into stock options
of Teligent, Inc. having the same vesting schedule, vesting rights and
term as the applicable Equity Award converted. This conversion
created a measurement date whereby the variable Equity Awards were
converted to nonvariable stock options. The intrinsic value of the
Equity Awards upon conversion to stock options resulted in non-cash
compensation expense of $186.3 million, of which $84.0 million and
$2.8 million were recorded in 1997 and 1996, respectively, and
additional non-cash expense of up to $99.5 million will be expensed
over the remaining vesting period of the options as follows: $25.2 million
per year through 2000, $21.4 million in 2001, and $2.5 million in 2002.
DEPRECIATION AND AMORTIZATION
The Company depreciates and amortizes its property and equipment
using the straight line method over the estimated useful life of the
assets ranging from five to ten years for equipment and the lesser of
the life of the asset or the lease term for leasehold improvements.
FCC licenses are amortized over fifteen years.
The Company uses certain property and equipment to provide
service to customers on an 18 GHz frequency. However, the Company's
future business plans are to deploy a 24 GHz frequency network in its
capacity as a telecommunications provider. As such, the Company has
recorded, as a component of depreciation expense in 1997, an
impairment loss of $5.0 million, which represents the difference
between the net book value of the assets prior to the impairment loss
and the estimated future cash flows to be derived by the assets.
CAPITAL EXPENDITURES
The Company's principal capital expenditure requirements involve
the purchase and installation of CPE, base stations, network switches
and switch electronics and network operations center expenditures.
Customer Premise Equipment. The purchase and installation of CPE
is the largest single capital expense component in Teligent's business
plan, and represents a success-based capital expenditure. Success-
based capital expenditures afford Teligent greater flexibility in its
business plan and reduce the risk of deploying equipment and capital
which are not associated with customers and revenues. While a certain
amount of equipment must initially be installed at each base station,
the majority of the equipment (and cost) will depend upon the number
of customers acquired. As more customers are loaded onto a given base
station area, the initial base station equipment will be augmented
with additional sectors, radios, antennas and modems to meet customer
demand.
The Company's CPE costs include an integrated radio/antenna unit,
modem(s), power supply, multiplexer and router equipment, line
interface cards, and cables and installation materials. Portions of
the CPE costs can also be shared among multiple customers in the same
building, thereby reducing the capital expenditures required per
customer. In addition, in the event of customer churn, the Company's
CPE can be redeployed at other customer premises thereby reducing
stranded assets.
Base Station Site. A base station will be able to serve
customers within a 360-degree coverage area, subject to lines of
sight. Teligent expects its average coverage radius will be
approximately three miles (five kilometers), depending on local
conditions. A base station will typically comprise four to eight
sectors, each of which cover a radial section of the service area
depending on coverage and capacity requirements. Each sector requires
one or more radio/antenna units and modems, depending on the system
deployed. Construction costs per base station are typically higher
than are construction costs per customer site. The Company expects
that its sites will typically be built on top of buildings as opposed
to towers constructed by the Company.
Base Station to Switch Transport. Teligent will transport
traffic between its base stations and switching sites. To the extent
the Company uses wireless transport rather than leased fiber, it will
incur capital expenditures as opposed to operating costs.
Switching. Switching costs include traditional circuit-based
switches, line cards for interfacing with the backhaul networks and
with the networks of other carriers, packet- and cell-based switching
systems, such as ATM and Frame Relay switches, power systems, and
environmental maintenance equipment. The Company expects to eventually
deploy a switch in each of its markets and thereafter will be able to
add increased switching capacity by adding more ports to each existing
switch. Accordingly, the cost structure for switches is expected to
have both a fixed and variable cost component.
BUSINESS DEVELOPMENT, CAPITAL EXPENDITURES AND ACQUISITIONS
From inception through December 31, 1997, expenditures for
property and equipment total $13.7 million. In addition, the Company
has incurred significant other costs and expenses in the development
of its business and has recorded cumulative losses from inception
through December 31, 1997 of approximately $151.7 million. This amount
includes $86.8 million of non-cash compensation, consisting of
expenses associated with the Equity Awards. In October 1997, the
Company consummated its acquisition of FirstMark, whereby it acquired
all of the capital stock of FirstMark, which holds additional FCC
authorizations and licenses, for an aggregate purchase price (before
related expenses) of approximately $42 million which consisted of
$10.5 million in cash and a 5% member interest in the predecessor to
the Company, Teligent, L.L.C (which such member interest was
subsequently converted to 1,831,410 shares of Class A Common Stock in
the Company as a result of the Merger.) The Company may, when and if
the opportunity arises, acquire other spectrum rights or related
businesses, incur expenses in the development of new technologies and
expand its fixed wireless broadband services into new market areas.
YEAR 2000
While the Year 2000 considerations are not expected to materially
impact the Company's internal operations, they may have an effect on some
of the Company's customers and suppliers, and thus indirectly affect
the Company. It is not possible to quantify the aggregate cost to the
Company with respect to customers and suppliers with Year 2000 problems,
although the Company does not anticipate it will have a material adverse
impact on its business.
RESULTS OF OPERATIONS
Prior to the transfer by MSI and DSC of their fixed wireless
licenses to the Company, revenues and cash flows associated with
customers using the fixed wireless licenses were accounted for by MSI
and DSC. Accordingly, the Company's historic revenues principally
reflect certain management and administration services to MSI and DSC
in connection with the development, construction and operation of
their 18 GHz and subsequently 24 GHz fixed wireless networks.
Additionally, Teligent has been or will be reimbursed by MSI and DSC
for the cost of certain services provided by Teligent prior to the
transfer by MSI and DSC of their fixed wireless licenses to Teligent,
in connection with the construction and operation of the fixed
wireless links related to the 18 GHz and 24 GHz licenses. During the
fourth quarter, the fixed wireless licenses previously owned by MSI
and DSC were contributed to the Company, and the management service
arrangements related to these licenses ended.
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE PERIOD MARCH 5, 1996
(INCEPTION) TO DECEMBER 31, 1996
For the twelve months ended December 31, 1997, the Company
generated revenues of approximately $3.3 million principally from
services provided to MSI and DSC, including $2.7 million of management
and other services primarily provided to MSI and DSC, and $0.6 million
from equipment leases.
For the period March 5, 1996 (inception) to December 31, 1996,
the Company generated revenues of $1.4 million principally from
services provided to MSI and DSC, including $1.2 million of management
and other services primarily provided to MSI and DSC, and $0.2 million
from equipment leases.
For the year ended December 31, 1997, the Company incurred
operating expenses (other than interest expense) of approximately
$138.7 million, including $4.8 million relating to the cost of
services, $43.5 million of sales, general and administrative expenses,
primarily due to payroll and consulting costs relating to the ,
commencement of operations of the Company, and $84.0 million of non-
cash expense associated with the Equity Awards. Interest expense for 1997
was $5.9 million, due to borrowings under a Revolving Credit Agreement
(terminated in November 1997) and a $300 million public debt offering
which occurred in November 1997. Interest and other income for 1997
was $3.2 million, primarily as a result of interest earned on cash and
investments. Depreciation and amortization for 1997 was $6.5 million
due to higher capital expenditures, an impairment loss included in
depreciation of $5.0 million and amortization of intangibles acquired
in the year.
For the period March 5, 1996 (inception) to December 31, 1996,
the Company incurred operating expenses (other than interest expense)
of approximately $14.1 million, including $1.6 million relating to the
cost of services and $9.6 million of sales, general and
administrative expenses, primarily due to payroll and consulting costs
relating to the commencement of operations of the Company, and
$2.8 million of non-cash expense associated with the Equity Awards.
Interest expense for the period ending December 31, 1996 was
$0.9 million, primarily due to the loan structuring fee for a certain
Revolving Credit Agreement, which such Revolving Credit Agreement was
subsequently terminated by the Company in November 1997. The
Company expects to generate significant operating and net losses for
the next several years.
LIQUIDITY AND CAPITAL RESOURCES
Unlike other new wireless entrants that have expended
considerable capital to acquire licenses, the majority of Teligent's
licensed spectrum was contributed by MSI and DSC, and Teligent has no
outstanding liabilities for license purchases. The development of the
Company's business and deployment of its services and systems will
require significant capital to fund capital expenditures, working
capital, debt service and operating losses. The Company's principal
capital expenditure requirements involve the purchase and installation
of CPE, base stations, network switches and switch electronics and
network operations center expenditures and information systems,
platforms and interface. The Company intends to offer its integrated
package of services in at least 10 market areas by the end of 1998 and
30 by the end of 1999, and subsequently in all of its 74 currently
licensed market areas. Based on the Company's current business plan,
the Company anticipates its existing cash balances, together with the
Vendor Financing and proceeds from its Discount Notes Offering, each
as defined below, will be sufficient to fund the Company's capital
requirements through December 2000. Actual capital requirements may
vary based upon the timing and success of the Company's roll-out. If
demand for the Company's services is lower than expected, the Company
expects to be able to reduce demand-driven capital expenditures such
as CPE and switch electronics. If the Company accelerates
implementation of its network roll-out, the Company may be required to
obtain additional financing earlier than anticipated.
The Company expects that its capital requirements after December
2000 will require it to obtain additional financing, which may include
commercial bank borrowings, additional vendor financing or the sale or
issuance of equity and debt securities either through one or more
offerings or to one or more strategic investors. There can be no
assurance that the Company will be successful in raising sufficient
additional capital at all or on terms acceptable to the Company.
Because the Company's cost of rolling-out its networks and
operating its business, as well as the Company's revenues, will depend
on a variety of factors (including the ability of the Company to meet
its roll-out schedules, the ability of the Company to negotiate
favorable prices for purchases of network equipment, the number of
customers and the services for which they subscribe, the nature and
penetration of new services that may be offered by the Company,
regulatory changes and changes in technology), actual costs and
revenues will vary from expected amounts, possibly to a material
degree, and such variations are likely to affect the Company's future
capital requirements. Accordingly, there can be no assurance that the
Company's actual capital requirements will not exceed the anticipated
amounts described above. Further, the exact amount of the Company's
future capital requirements will depend upon many factors, including
the cost of the development of its networks in each of its markets,
the extent of competition and pricing of telecommunications services
in its markets, the acceptance of the Company's services and the
development of new products.
INITIAL PUBLIC COMMON STOCK OFFERING
In November 1997, the Company completed an initial public
offering of 6,325,000 shares of Common Stock at $21.50 per share,
raising approximately $125.7 million of net proceeds, after deducting
approximately $10.3 million of offering expenses.
PUBLIC DEBT OFFERING
In November 1997, the Company issued $300 million of 11 1/2%
Senior Notes due 2007 (the "Senior Notes".) The Company used
approximately $93.9 million of the net proceeds of this offering to
purchase a portfolio of U.S. Treasury securities which are classified
as restricted cash and investments on the balance sheet, and have been
pledged as collateral for the payment of interest on the Senior Notes
through December 1, 2000. Interest on the Senior Notes accrues at a
rate of 11 1/2% per annum and is payable semi-annually on June 1 and
December 1, commencing June 1, 1998.
DISCOUNT NOTES OFFERING
On February 20, 1998, the Company completed an offering (the
"Discount Notes Offering") of $440 million 11 1/2% Senior Discount
Notes due 2008 (the "Discount Notes"). The Discount Notes carry
zero-coupon interest until March 1, 2003, after which the Discount
Notes pay interest at 11 1/2% per annum payable March 1 and September 1,
through March 1, 2008. The Company received approximately
$243.1 million net proceeds from the Discount Notes Offering, after
deductions for offering expenses of approximately $7.6 million.
VENDOR FINANCING
Teligent has the ability to source key network components from a
number of equipment vendors. Unlike many cellular and PCS networks,
fixed wireless networks can be constructed using equipment from
different manufacturers because customers do not roam between base
stations. Teligent believes that the flexibility provided by vendor
diversity will assist in ensuring an adequate and prompt supply of
equipment at attractive prices.
The Company has entered into the Network Products Purchase
Agreement with Nortel for the purchase of certain telecommunications
system equipment, software and services (collectively, the
"Deliverables"). The Company has also entered into a commitment
letter with Nortel setting forth the anticipated terms and conditions
under which Nortel will provide loans in an aggregate amount of up to
$780 million (the "Nortel Loans") which will be used to finance the
purchase of the Deliverables and provide working capital (the
"Financing Commitment Letter"). The Financing Commitment Letter
expires May 31, 1998 and the Company is currently negotiating a new
credit facility with a consortium of banks under which the Company
will finance all purchases made under the Network Products Purchase
Agreement. The purchase and sale of certain Deliverables from Nortel
has commenced in advance of the signing of this agreement.
HISTORICAL CASH FLOWS
To develop its networks, the Company has relied upon several
sources for its cash flow. The Company received cumulative cash
contributions of approximately $70.4 million from MSI and DSC. MSI and
DSC also lent $15.0 million to Alex J. Mandl in connection with his
employment by the Company for the Company's benefit. The Company used
$42.5 million of the Additional Sponsor Cash Contributions to repay
the outstanding balance of the Revolving Credit Agreement. In
November 1997, the Company received net proceeds of cash contributions
totaling $99.0 million (net of transaction expenses) from NTT pursuant
to a Securities Purchase Agreement, and the Company received an
additional $414.3 million of net proceeds from its public debt and
equity offerings. The Company used $93.9 million of the net proceeds
from the debt offering to purchase a portfolio of U.S. Treasury
Securities, pledged as collateral for the payment of interest on the
Senior Notes through December 1, 2000.
From inception through December 31, 1997, the Company used $40.5
million of cash in its operating activities and $118.3 million of cash
in its investing activities. At December 31, 1997, the Company had
working capital of $441.3 million and cash (including cash
equivalents) of $424.9 million, as compared to a working capital
deficit of $7.0 million and cash of $1.3 million at December 31, 1996.
The increase in working capital from December 31, 1996 to December 31,
1997 is primarily a result of the sponsor cash contributions and the
Offerings. The buildout of the Company's networks and the marketing
of its services will require significant capital and operating
expenditures.
The Company's total assets increased from $5.1 million as of
December 31, 1996 to $596.4 million at December 31, 1997, due
primarily to cash from the Additional Sponsor Cash Contributions and
the Offerings. Property and equipment, net of accumulated
depreciation, comprised $3.5 million of total assets at December 31,
1996, and $8.2 million at December 31, 1997.
The Company used cash in operations of $6.0 million for the
period March 5, 1996 (date of inception) through December 31, 1996,
primarily due to the loss from operations for the period offset by the
current liabilities at December 31, 1996. For the year ended December
31, 1997 the Company used cash in operations of $34.4 million, due
primarily to the operating loss for the period offset by non-cash
stock-based compensation and current liabilities at December 31, 1997
The Company used cash in investing activities of $3.7 million for
the period March 5, 1996 (date of inception) to December 31, 1996
relating to the purchase of property and equipment. For the year ended
December 31, 1997, the Company used $114.6 million in investing
activities, consisting primarily of $10.0 million relating to the
purchase of property and equipment, $10.5 million of payments relating
to the acquisition of FirstMark and $93.9 million related to the
purchase of U.S. Treasury securities which are pledged as collateral
for the payment of interest on the Senior Notes through December 1,
2000.
The Company's cash flows provided by financing activities for the
period March 5, 1996 (date of inception) to December 31, 1996 were
$11.1 million, consisting of cash capital contributions from MSI and
DSC of $9.1 million, and borrowings under the Revolving Credit
Agreement of $2.0 million. Cash flows provided by financing activities
for the year ended December 31, 1997 amounted to $572.6 million,
consisting primarily of $160.3 million of capital contributions from
MSI, DSC and NTT, and $414.3 million of net proceeds from the Equity
Offering and the offering of the Senior Notes, after costs of $21.7
million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements and supplementary data,
together with the report of the independent auditor, are included or
incorporated by reference elsewhere herein. Reference is made to the
"Index to Financial Statements and Financial Statement Schedule"
following the signature pages hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement for the
Company's 1998 Annual Meeting of Stockholders. If the registrant does
not file a definitive proxy statement with the SEC on or before April
30, 1998, the registrant will, on or before April 30, 1998, file an
amendment to this Form 10-K containing the Part III information.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement for the
Company's 1998 Annual Meeting of Stockholders. If the registrant does
not file a definitive proxy statement with the SEC on or before April
30, 1998, the registrant will, on or before April 30, 1998, file an
amendment to this Form 10-K containing the Part III information.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement for the
Company's 1998 Annual Meeting of Stockholders. If the registrant does
not file a definitive proxy statement with the SEC on or before April
30, 1998, the registrant will, on or before April 30, 1998, file an
amendment to this Form 10-K containing the Part III information.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement for the
Company's 1998 Annual Meeting of Stockholders. If the registrant does
not file a definitive proxy statement with the SEC on or before April
30, 1998, the registrant will, on or before April 30, 1998, file an
amendment to this Form 10-K containing the Part III information.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
Balance Sheets, December 31, 1997 and 1996
Statements of Operations for the year ended December 31,
1997 and the periods from March 5, 1996 (date of inception) to
December 31, 1997 and 1996
Statements of Stockholders' Equity (Deficit) for the period from
March 5, 1996 (date of inception) to December 31, 1997
Statements of Cash Flows for the year ended December 31,
1997 and the periods from March 5, 1996 (date of inception)
to December 31, 1997 and 1996
Notes to Financial Statements
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or not
required or because the required information is incorporated
herein by reference or included in the financial statements or
notes thereto included elsewhere in this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of
1997.
(c) Exhibits. The following exhibits are filed as a part of this
Annual Report on Form 10-K:
3.1 Form of Certificate of Incorporation of Registrant, filed as Exhibit 3.1
to the Company's Registration Statement on Form S-1 (Registration
No. 333-37381), dated November 26, 1997, and incorporated herein by
reference.
3.2 Form of By-laws of Registrant , filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
4.1 Form of Stockholders Agreement, filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
4.2 Form of Indenture between the Registrant, as issuer, and First Union
National Bank, as Trustee, relating to Registrant's Senior Notes due
2007, including form of Note, filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
4.3 Form of Pledge Agreement between Registrant, as issuer, and First
Union National Bank, as Escrow Agent, relating to Registrant's
Senior Notes due 2007, filed as Exhibit 4.3 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
4.4 Form of Indenture between the Registrant, as issuer, and First Union
National Bank, as Trustee, relating to Registrant's Senior Discount
Notes due 2008, including form of Note.
4.5 Form of Certificate for the Class A Common Stock, filed as Exhibit
to the Company's Registration Statement on Form S-1 (Registration
No. 333-37381), dated November 26, 1997, and incorporated herein by
reference.
10.1 Employment Agreement, dated August 19, 1996, between Associated
Communications, L.L.C. and Alex J. Mandl, filed as Exhibit 10.1 to
the Company's Registration Statement on Form S-1 (Registration No.
333-37381), dated November 26, 1997, and incorporated herein by
reference.
10.2 Stock Contribution Agreement, dated as of March 10, 1997, among
Associated Communications, L.L.C., FirstMark Communications, Inc.
and Lynn Forester, filed as Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
10.3 Securities Purchase Agreement, dated as of September 30, 1997, by and
among Teligent, L.L.C., Microwave Services, Inc., Digital Services
Corporation, and Nippon Telegraph and Telephone Corporation, filed
as Exhibit 10.3 to the Company's Registration Statement on Form S-1
(Registration No. 333-37381), dated November 26, 1997, and
incorporated herein by reference.
10.4 Form of Registration Rights Agreement, by and among Teligent, L.L.C.
and Nippon Telegraph and Telephone Corporation, filed as Exhibit
to the Company's Registration Statement on Form S-1
(Registration No. 333-37381), dated November 26, 1997, and
incorporated herein by reference.
10.5 Form of Technical Services Agreement, by and among Teligent, L.L.C. and
NTT America, Inc. , filed as Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
10.6 Agreement, dated September 29, 1997, among Teligent, L.L.C., Digital
Services Corporation, Telcom-DTS Investors, L.L.C., Microwave
Services, Inc., The Associated Group, Inc. and certain other
parties, filed as Exhibit 10.6 to the Company's Registration
Statement on Form S-1 (Registration No. 333-37381), dated November
26, 1997, and incorporated herein by reference.
10.7 Agreement and Plan of Merger, dated as of October 6, 1997, by and
between Teligent, Inc. and Teligent, L.L.C. , filed as Exhibit 10.7
to the Company's Registration Statement on Form S-1 (Registration
No. 333-37381), dated November 26, 1997, and incorporated herein by
reference.
10.8 Form of Lease Agreement, dated as of July 22, 1997, for the 8065
Leesburg Pike, Vienna, Virginia office space lease between NHP
Incorporated and Teligent, L.L.C. , filed as Exhibit 10.8 to the
Company's Registration Statement on Form S-1 (Registration No. 333-
37381), dated November 26, 1997, and incorporated herein by
reference.
10.9 Form of Teligent, Inc. 1997 Stock Incentive Plan, filed as Exhibit 10.9
to the Company's Registration Statement on Form S-1 (Registration
No. 333-37381), dated November 26, 1997, and incorporated herein by
reference.
10.10 Network Products Purchase Agreement, dated December 11, 1997, by and
between Northern Telecom Inc. and Teligent, Inc. *
10.11 Financing Commitment Letter of Intent, dated October 28, 1997, by and
between Northern Telecom Inc. and Teligent, Inc, filed as Exhibit
to the Company's Registration Statement on Form S-1
(Registration No. 333-37381), dated November 26, 1997, and
incorporated herein by reference.
10.12 Promissory Note, dated February 1, 1997, by Kirby G. Pickle, Jr. to
Associated Communications, L.L.C. , filed as Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (Registration No. 333-
37381), dated November 26, 1997, and incorporated herein by
reference.
10.13 Promissory Notes, each dated October 29, 1997, by Abraham L. Morris to
Teligent, L.L.C. , filed as Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
10.14 Promissory Note, dated August 5, 1997, by Laurence E. Harris to
Associated Communications, L.L.C. , filed as Exhibit 10.12 to the
Company's Registration Statement on Form S-1 (Registration No. 333-
37381), dated November 26, 1997, and incorporated herein by
reference.
10.15 Promissory Note, dated April 7, 1997, by Steven F. Bell to Associated
Communications, L.L.C. , filed as Exhibit 10.14 to the Company's
Registration Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by reference.
10.16 Registration rights agreement dated as of March 6, 1998, by and between
Teligent, Inc., and Microwave Services, Inc.
21.1 Significant Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
27.1 Financial Data Schedule (filed only electronically with the Securities
and Exchange Commission)
* - Portions of this document have been omitted pursuant to a request
for confidential treatment.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELIGENT, INC
(Registrant)
Date: March ___, 1998. By:
------------------------
Alex J. Mandl
Chairman of the Board, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date: March 30, 1998 By: /s/Alex J. Mandl
------------------------
Alex J. Mandl
Chairman of the Board, Chief
Executive Officer and Director
Date: March 30, 1998 By: /s/Abraham L. Morris
------------------------
Abraham L. Morris
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Date: March 30, 1998 By: /s/Cindy L. Tallent
------------------------
Cindy L. Tallent
Vice President and Controller
(Principal Accounting Officer)
Date: March 30, 1998 By: /s/Myles P. Berkman
------------------------
Myles P. Berkman
Director
Date: March 30, 1998 By: /s/David J. Berkman
------------------------
David J. Berkman
Director
Date: March 30, 1998 By: /s/William H. Berkman
------------------------
William H. Berkman
Director
Date: March 30, 1998 By: /s/Donald H. Jones
------------------------
Donald H. Jones
Director
Date: March 30, 1998 By: /s/Tetsuro Mikami
------------------------
Tetsuro Mikami
Director
Date: March 30, 1998 By: /s/Rajendra Singh
------------------------
Rajendra Singh
Director
TELIGENT, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Ernst & Young LLP, Independent Auditors ........... F-2
Balance Sheets, December 31, 1997 and 1996 .................. F-3
Statements of Operations for the year ended December 31, 1997
and the periods from March 5, 1996 (date of inception) to
December 31, 1997 and 1996................................ F-4
Statements of Stockholders' Equity (Deficit) for the period from
March 5, 1996 (date of inception) to December 31, 1997 ...... F-5
Statements of Cash Flows for the year ended December 31, 1997
and the periods from March 5, 1996 (date of inception) to
December 31, 1997 and 1996 ................................ F-6
Notes to Financial Statements ............................... F-7
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Teligent, Inc.
We have audited the accompanying balance sheets of Teligent, Inc., (a
development stage company) (formerly Teligent, L.L.C.) as of December
31, 1997 and 1996, and the related statements of operations, and
stockholders' equity (deficit) and cash flows for the year ended
December 31, 1997, and for the periods from March 5, 1996 (date of
inception) to December 31, 1997 and 1996. The financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Teligent,
Inc., (formerly Teligent, L.L.C.) at December 31, 1997 and 1996, and
the results of its operations and its cash flows for the year ended
December 31, 1997, and for the periods from March 5, 1996 (date of
inception) to December 31, 1997 and 1996, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Vienna, Virginia
February 27, 1998
TELIGENT, INC.
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $424,900,715 $ 1,302,612
Prepaid expenses and other current assets 7,087,268 147,073
Restricted cash and investments 30,372,962 -
----------- ---------
Total current assets 462,360,945 1,449,685
Property and equipment, net 8,185,899 3,544,949
Restricted cash and investments 64,702,148 -
Intangible assets, net 60,354,191 -
Other assets 777,085 150,695
----------- ---------
Total assets $596,380,268 $ 5,145,329
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 16,577,277 $ 3,002,179
Accrued interest and other 4,467,473 646,972
Revolving line of credit - 2,000,000
Accrued company appreciation rights - 2,778,165
----------- ---------
Total current liabilities 21,044,750 8,427,316
11 1/2% Senior Notes, due 2007 300,000,000 -
Other non-current liabilities 1,189,296 292,548
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock - -
Common stock 525,827 -
Member contributions - 24,058,158
Additional paid-in capital 436,307,243 -
Deficit accumulated during
the development stage (151,686,848) (13,632,693)
----------- ----------
285,146,222 10,425,465
Notes receivable from Executive (11,000,000) (14,000,000)
----------- ----------
Total stockholders' equity (deficit) 274,146,222 (3,574,535)
----------- ----------
Total liabilities and stockholders'
equity (deficit) $596,380,268 $ 5,145,329
=========== ==========
</TABLE>
See notes to financial statements
TELIGENT, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from March 5, 1996
(date of inception) to
December 31,
------------
Year Ended
December 31,1997 1997 1996
---------------- ---- ----
<S> <C> <C> <C>
REVENUES:
Management fees and other services
provided to members $ 3,278,254 $ 4,664,596 $ 1,386,342
Wireless communication services 32,745 32,745 -
----------- ----------- ----------
Total revenues 3,310,999 4,697,341 1,386,342
COSTS AND EXPENSES:
Cost of services 4,785,589 6,410,595 1,625,006
Sales, general and administrative
expenses 43,465,732 53,048,369 9,582,637
Stock-based compensation 84,042,581 86,820,746 2,778,165
Depreciation and amortization 6,453,632 6,617,683 164,051
----------- ----------- ----------
Total costs and expenses 138,747,534 152,897,393 14,149,859
----------- ----------- ----------
Loss from operations (135,436,535) (148,200,052) (12,763,517)
Interest and other income 3,241,837 3,251,932 10,095
Interest expense (5,859,457) (6,738,728) (879,271)
----------- ----------- -----------
Net loss $(138,054,155) $(151,686,848) $(13,632,693)
=========== =========== ===========
Net loss per share $ (2.94) $ (3.25) $ (0.29)
=========== =========== ============
Weighted average common shares
Outstanding 46,950,860 46,638,160 46,257,709
=========== =========== ============
</TABLE>
See notes to financial statements
TELIGENT, INC.
(a development stage company)
STATEMENTS OF AND STOCKHOLDERS' EQUITY (DEFICIT)
Period from March 5, 1996 (date of inception) to
December 31, 1997
<TABLE>
<CAPTION>
Capital /----- Common Stock -----/
Contributions A B-1
------------- ---------------- --------
<S> <C> <C> <C>
Balance at March 5, 1996
(date of inception) $ - $ - $ -
Member capital contributions 24,058,158
----------- ------- -------
Balance at December 31, 1996 24,058,158 - -
----------- ------- -------
Contribution of licenses from members 8,497,006
Acquisition 31,500,000
Cash contributions 100,300,612
Conversion of member interests
to capital stock (164,355,776) 18,314 214,367
Public stock offering 63,250
----------- ------ -------
Balance at December 31, 1997 $ - $81,564 $214,367
=========== ====== =======
<CAPTION>
/-------------- Common Stock --------------/
B-2 B-3 Total
------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1996 $ - $ - $ -
Contribution of equity prior to
public offering 34,700 34,700
Conversion of member interests
to capital stock 172,062 23,134 427,877
Public stock offering 63,250
------- ------ -------
Balance at December 31, 1997 $ 172,062 $57,834 $525,827
======= ====== =======
<CAPTION>
Additional Receivable
Paid-in Accumulated From
Capital Deficit Executive
--------- ----------- ----------
<S> <C> <C> <C>
Balance at March 5, 1996
(date of inception) $ - $ - $ -
Notes receivable from Executive (15,000,000)
Amortization of notes receivable
from Executive 1,000,000
Net loss (13,632,693)
----------- ----------- -----------
Balance at December 31, 1996 - (13,632,693) (14,000,000)
----------- ----------- ----------
Contribution of equity prior to
public offering 59,965,300
Conversion of member interests
to capital stock 163,927,899
Conversion of CARs and Appreciation
Units to stock options 86,820,746
Public stock offering 125,593,298
Amortization of notes
receivable from Executive 3,000,000
Net loss (138,054,155)
----------- ----------- ----------
Balance at December 31, 1997 $ 436,307,243 $ (151,686,848) $(11,000,000)
=========== =========== ==========
<CAPTION>
Total
----------
<S> <C>
Balance at March 5, 1996
(date of inception) $ -
Member capital contributions 24,058,158
Notes receivable from Executive (15,000,000)
Amortization of notes receivable from Executive 1,000,000
Net loss (13,632,693)
-----------
Balance at December 31, (3,574,535)
-----------
Contribution of licenses from members 8,497,006
Acquisition 31,500,000
Cash contributions 100,300,612
Contribution of equity prior to public offering 60,000,000
Conversion of member interests
to capital stock -
Conversion of CARs and Appreciation Units
to stock options 86,820,746
Public stock offering 125,656,548
Amortization of notes receivable from Executive 3,000,000
Net loss (138,054,155)
-----------
Balance at December 31, 1997 $ 274,146,222
===========
</TABLE>
See notes to financial statements
TELIGENT, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from March 5, 1996 (date
of inception) to December 31,
Year Ended ----------------------------
December 31, 1997 1997 1996
----------------- ----- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES:
Net loss $(138,054,155) $(151,686,848) $(13,632,693)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 6,453,632 6,617,683 164,051
Amortization of notes
receivable from executive 3,000,000 4,000,000 1,000,000
Amortization of debt issue costs 59,381 59,381 -
Other noncurrent liabilities 896,748 1,189,296 292,548
Stock-based compensation 84,042,581 86,820,746 2,778,165
Other (626,390) (777,085) (150,695)
Changes in current assets and
current liabilities:
Restricted cash and investments (1,168,357) (1,168,357) -
Prepaid expenses and other
current assets (6,426,665) (6,573,738) (147,073)
Accounts payable 13,575,098 16,577,277 3,002,179
Accrued expenses and other
current liabilities 3,820,501 4,467,473 646,972
----------- ----------- ----------
Net cash used in operating
activities (34,427,626) (40,474,172) (6,046,546)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITES:
Restricted cash and investments (93,906,753) (93,906,753) -
Purchase of property and equipment (9,960,652) (13,669,652) (3,709,000)
Acquisition and other investments (10,720,000) (10,720,000) -
----------- ----------- ----------
Net cash used in investing
activities (114,587,405) (118,296,405) (3,709,000)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITES:
Proceeds from bank borrowing 40,500,000 42,500,000 2,000,000
Repayment of bank borrowing (42,500,000) (42,500,000) -
Equity contribution prior to
Public offering 60,000,000 60,000,000 -
Net proceeds from issuance of
common stock 125,656,548 125,656,548 -
Proceeds from long-term debt 300,000,000 300,000,000 -
Debt financing costs (11,344,026) (11,344,026) -
Member contributions 100,300,612 109,358,770 9,058,158
----------- ----------- ----------
Net cash provided by financing
activities 572,613,134 583,671,292 11,058,158
----------- ----------- ----------
Net increase in cash
and equivalents 423,598,103 424,900,715 1,302,612
Cash and cash equivalents, beginning
of period 1,302,612 - -
----------- ----------- ----------
Cash and cash equivalents,
end of period $424,900,715 $424,900,715 $ 1,302,612
=========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 2,450,000 $ 3,325,000 $ 875,000
=========== =========== ==========
</TABLE>
TELIGENT, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
Teligent, Inc. ("Teligent" or the "Company") (a development
stage company) was formed in September 1997, as a wholly-owned
subsidiary of Teligent, L.L.C. On November 21, 1997 concurrent with
an initial public offering of the Company's Class A Common Stock,
Teligent, L.L.C. merged with and into the Company (the "Merger") with
the Company as the surviving entity. Teligent, L.L.C. was originally
formed in March 1996, by Microwave Services, Inc. ("MSI") and Digital
Services Corporation ("DSC"), both of which, through affiliates, have
extensive experience in pioneering wireless telecommunications businesses.
Prior to the Merger, Nippon Telegraph and Telephone Corporation ("NTT"),
through its wholly owned subsidiary NTTA&T, acquired a 5% interest in
Teligent L.L.C., and immediately after the Merger acquired an additional
7.5% equity interest in the Company. All of Teligent, L.L.C.'s member
interests were converted into shares of common stock upon the Merger in
a manner proportionate to each member's percentage interest in Teligent,
L.L.C. immediately prior to the Merger.
Teligent, currently in the development stage, intends to be a
premier provider of high quality, low cost voice, data, and video
telecommunications services primarily to small and medium size businesses
through its own fixed local wireless point-to-multipoint broadband
networks and leased long distance facilities. The Company intends to
deploy its 24GHz fixed wireless licenses in 74 major U.S. metropolitan
market areas.
2. SIGNIFICANT 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 amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with maturity dates of 90 days or less at the time of purchase to be
cash equivalents. Cash equivalents consist of money market fund
investments and short term-commercial paper. Restricted cash and
investments relates to cash and securities held exclusively to fund
future interest payments and to secure letters of credit obtained by the
Company.
Property and Equipment
Property and equipment is recorded at cost. Depreciation and
amortization are computed on the straight-line method over the estimated
useful lives of the assets: 5-10 years for operating equipment, computer
equipment, and furniture, and the lesser of the life of the asset or the
lease term for leasehold improvements. Maintenance and repairs are
charged to expense when incurred.
Long-Lived Assets
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", management periodically reviews,
if impairment indicators exist, the carrying value and lives of property
and equipment and intangible assets based on expected future cash flows.
F-7
The Company uses certain property and equipment to provide service
to customers on an 18GHz frequency. However, the Company's future
business plans are to deploy a 24GHz frequency network in its capacity as
a telecommunications provider. As such, the Company has recorded, as a
component of depreciation expense, an impairment loss of $5.0 million,
which represents the difference between the net book value of the assets
prior to the impairment loss and the estimated future cash flows to be
derived by the assets.
Intangible Assets
Intangible assets, and their respective amortization lives, are
as follows as of December 31, 1997:
Years
Fixed wireless licenses $49,808,769 15
Debt financing costs 11,344,022 10
----------
61,152,791
Accumulated amortization (798,600)
----------
$60,354,191
==========
Fixed wireless licenses represent the direct costs of obtaining
such licenses, including $41.6 million acquired from FirstMark
Communications, Inc. ("FirstMark", see Note 7). Debt financing costs
represent fees and other costs incurred in connection with the issuance
of long-term debt. Debt financing costs are amortized to interest expense
over the term of the related debt.
Income Taxes
The Company uses the liability method of accounting for income
taxes. Deferred income taxes result from temporary differences between
the tax basis of assets and liabilities and the basis reported in the
financial statements. Prior to the Merger, Teligent, L.L.C. was treated
as a partnership for U.S. Federal income tax purposes. Therefore, no
provision for income taxes was made prior to the Merger, and tax losses
recognized prior to the Merger are not available to offset any future
earnings of the Company.
Revenue Recognition
Revenue from providing wireless communications services is
recognized when services are rendered based on usage of the Company's
exchange networks and facilities. Revenue from management fees, equipment
leases, and other services provided to members or affiliated companies is
recognized as earned on the accrual basis.
Net Loss Per Share
During 1997, the Company adopted SFAS No. 128 ,("Earnings Per
Share",) which requires the Company to present basic and fully diluted
earnings per share for all years presented. The Company's net loss per
share calculation (basic and fully diluted), is based upon the number of
common shares outstanding prior to the initial public offering, as if
outstanding for all periods presented similar to a stock split, plus the
weighted average common shares issued subsequently through December 31,
1997. There are no reconciling items in the numerator or denominator of
the Company's net loss per share calculation. Employee stock options
(see note 4) have been excluded from the net loss per share calculation
because their effect would be anti-dilutive.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123") established a fair value method of accounting for employee stock
options and similar equity instruments. The fair value
F-8
method requires compensation cost to be measured at the grant date,
based on the value of the award, and recognized over the service period.
SFAS No. 123 allows companies to either account for stock-based
compensation under the provisions of SFAS No. 123 or under the provisions
of APB No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25").
The Company has elected to account for its stock-based compensation in
accordance with the provisions of APB No. 25 and will present pro forma
disclosures of net loss as if the fair value method had been adopted.
Recent Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, "Reporting Comprehensive Income", ("SFAS No. 130"),
which is required to be adopted during the first quarter of fiscal 1998.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in the financial statements and
(b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
Statement of Stockholders' Equity. The Company will be required to
restate earlier periods provided for comparative purposes, but believes
that the adoption of SFAS No. 130 will be not material to the Company's
reported financial condition or results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", ("SFAS No. 131"),
which is required to be adopted during the year ended December 31, 1998.
SFAS No. 131 changes the way public companies report segment information
in annual financial statements and also requires those companies to report
selected segment information in interim financial reports to stockholders.
The effect of the disclosure for segment information on the Company's
reported financial condition or results of operations is not expected to
be material.
Reclassifications
Certain amounts in the prior periods' financial statements have
been reclassified to conform to the current year's presentation.
3.CAPITAL STOCK
The Company has authorized two classes of Common Stock, Class A
Common Stock and Class B Common Stock. The rights of the two classes of
Common Stock are substantially identical, except that until the number of
shares held by holders of the respective series of Class B Common Stock
fall below certain thresholds, such holders will have the right to elect
directors to the Company's Board of Directors as follows: a majority
of the directors will be elected by the holders of Series B-1 Common Stock,
one director will be elected by the holders of Series B-2 Common Stock,
and one director will be elected by the holders of Series B-3 Common
Stock.
The number of shares authorized, issued and outstanding at
December 31 1997, for each class of stock is summarized below:
<TABLE>
<CAPTION>
Shares Shares Issued
Class Par Value Authorized and Outstanding
<S> <C> <C> <C>
A $ .01 200,000,000 8,156,410
Series B-1 .01 30,000,000 21,436,689
Series B-2 .01 25,000,000 17,206,210
Series B-3 .01 10,000,000 5,783,400
</TABLE>
The Company has authorized 10,000,000 shares of Preferred Stock,
par value $.01 per share, of which none are issued and outstanding.
F-9
Initial Public Common Stock Offering
In November 1997, the Company completed an initial public offering
of 6,325,000 shares of Common Stock at $21.50 per share (the "Equity
Offering"), raising approximately $125.7 million of net proceeds, after
deducting approximately $10.3 million of offering expenses.
4.STOCK-BASED COMPENSATION
Company Appreciation Rights and Appreciation Units
On September 1, 1996, Teligent, L.L.C. granted six separate
Company Appreciation Rights ("CARs") to an executive officer of the
Company (the "Executive") pursuant to an employment agreement dated
September 1, 1996 (The "Employment Agreement"). For each CAR, the
Executive was entitled to receive a percentage of the excess of the
Company's fair market value, as defined, over the target value for the
CAR. The CARs vested over a period of six years.
During 1996, Teligent, L.L.C. adopted a Long-Term Incentive
Compensation Plan (the "Plan") under which an aggregate of 1,600,000
appreciation units (the "Appreciation Units") were available and granted
to employees and directors of the Company.
Conversion of CARs and Appreciation Units into Stock Options
Upon consummation of the Equity Offering (see note 3), all
outstanding CARs and Appreciation Units were converted into options
(the "Conversion Options") to purchase a number of shares of Class A
Common Stock at respective exercise prices such that the intrinsic value
of the stock options approximated the intrinsic value of the CARs and
Appreciation Units. The stock options granted in connection with this
conversion are governed by and subject to the terms of the 1997 Plan
(see "1997 Stock Incentive Plan" below) and have the same vesting schedule,
vesting rights and term as the applicable CAR or Appreciation Units which
were converted.
Upon the conversion described above, the Company issued options to
purchase an aggregate of 12,480,779 shares of the Company's Class A Common
Stock at exercise prices ranging from $3.35 to $46.00. In connection with
the issuance of these options, the Company will recognize $186.3 million
of compensation expense over the vesting period of the options. The
Company recognized $84.0 million of compensation expense during the year
ended December 31, 1997 ($86.8 million for the period from March 6, 1996
(date of inception) to December 31, 1997) and additional expense up to
$99.5 million through September 1, 2002, as follows: $25.2 million per
year through 2000, $21.4 million in 2001 and $2.5 million in 2002.
1997 Stock Incentive Plan
The Company maintains the Teligent, Inc. 1997 Stock Incentive Plan
(the "1997 Plan"). As of December 31, 1997, the maximum number of shares
of common stock available for grant under the 1997 Plan was 14,729,125.
Generally, all options granted under the 1997 Plan vest over a period of
five years and expire ten years from the date of grant.
The Company applies the provisions of APB No. 25 in accounting for
its stock-based compensation. Had compensation expense been determined in
accordance with SFAS No. 123, the Company's net loss for the year ended
December 31, 1997, and the periods from March 5, 1996 (date of inception)
to December 31, 1996 and 1997 would have been $161.2 million, $12.5
million and $173.7 million, respectively. Options arising from the
conversion of CARs and Appreciation Units have been valued based on the
number and exercise price of the options issued upon conversion. The
weighted average fair value of options granted was $18.57 and $14.04 in 1997
and 1996, respectively, using the Black-Scholes option pricing model with
F-10
the following assumptions: dividend yield 0%, risk free rate interest
rate of 6.6% in 1997 and 7.0% for the period from March 5, 1996 (date of
inception) to December 31, 1996, an expected life of ten years, and an
expected volatility of .50 in 1997 and .34 for the period from March 6,
1996 (date of inception) to December 31, 1996.
Additional information with respect to the Company's 1997 Plan is as
follows.
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
------- --------------
<S> <C> <C>
Options at beginning of year - -
Converted from Appreciation Units 6,471,047 $ 7.07
Converted from CARs 6,009,732 $12.41
Options granted under 1997 Plan 380,450 $22.18
Options forfeited and returned to the plan (50,544) $12.94
----------
Options outstanding at end of year 12,810,685 $10.00
==========
</TABLE>
Weighted average remaining contractual life 9.4 years
Options exercisable at end of year:
Exercise price of $6.52 454,107
Exercise price of $3.35 1,001,622
---------
Total 1,455,729
=========
5. NOTES RECEIVABLE FROM EXECUTIVE AND DEFERRED COMPENSATION
The Executive's Employment Agreement provides for, among
other things, a forgivable loan of $15,000,000 with a five-year term,
at an interest rate of 6.53% per year, which was advanced to the Executive
from certain stockholders of the Company. The loan is recorded as a
reduction to stockholders' equity in the Company's financial statements.
The Employment Agreement also provides for a payment of $5,000,000 on the
fifth anniversary of the Executive's employment, or earlier in certain
circumstances. The Company accrues the present value of the payment due
over the expected service period of five years.
6. LONG-TERM DEBT
Public Debt Offering
In November 1997, the Company issued $300 million of 11 1/2% Senior
Notes due 2007 (the "Senior Notes".) The Company used approximately $93.9
million of the net proceeds of this offering to purchase a portfolio of
U.S. Treasury securities which are classified as restricted cash and
investments on the balance sheet, and have been pledged as collateral
for the payment of interest on the Senior Notes through December 1, 2000.
Interest on the Senior Notes accrues at a rate of 11 1/2% per annum and is
payable semi-annually on June 1 and December 1, commencing June 1, 1998.
On or after December 1, 2002, the Notes will be redeemable at the
option of the Company, in whole at any time or in part from time to time,
at the following prices (expressed in percentages of the principal amount
thereof).
Year Percentage
---- ----------
2002 105.750%
2003 103.833
2004 101.917
2005 and thereafter 100.000
F-11
Upon the occurrence of a change in control, as defined in the
Senior Notes agreement, each holder of the Senior Notes will have the right
to require the Company to repurchase all or any part of such holder's
Senior Notes at a purchase price in cash equal to 101% of the principal
amount thereof on any change of control payment date, plus accrued and
unpaid interest, if any, to such change of control payment date.
Credit Facility
In December 1996, the Company entered into a loan agreement with
a bank providing for a $50.0 million senior secured revolving credit
facility (the Credit Facility) which expired December 19, 1997. In
November 1997, the Company used $42.5 million of proceeds from member
cash contributions to repay all outstanding amounts under the Credit
Facility, which was terminated.
7. ACQUISITION
In October 1997, Teligent, L.L.C. acquired all of the outstanding
stock of FirstMark (the "FirstMark Acquisition"), for an aggregate
purchase price of approximately $42.0 million which consisted of $10.5
million in cash and a 5% member interest in Teligent, L.L.C valued at $31.5
million. As a result of the Merger, the sole stockholder of FirstMark
received 1,831,410 shares of Teligent, Inc. Class A Common Stock. The
FirstMark Acquisition was accounted for under the purchase method of
accounting. The majority of the purchase price ($41.6 million) was
allocated to the fixed wireless licenses acquired and the remaining amount
was allocated to the net assets acquired. The acquisition of FirstMark
would not have had a material impact on the Company's operating results
for the year ended December 31, 1997 and thus no pro forma information
has been disclosed herein.
8. PROPERTY AND EQUIPMENT
The amounts included in property and equipment are as follows.
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- -----
<S> <C> <C>
Operating equipment 4,815,283 $1,999,690
Computer equipment 2,105,557 183,605
Furniture and leasehold improvements 2,072,462 366,937
Systems in progress 5,178,080 1,158,768
---------- ---------
14,171,382 3,709,000
Accumulated depreciation (5,985,483) (164,051)
---------- ---------
$ 8,185,899 $3,544,949
========== =========
</TABLE>
9. INCOME TAXES
Income and losses were reported on the respective tax returns of
the members of Teligent L.L.C. and, therefore, no provision for income
taxes was made for the year ended December 31, 1996. As a result of the
Merger, the Company has recorded income taxes in accordance with SFAS
No. 109 for the year ended December 31, 1997.
F-12
The tax effects of temporary differences as of December 31, 1997
are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 2,356,383
Stock based compensation 29,519,054
Property and equipment 1,737,829
Deferred compensation 1,230,400
Other 704,100
----------
Total deferred tax assets 35,547,766
Deferred tax liability:
Intangible assets (13,106,847)
----------
Net deferred tax assets 22,440,919
Valuation allowance (22,440,919)
----------
Total $ -
==========
</TABLE>
The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which
those temporary differences become deductible. The Company has not
recorded its deferred tax assets and liabilities on its balance sheet
given the fact that the majority of the assets and liabilities are long
term and as such have no impact on the balance sheet.
During the period ended December 31, 1997, the Company did
not record an income tax provision given the significant operating
losses and based on the fact that any resultant asset would be
fully reserved. At December 31, 1997, the Company has a federal
net operating loss carryforward of $6.9 million, which expires in
the year 2017.
A reconciliation between income taxes computed using the statutory
federal income tax rate (34%) and the effective rate, for the year ended
December 31, 1997, is as follows:
<TABLE>
<S> <C>
Federal income tax (credit) at statutory rate $(46,938,413)
Operating losses recognized by Teligent L.L.C.
for which no tax benefit is available 13,350,045
Purchase accounting adjustment 13,106,847
Net change in valuation allowance (from
beginning balance of $2,128,665) 20,312,254
Other 169,267
----------
$ -
==========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company leases various operating sites, roof-tops, storage,
and administrative offices under operating leases. Rent expense was
approximately $2.3 million and $0.9 million for the year ended
December 31, 1997 and the period March 5, 1996 (date of inception) to
December 31, 1996, respectively. Future minimum lease payments by year
and in the aggregate, are as follows at December 31, 1997:
1998 $ 5,013,242
1999 5,200,713
2000 5,140,898
2001 5,180,322
2002 4,223,945
Thereafter 20,614,343
----------
$ 45,373,463
==========
F-13
11 . RELATED PARTY TRANSACTIONS
Employees of the parent companies of MSI and DSC performed
administrative and management services on behalf of the Company. These
services were billed to the Company at cost for the year ended
December 31, 1997, and for the period March 5, 1996 (date of inception)
through December 31, 1996, and totaled approximately $1.7 million and
$1.5 million, respectively.
Employees of the Company are covered under certain health and
benefit plans of the parent company of MSI. The Company is billed for
their pro rata cost of these benefits.
The company entered into a five-year technical service agreement
(the "TSA") with a subsidiary of NTT (the "Provider"). Under the terms
of the TSA, the Provider will provide certain technical services to the
Company relating to network design and implementation. During the first
two years of the TSA which commenced December 1, 1997, the Company is
required to pay the Provider a fee in the amount of $4.0 million per
year. Payments during the remaining three years shall be negotiated
annually based on the scope of technical services to be provided.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments classified
as current assets or liabilities, including cash and cash equivalents,
restricted cash and investments and other assets, accounts payable and
accrued expenses, approximate carrying value, principally because of
the short maturity of these items. The fair value of the Company's
non-current restricted cash and investments approximate carrying value
based on their effective interest rates compared with market interest
rates.
As of December 31, 1997, the estimated fair value and carrying
amount of the Company's 11 1/2% Senior Notes due 2007 was $301,590,000 and
$300,000,000, respectively.
13. SUBSEQUENT EVENT
On February 20, 1998, the Company completed an offering (the
"Discounted Notes Offering") of $440 million 11 1/2% Senior Discount Notes
due 2008 (the "Discount Notes"). The Discount Notes carry zero-coupon
interest until March 1, 2003, after which the Discount Notes pay interest
at 11 1/2% payable March 1 and September 1 through March 1, 2008. The
Company received approximately $243.1 million net proceeds from the
Discount Notes Offering, after deductions for offering expenses of
approximately $7.6 million.
F-14
INDENTURE, dated as of February 20, 1998 by and between TELIGENT, INC.,
a Delaware corporation duly organized and existing under the laws of the State
of (herein called the "Company"), having its principal office at 8065
Leesburg Pike, Vienna, VA 22182, and FIRST UNION NATIONAL BANK, a national
banking association (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 11 1/2%
Senior Discount Notes due 2008 (herein called the "Initial Notes"), and its
11 1/2% Series B Senior Discount Notes due 2008 (the "Exchange Notes" and,
together with the Initial Notes, the "Notes") of substantially the tenor and
amount hereinafter set forth, and to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. The Company has
outstanding 11 1/2% Senior Notes due 2007 (the "Senior Notes") issued pursuant
to an indenture dated November 26, 1997 (the "Senior Notes Indenture"), and
the Notes governed hereby will rank pari passu in right of payment with the
Senior Notes. The Trustees is also the trustee under the Senior Notes
Indenture.
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are required to be part of this Indenture and
shall, to the extent applicable, be governed by such provisions.
All things necessary have been done to make the Notes, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction"
and "self-liquidating paper", as used in TIA Section 311, shall have
the meanings assigned to them in the rules of the Commission adopted
under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Ten, are defined in that
Article.
"Accounts Receivable Subsidiary" means any Restricted Subsidiary
of the Company that is, directly or indirectly, wholly owned by the Company
(other than directors' qualifying shares) and organized for the purpose of
and engaged in (i) purchasing, financing, and collecting accounts receivable
obligations of customers of the Company or its Restricted Subsidiaries, (ii)
the sale or financing of such accounts receivable or interests therein and
(iii) other activities incident thereto.
"Accreted Value" as of any date (the "Specified Date") means, with
respect to each $1,000 principal amount at Stated Maturity of Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date
below:
<TABLE>
<CAPTION>
Accreted
Semi-Annual Accrual Date Value
---------------------------------------------------------------
<S> <C>
Issue Date ................................. $569.78
September 1, 1998 .......................... 604.61
March 1, 1999 .............................. 639.37
September 1, 1999 .......................... 676.14
March 1, 2000 .............................. 715.02
September 1, 2000 .......................... 756.13
March 1, 2001 .............................. 799.61
September 1, 2001 .......................... 845.59
March 1, 2002 .............................. 894.21
September 1, 2002 .......................... 945.63
March 1, 2003 .............................. $1000.00;
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual
Date immediately preceding the Specified Date and (b) an amount equal
to the product of (x) the Accreted Value for the immediately following
Semi-Annual Accrual Date less the Accreted Value for the immediately
preceding Semi-Annual Accrual Date and (y) a fraction, the numerator
of which is the number of days actually elapsed from the immediately
preceding Semi-Annual Accrual Date to the Specified Date and the
denominator of which is 180; and
(iii) if the Specified Date is after March 1, 2003, $1,000.
"Acquired Debt" means Debt of a Person (a) existing at the time
such Person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such Person; provided that, for the purposes of
Section 1010, such Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired
Person becomes a Restricted Subsidiary.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means, as to any Person, any other Person that
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies of such Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any
--------
Person that owns directly or indirectly 10% of more of the securities having
ordinary voting power for the election of directors or other governing body
of a corporation or 10% or more of the partnership or other ownership
interests of any other Person (other than as a limited partner of such other
Person) shall be deemed to control such corporation or other Person.
Notwithstanding the foregoing, no individual shall be deemed to be an
Affiliate of a Person solely by reason of his or her being an officer or
director (or equivalent) of such Person.
"Arrangement Commitment Letter" means the commitment letter
among Northern Telecom, Inc. and the financial institutions acting as
arrangement agents thereunder setting forth the terms and conditions under
which the arranging agents will provide the facility contemplated by the
Financing Commitment Letter and underwrite and arrange the syndication of
such facility.
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation,
by way of sale-and-leaseback and dispositions pursuant to any consolidation
or merger) by such Person or any of its Restricted Subsidiaries to any
Person other than to such Person or its Restricted Subsidiaries in any
single transaction or series of transactions of (i) shares of Capital Stock
or other ownership interests of another Person (other than directors'
qualifying shares) or (ii) any other property or assets of such Person or
any of its Restricted Subsidiaries other than sales of property or assets in
the ordinary course of business and consistent with past practices. For
purposes of this definition, any series of related transactions that, if
effected as a single transaction, would constitute an Asset Sale, shall be
deemed to be a single Asset Sale when the last such transaction that is a
part thereof is effected, provided that such last transaction is effected
--------
within 12 months of the first such transaction. For purposes of Section
[1016], the term "Asset Sale" (i) when used with respect to the Company,
shall exclude any asset disposition permitted pursuant to Article Eight that
constitutes a disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole, (ii) shall exclude
any Asset Sale of less than or equal to $2.0 million, (iii) shall exclude
sales of Eligible Cash Equivalents and Permitted Temporary Investments, and
(iv) shall exclude any sale, conveyance, disposition or other transfer of
the Capital Stock of an Unrestricted Subsidiary or other Investment
described in clause (iv) of the definition of Restricted Payment, provided
--------
that such Investment was permitted by the terms of this Indenture.
Notwithstanding the provisions of Section 1016, the Company and its
Restricted Subsidiaries may (a) sell or dispose of damaged, worn out or
other obsolete property in the ordinary course of business so long as such
property is no longer necessary for the proper conduct of the business of
the Company or such Restricted Subsidiary, as applicable, (b) create or
assume Liens (or permit any foreclosure thereon) securing Debt to the extent
that such Lien does not violate Section 1011, and (c) sell, convey,
transfer, lease or otherwise dispose of accounts receivable to an Accounts
Receivable Subsidiary or to Persons that are not Affiliates of the Company
or any Subsidiary of the Company in the ordinary course of business,
including in connection with financing transactions.
"Asset Sale Offer" has the meaning set forth in Section 1016.
"Attributable Debt" means, with respect to an operating lease
included in any Sale and Leaseback Transaction at the time of determination,
the present value (discounted at the interest rate implicit in the lease or,
if not known, at the Company's incremental borrowing rate) of the
obligations of the lessee of the property subject to such lease for rental
payments during the remaining term of the lease included in such
transaction, including any period for which such lease has been extended or
may, at the option of the lessor, be extended, or until the earliest date on
which the lessee may terminate such lease without penalty or upon payment of
penalty (in which case the rental payments shall include such penalty),
after excluding from such rental payments all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water,
utilities and similar charges.
"Average Life" means, as of any date, with respect to any Debt,
the quotient obtained by dividing (i) the sum of the products of (x) the
number of years from such date to the dates of each scheduled principal
payment (including any sinking fund or mandatory redemption payment
requirements) of such Debt multiplied in each case by (y) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in the Borough of
Manhattan, The City of New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to
pay rent or other payment amounts under a lease of (or other Debt
arrangement conveying the right to use) real or personal property of such
Person that is required to be classified and accounted for as a capital
lease or a liability on the face of a balance sheet of such Person in
accordance with GAAP and the Stated Maturity thereof shall be the date of
the last payment of rent or any amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" in any Person means any and all shares,
interests, participations or other equivalents in the equity interest
(however designated) in such Person and any rights (other than Debt
securities convertible into an equity interest), warrants or options to
acquire an equity interest in such Person.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than a Permitted Holder is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than
50% of the total Voting Capital Stock of the Company; provided that
--------
Permitted Holders do not otherwise control the election of a majority of the
Board of Directors of the Company; (ii) the Company consolidates with, or
merges with or into, another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to
any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which the
outstanding Voting Capital Stock of the Company is converted into or
exchanged for cash, securities or other property, and immediately after such
transaction a "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than a Permitted Holder is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than
50% of the total Voting Capital Stock of the surviving or transferee Person;
provided that Permitted Holders do not otherwise control the election of a
- --------
majority of the Board of Directors of the Company; (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
members of the Company was approved by (a) one or more Permitted Holders or
(b) a vote of a majority of the directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute 66_% of the Board of Directors then in office; and
(iv) the approval by the holders of Capital Stock of the Company of any plan
or proposal for the liquidation or dissolution of the Company.
"Closing Date" means the date on which the Notes originally are
issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at such
time.
"Common Stock" means, with respect to the Company, the Class A
Common Stock, the Class B Common Stock or any similar common stock of the
Company.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by an officer of the Company, and
delivered to the Trustee.
"Consolidated Interest Expense" means, with respect to any
Person for any period, without duplication (A) the sum of (i) the aggregate
amount of cash and non-cash interest expense (including capitalized
interest) of such Person and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP in respect of
Debt (including, without limitation, (v) any amortization of debt discount,
(w) net costs associated with Interest Swap Obligations (including any
amortization of discounts), (x) the interest portion of any deferred payment
obligation, (y) all accrued interest, and (z) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bankers'
acceptances or similar facilities) paid or accrued, or scheduled to be paid
or accrued, during such period; (ii) dividends on preferred stock or
preferred equity interests of such Person and of its Restricted Subsidiaries
(if paid to a Person other than such Person or its Restricted Subsidiaries)
declared and payable in cash; (iii) the portion of any rental obligation of
such Person or its Restricted Subsidiaries in respect of any Capital Lease
Obligation allocable to interest expense in accordance with GAAP; and (iv)
the portion of any rental obligation of such Person or its Restricted
Subsidiaries in respect of any Sale and Leaseback Transaction allocable to
interest expense (determined as if such were treated as a Capital Lease
Obligation); less (B) to the extent included in (A) above, amortization or
write-off of deferred financing costs of such Person and its Restricted
Subsidiaries during such period and any charge related to any premium or
penalty in connection with redeeming or retiring any Debt of such Person and
its Restricted Subsidiaries prior to its stated maturity; in the case of
both (A) and (B) above, after elimination of intercompany accounts among
such Person and its Restricted Subsidiaries and as determined in accordance
with GAAP.
"Consolidated Net Income" of any Person means, for any period,
the aggregate net income (or net loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis determined in
accordance with GAAP; provided that there shall be excluded therefrom,
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without duplication, (a) all items classified as extraordinary, (b) any net
income or loss of any Person other than such Person and its Restricted
Subsidiaries, except with respect to net income to the extent of the amount
of dividends or other distributions actually paid in cash to such Person or
its Restricted Subsidiaries by such other Person during such period, (c) the
net income or loss of any Person acquired by such Person or any of its
Restricted Subsidiaries in a pooling-of-interests transaction for any period
prior to the date of such acquisition, (d) gains or losses in respect of any
sale, transfer or disposition of assets other than in the ordinary course of
business by such Person or its Restricted Subsidiaries, (e) the net income
or loss of any Restricted Subsidiary of such Person to the extent that the
payment of dividends or other distributions to such Person at the time is
restricted by the terms of its charter or any agreement, instrument,
contract, judgment, order, decree, statute, rule, governmental regulation or
otherwise, except for any dividends or distributions actually paid or that
could have been paid by such Restricted Subsidiary to such Person in
compliance with such restrictions, (f) any non-cash, nonrecurring charges,
(g) any non-cash compensation charge arising from any grant of stock options
and (h) any gain or loss, net of taxes, realized on the termination of an
employee pension benefit plan.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of
this Indenture is located at 901 E. Cary Street, 2nd Floor, Richmond,
Virginia 23219 except that, with respect to presentation of Notes for
payment or for registration of transfer or exchange, such term shall mean
the office or agency of the Trustee at which, at any particular time, its
corporate agency business shall be conducted.
"Corporation" includes corporations, associations, companies and
business trusts.
"Credit Agreement" means a secured or unsecured credit agreement
providing for revolving credit loans, term loans and/or letters of credit
between the Company and one or more lenders, as such agreement may be
amended, modified, supplemented, refunded, refinanced, restructured,
renewed, repaid or replaced from time to time (whether in whole or in part,
whether with the original agent or lenders or other agents or lenders or
otherwise and whether provided pursuant to the facility contemplated by the
Financing Commitment Letter or otherwise).
"Currency Hedge Obligations" means the obligations of any
Person, whether or not incurred in the ordinary course of business, pursuant
to any foreign currency exchange agreement, option or futures contract or
other similar agreement or arrangement.
"Debt" means at any time (without duplication), with respect to
any Person, and whether or not contingent, (i) any obligation of such Person
for money borrowed, (ii) any obligation of such Person evidenced by bonds,
debentures, notes, Guarantees or other similar instruments, including,
without limitation, any such obligations incurred in connection with
acquisition of property, assets or businesses, excluding trade accounts
payable arising in the ordinary course of business, (iii) any reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person,
(iv) any obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business that in
either case are not more than 90 days overdue or are being contested in good
faith), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such service, (v) any Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Redeemable Capital
Stock of such Person at the date of determination, (vii) to the extent not
otherwise included in this definition of "Debt", any Interest Swap
Obligations or Currency Hedge Obligations of such Person at the date of
determination, (viii) Attributable Debt of such Person with respect to any
Sale and Leaseback Transaction to which such Person is a party, (ix)
preferred stock of a Restricted Subsidiary of such Person, and (x) to the
extent not otherwise included in this definition of "Debt", any obligation
of the type referred to in clauses (i) through (ix) of this definition of
another Person and all dividends and distributions of another Person the
payment of which, in either case, such Person has Guaranteed, or the payment
of which is secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien upon or
with respect to property or assets owned by such Person, provided, however,
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if the obligations secured by a Lien (other than a Permitted Lien not
securing any liability that would itself constitute Debt) on any assets or
property have not been assumed by such Person in full or are not such
Person's legal liability in full, the amount of such Debt for purposes of
this definition shall be limited to the lesser of the amount of Debt secured
by such Lien or the value of the property subject to such Lien. For
purposes of the preceding sentence, the maximum fixed repurchase price of
any Redeemable Capital Stock that does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Redeemable Capital
Stock as if such Redeemable Capital Stock were repurchased on any date on
which Debt shall be required to be determined pursuant to this Indenture;
provided, however, that if such Redeemable Capital Stock is not then
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permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Capital Stock. The principal amount outstanding of any Debt
issued with original issue discount is the accreted value of such Debt and
Debt shall not include any liability for federal, state, local or other
taxes. The amount of Debt of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of any Guarantees at such date.
"Debt Securities" means any debt securities (including any
Guarantee of such securities) issued by the Company and/or any Restricted
Subsidiary in connection with a public offering (whether or not
underwritten) or a private placement (provided such private placement is
underwritten for resale pursuant to Rule 144A, Regulation S or otherwise
under the Securities Act or sold on an agency basis by a broker-dealer or
one of its Affiliates to ten or more beneficial holders); it being
understood that the term "Debt Securities" shall not include any evidence of
indebtedness under the Credit Agreement or other commercial bank borrowings
or similar borrowings (including the facility contemplated by the Financing
Commitment Letter), recourse transfers of financial assets, capital leases
or other types of borrowings incurred in a manner not customarily viewed as
a "securities offering", or any Guarantees in respect of any of the
foregoing.
"Debt to Annualized EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of Debt of the Company
and its Restricted Subsidiaries on a consolidated basis as at the date of
determination to (ii) the aggregate amount of EBITDA of the Company and its
Restricted Subsidiaries for the two preceding fiscal quarters for which
financial information is available immediately prior to the date of
determination multiplied by two; provided that any Debt incurred or retired
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by the Company or any of its Restricted Subsidiaries during the fiscal
quarter in which the transaction date occurs shall be calculated as if such
Debt was so incurred or retired on the first day of the fiscal quarter in
which the date of determination occurs; and provided further that if the
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transaction giving rise to the need to calculate the Debt to Annualized
EBITDA Ratio would have the effect of increasing or decreasing Debt or
EBITDA in the future, Debt or EBITDA shall be calculated on a pro forma
basis as if such transaction had occurred on the first day of such two
fiscal quarter period preceding the date of determination, and (y) if during
such two fiscal quarter period, the Company or any of its Restricted
Subsidiaries shall have engaged in any Asset Sale of any company, entity or
business, EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive), or increased by an amount equal to the EBITDA (if
negative), directly attributable to the company, entity or business that is
the subject of such Asset Sale and any related retirement of Debt as if such
Asset Sale and related retirement of Debt had occurred on the first day of
such period or (z) if during such two fiscal quarter period the Company or
any of its Restricted Subsidiaries shall have acquired any company, entity
or business, EBITDA shall be calculated on a pro forma basis as if such
acquisition and related financing had occurred on the first day of such
period.
"Default" means any event, act or condition the occurrence of
which is, or after notice or the passage of time or both would be, an Event
of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" shall mean The Depository Trust Company, its
nominees, and their respective successors.
"Disinterested Director" means, with respect to any transaction
or series of related transactions, a member of the Board of Directors of the
Company who has no material direct or indirect financial interest in or with
respect to such transaction or series of related transactions. For purposes
of this definition, no Person would be deemed not to be a Disinterested
Director solely because such Person or an Affiliate of such Person holds
Capital Stock of the Company.
"EBITDA" means, with respect to any Person for any period, the
sum for such Person for such period of Consolidated Net Income plus, to the
extent reflected in the income statement of such Person for such period from
which Consolidated Net Income is determined, without duplication, (i)
Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation
expense, (iv) amortization expense including without limitation,
amortization of goodwill and other intangibles, (v) any charge related to
any premium or penalty paid in connection with redeeming or retiring any
Debt prior to its stated maturity and (vi) any non-cash charges excluded in
calculating Consolidated Net Income less any non-cash charges added to the
calculation of Consolidated Net Income (excluding in each case any such non-
cash charge that requires an accrual of or reserve for cash charges for any
future period).
"Eligible Cash Equivalents" means (i) United States dollars,
(ii) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof having
maturities of not more than one year and one day from the date of
acquisition, (iii) certificates of deposit and Eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States or in any member of the Organization for Economic Cooperation and
Development having capital and surplus in excess of $500.0 million and a
Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper rated no lower than P-2 or the equivalent thereof by
Moody's Investors Service, Inc. or no lower than A-2 or the equivalent
thereof by Standard & Poor's Rating Services or corporate notes, bonds or
medium term notes rated no lower than A-2 or the equivalent thereof by
Moody's Investors Service, Inc. or no lower than A or the equivalent thereof
by Standard & Poor's Ratings Services, and in each case maturing within one
year and one day after the date of acquisition, (vi) direct obligations
issued by any state of the United States or any political subdivision of any
such state or political instrumentality thereof maturing, or subject to
tender at the option of the holder thereof, within 90 days after the date of
acquisition, having a rating of A from Standard & Poor's Ratings Services or
A-2 from Moody's Investors Service, Inc., (vii) asset-backed securities with
an Average Life equal to or less than one year and one day from the time of
acquisition and rated no lower than Aaa or the equivalent thereof by Moody's
Investors Service, Inc. or AAA or the equivalent thereof by Standard &
Poor's Ratings Services, and (viii) investments in money market funds
substantially all of whose assets comprise securities of the types described
in clauses (i) through (vii).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that (i) such Exchange
Notes shall not contain terms with respect to transfer restrictions and
shall be registered under the Securities Act, and (ii) certain provisions
relating to Additional Interest (as defined in the Note) shall be
eliminated) that are issued and exchanged for the Initial Notes in
accordance with the Exchange Offer, as provided for in the Registration
Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the Holders
of the Initial Notes to exchange all of the Initial Notes for Exchange
Notes, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or property, the
sale value that could be obtained in an arm's-length transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise
specified herein, Fair Market Value shall be determined by the Board of
Directors of the Company acting in good faith and as of the date on which
such determination is made.
"Federal Communications Commission" means the Federal
Communications Commission, or, if at any time after the execution of this
Indenture such Commission is not existing and performing the duties now
assigned to it, then the body performing such duties at such time.
"Financing Commitment Letter" means the commitment letter
between the Company and Northern Telecom, Inc. setting forth the anticipated
terms and conditions under which Northern Telecom, Inc. will provide loans
to the Company in an aggregate amount of up to $780.0 million that will be
used to provide working capital and finance the purchase of certain
telecommunications system equipment, software and services subject to the
Arrangement Commitment Letter.
"GAAP" means United States generally accepted accounting
principles, consistently applied, as 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 may be approved by a significant segment of the accounting
profession of the United States, that are applicable to the circumstances as
of the date of determination; provided, however, that, except as otherwise
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specifically provided, all calculations made for purposes of determining
compliance with the terms of the provisions of this Indenture shall utilize
GAAP in effect at the time of preparation of, and in accordance with the
GAAP used to prepare, the historical financial statements of the Company on
the Issue Date.
"Global Notes" has the meaning set forth in Section 201.
"Guarantee" means, as applied to any obligation of another
Person, (i) a guarantee (other than by endorsement of negotiable instruments
for collection in the ordinary course of business), direct or indirect, in
any manner, of any part or all of such obligation, (ii) any direct or
indirect obligation, contingent or otherwise, of a Person guaranteeing or
having the effect of guaranteeing the obligations of any other Person in any
manner and (iii) an agreement of a Person, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of
all or any part of such obligation of another Person (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing).
"Holder" means a Person in whose name a Note is registered in
the Note Register.
"incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, Guarantee or otherwise become liable in respect of such Debt
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Debt or obligation on the balance sheet of such
Person; provided that neither the accrual of interest nor the accretion of
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original issue discount shall be considered an incurrence of Debt (and
"incurrence", "incurred", "incurrable" and "incurring" shall have meanings
correlative to the foregoing); provided further that a change in GAAP that
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results in an obligation of such Person that exists at such time becoming
Debt shall not be deemed an incurrence of such Debt. Debt otherwise incurred
by a Person before it becomes a Restricted Subsidiary of the Company shall
be deemed to have been incurred at the time at which it becomes a Restricted
Subsidiary.
"Indenture" means this instrument as originally executed and as
it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Initial Notes" has the meaning specified in the recitals to
this Indenture.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Swap Obligations" means, with respect to any Person,
the obligations of such Person pursuant to any interest rate swap agreement,
interest rate cap, collar or floor agreement or other similar agreement or
arrangement.
"Invested Capital" means the sum of (a) 15% of the aggregate net
cash proceeds received by the Company (or its predecessor) from the issuance
of (or capital contributions with respect to) any Qualified Capital Stock,
(b) the aggregate net cash proceeds received by the Company from the
issuance of (or capital contributions with respect to) any Qualified Capital
Stock (including preferred stock but only if any redemption thereof is
permitted only after the Stated Maturity of the Notes) or Subordinated
Stockholder Debt subsequent to the Issue Date, other than the issuance of
Qualified Capital Stock to a Restricted Subsidiary of the Company, and (c)
all net cash proceeds from the sales of Redeemable Capital Stock of the
Company or Debt securities of the Company convertible into Qualified Capital
Stock of the Company, in each case upon such redemption or conversion
thereof into Qualified Capital Stock; provided, however, that Invested
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Capital shall be excluded from any computation thereof to the extent
utilized to make a Restricted Payment.
"Investment" by any Person means any direct or indirect loan,
advance (or other extension of credit, including any Guarantee) or capital
contribution to (by means of any transfer of cash or other property to
others or any other payments for property or services for the account or use
of others), the purchase or acquisition of any Capital Stock, bonds, notes,
debentures or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the businesses or assets or stock
or other evidence of beneficial ownership of, any Person or making of any
Investment in any Person. Investments shall exclude accounts receivable and
other extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Issue Date" means the date on which the Notes are first
authenticated and delivered under this Indenture.
"Lien" means, with respect to any property or other asset, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien (statutory or other), charge, easement,
preference, priority or other encumbrance on or with respect to such
property or other asset (including, without limitation, any conditional sale
or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity", when used with respect to a Note, means the date on
which the principal of such Note becomes due and payable as provided therein
or herein, whether at the Stated Maturity, on the purchase date established
pursuant to the terms of this Indenture with regard to a Change of Control
Offer or an Asset Sale Offer, as applicable, or by declaration of
acceleration, call for redemption or otherwise.
"Net Cash Proceeds" means, (a) with respect to Asset Sales of
any property or other assets by a Person or its Restricted Subsidiaries,
cash and cash equivalents received net of (i) all reasonable out-of-pocket
expenses of such Person or such Restricted Subsidiary incurred in connection
with such sale, including, without limitation, all legal, title and
recording tax expenses, commissions and other fees and expenses incurred
(but excluding any finder's fee or broker's fee payable to any Affiliate of
such Person) and all federal, state, foreign and local taxes arising in
connection with such an Asset Sale that are paid or required to be accrued
as a liability under GAAP by such Person or its Restricted Subsidiaries,
(ii) all payments made by such Person or its Restricted Subsidiaries on any
Debt that is secured by such properties or other assets in accordance with
the terms of any Lien upon or with respect to such properties or other
assets or that must, by the terms of such Debt or in order to obtain a
necessary consent to such transaction or by applicable law, be repaid in
connection with such Asset Sale, (iii) all contractually required
distributions and other payments made to minority interest holders in
Restricted Subsidiaries of such Person as a result of such transaction, and
(iv) appropriate amounts to be provided by the Company or any Restricted
Subsidiary of the Company as a reserve against any liabilities associated
with such Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters
and liabilities under any indemnification obligations associated with such
Asset Sale; provided that, in the event that any consideration for a
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transaction (that otherwise would constitute Net Cash Proceeds) is required
to be held in escrow pending determination of whether a purchase price
adjustment shall be made or is reserved pursuant to clause (iv) above, such
consideration (or any portion thereof) shall become Net Cash Proceeds only
at such time as it is released to such Person or its Restricted Subsidiaries
from escrow or ceases to be reserved, and provided that any non-cash
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consideration received in connection with any transaction that is
subsequently converted to cash shall be deemed to be Net Cash Proceeds at
such time, for purposes of an Asset Sale and shall thereafter be applied in
accordance with Section 1016, and (b) with respect to any issuance or sale
of Capital Stock, the proceeds of such issuance or sale in the form of cash
or cash equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash or cash equivalents
(except to the extent such obligations are financed or sold with recourse to
the Company or any Restricted Subsidiary of the Company) and proceeds from
the conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof. For purposes of the preceding clause (b) the
value of the aggregate Net Cash Proceeds received by the Company upon the
issuance of Capital Stock either upon the conversion of convertible Debt or
Redeemable Capital Stock, shall be the Net Cash Proceeds received upon the
issuance of such Debt or Redeemable Capital Stock plus the incremental
amount received by the Company upon the conversion, exchange or exercise
thereof.
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Regulation S.
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 305.
"Notes" has the meaning stated in the first recital of this
Indenture and more particularly means any Notes authenticated and delivered
under this Indenture.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President or a Vice President, and by the Chief Financial
Officer, the Chief Accounting Officer, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee, which certificate shall comply with this
Indenture.
"Offshore Global Note" has the meaning set forth in Section 201.
"Offshore Physical Note" has the meaning set forth in Section 201.
"Opinion of Counsel" means a written opinion of counsel, who may
be an employee of or counsel for the Company, including an employee of the
Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Notes, means, as of the
date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Notes; provided that,
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if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor reasonably
satisfactory to the Trustee has been made;
(iii) Notes, except to the extent expressly provided in
Sections 1302 and 1303, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Thirteen;
and
(iv) Notes that have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser
in whose hands the Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the
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requisite principal amount at Stated Maturity of Outstanding Notes have
given any request, demand, authorization, direction, consent, notice or
waiver hereunder, and for the purpose of making the calculations
required by TIA Section 313, Notes owned by the Company or any other
obligor upon the Notes or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in making
such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that
the Trustee knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and
that the pledgee is not the Company or any other obligor upon the Notes
or any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and
premium, if any) or interest on any Notes on behalf of the Company.
"Permitted Debt" means (a) Vendor Debt in an aggregate principal
amount not to exceed $780.0 million outstanding at any one time; (b) Debt
permitted to be borrowed under the Credit Agreement in an aggregate
principal amount not to exceed $175.0 million outstanding at any time; (c)
Telecommunications Assets Debt; (d) Debt under Interest Swap Obligations
designed to protect against or manage the Company's or any of its
Subsidiaries' exposure to fluctuations in interest rates, provided that such
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obligations are related to payment obligations on other Permitted Debt, and
Currency Hedging Obligations entered into in the ordinary course of business
and designed to protect against or manage the Company's or any of its
Subsidiaries' exposure to fluctuations in foreign currency exchange rates;
(e) Debt of the Company to any of its Restricted Subsidiaries or Debt of a
Restricted Subsidiary of the Company to the Company or to another Restricted
Subsidiary of the Company (but only so long as such Debt is held by a Person
who is the Company or such a Restricted Subsidiary); (f) Debt in respect of
(1) letters of credit, bankers' acceptances or other similar instruments or
obligations, issued in connection with liabilities incurred in the ordinary
course of business (including those issued to governmental entities in
connection with self-insurance under applicable workers' compensation
statutes) or (2) surety, judgment, appeal, performance and other similar
bonds, instruments or obligations provided in the ordinary course of
business; (g) Debt represented by the Notes and the Senior Notes, any
Guarantees in respect thereof, and any Debt arising by reason of any Lien
granted to secure any of the foregoing Debt; (h) Debt arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees, or letters of credit, surety bonds
or performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company, in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (i) Capital Lease Obligations in an
aggregate principal amount outstanding at any time not to exceed $10.0
million; (j) Debt in existence on the Issue Date; (k) Debt arising from the
honoring of a check, draft or similar instrument of a Person drawn against
insufficient funds, provided that such Debt is extinguished within five
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Business Days of its incurrence; (l) Debt incurred (and refinancing of such
Debt) not to exceed, at any one time outstanding, two times the aggregate
Net Cash Proceeds received by the Company after the Issue Date from the
issuance and sale of its Capital Stock (other than (1) Redeemable Capital
Stock and (2) preferred stock that requires the accrual of dividends in cash
prior to the Stated Maturity of the Notes) or Subordinated Stockholder Debt
to a Person that is not a Subsidiary of the Company to the extent that such
Net Cash Proceeds have not been used to make a Permitted Investment pursuant
to clause (a) of the definition of "Permitted Investments", or to make a
Restricted Payment pursuant to Section 1012, provided that such Debt does
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not mature prior to the Stated Maturity of the Notes and has an Average Life
longer than the Notes; (m) any Debt incurred in connection with or given in
exchange for the renewal, extension, substitution, refunding, defeasance,
refinancing or replacement of any Debt referred to in clauses (c), (g), (j),
(n), and (o) and not incurred in violation of this Indenture ("Refinancing
Debt"), provided, however, that (1) the principal amount of such Refinancing
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Debt shall not exceed the principal amount of the Debt so renewed, extended,
substituted, refunded, defeased, refinanced or replaced (plus the premiums
paid, and the expenses incurred, in connection therewith), (2) with respect
to Refinancing Debt of any Debt, if the Average Life of the Debt being
renewed, extended, substituted, refunded, defeased, refinanced or replaced
is equal to or greater than the Average Life of the Notes, the Refinancing
Debt shall have an Average Life equal to or greater than the Average Life of
the Notes and shall not mature prior to the Stated Maturity of the Notes,
and (3) with respect to Refinancing Debt of any Debt, such Refinancing Debt
shall rank no more senior (including as a result of structural subordination
of the Notes), and shall be at least as subordinated, in right of payment to
the Notes as the Debt being renewed, extended, substituted, refunded,
defeased, refinanced or replaced; (n) Debt incurred in connection with a
prepayment or redemption of the Notes or the Senior Notes pursuant to a
Change of Control), provided that the principal amount of such Debt does not
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exceed 101% of the principal amount at Stated Maturity of the Notes or the
principal amount of the Senior Notes, prepaid (plus the amount of reasonable
expenses incurred in connection therewith) and that such Debt (i) has an
Average Life to stated maturity equal to or greater than the remaining
Average Life to Stated Maturity of the Notes and (ii) does not mature prior
to the Stated Maturity of the Notes; (o) Debt incurred if after giving pro
forma effect to the incurrence and application of the proceeds thereof, the
Debt to Annualized EBITDA Ratio would not equal or exceed 5 to 1 in the case
of any such incurrence; (p) Debt of the Company or any of its Restricted
Subsidiaries arising by reason of the recharacterization of the sale of
accounts receivable to an Accounts Receivable Subsidiary; and (q)
Subordinated Stockholder Debt.
For purposes of determining compliance with, and any particular
amount of Debt under, Section 1010, Guarantees, Liens or obligations with
respect to letters of credit supporting Debt shall be disregarded (x) if
otherwise included in the determination of such particular amount, or (y) if
incurred by the obligor on such Debt, to the extent that any such Guarantee,
Lien or letter of credit secures the principal amount of such Debt. For
purposes of determining compliance with Section 1010, in the event that an
item of Debt meets the criteria of more than one of the types of Debt
described in this definition of Permitted Debt, the Company, in its sole
discretion, shall classify such item of Debt and only be required to include
the amount and type of such Debt in one of such clauses.
For purposes of determining compliance with any Dollar-
denominated restriction on the incurrence of Debt denominated in a foreign
currency, the Dollar-equivalent principal amount of such Debt incurred
pursuant thereto shall be calculated based on the relevant currency exchange
rate in effect on the date that such Debt was incurred, in the case of term
debt, or first committed, in the case of revolving credit debt, provided
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that (x) the Dollar-equivalent principal amount of any such Debt outstanding
on the Issue Date shall be calculated based on the relevant currency
exchange rate in effect on the Issue Date and (y) if such Debt is incurred
to refinance other Debt denominated in a foreign currency, and such
refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such Dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
refinancing Debt does not exceed the principal amount of such Debt being
refinanced. The principal amount of any Debt incurred to refinance other
Debt, if incurred in a different currency from the Debt being refinanced,
shall be calculated based on the currency exchange rate applicable to the
currencies in which such respective Debt is denominated that is in effect on
the date of such refinancing.
Debt of any Person that is not a Restricted Subsidiary, which
Debt is outstanding at the time such Person becomes a Restricted Subsidiary
or is merged with or into or consolidated with the Company or a Restricted
Subsidiary, shall be deemed to have been incurred at the time such Person
becomes a Restricted Subsidiary or is merged with or into or consolidated
with the Company or a Restricted Subsidiary, and Debt that is assumed at the
time of the acquisition of any asset shall be deemed to have been incurred
at the time of such acquisition.
"Permitted Holder" means each of Microwave Services Inc.,
Digital Services Corporation, Nippon Telegraph and Telephone Corporation,
Alex J. Mandl and their respective Affiliates on the Issue Date.
"Permitted Investments" means (a) Investments in an aggregate
amount not to exceed the sum of (i) Invested Capital, (ii) the Fair Market
Value of Qualified Capital Stock of the Company, Redeemable Capital Stock of
the Company, or Debt securities of the Company convertible into Qualified
Capital Stock of the Company, in the latter two cases upon such redemption
or conversion thereof into Qualified Capital Stock of the Company, issued by
the Company or any Restricted Subsidiary of the Company as consideration for
any such Investments made pursuant to this clause (a), and (iii) in the case
of the disposition or repayment of any Investment made pursuant to this
clause (a) after the Issue Date (including by redesignation of an
Unrestricted Subsidiary of the Company to a Restricted Subsidiary of the
Company), an amount equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such Investment, in
either case, less the cost of the disposition of such Investment; (b)
Permitted Temporary Investments; (c) Investments in assets used in the
ordinary course of business; (d) Investments in any Person as a result of
which such Person becomes a Restricted Subsidiary of the Company provided
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that such Restricted Subsidiary is engaged in a Telecommunications Business;
(e) Investments in trade receivables, prepaid expenses, negotiable
instruments held for collection and lease, utility and workers'
compensation, performance and other similar deposits; (f) loans and advances
to employees made in the ordinary course of business; (g) Interest Swap
Obligations and Currency Hedge Obligations; (h) bonds, notes, debentures or
other securities received as a result of Asset Sales permitted under Section
1016; (i) Investments in existence at the Issue Date and any extension,
modification or renewal of any such Investment that does not increase the
amount of such Investment; (j) endorsements for collection or deposit in the
ordinary course of business by such Person of bank drafts and similar
negotiable instruments of such other Person received as payment for ordinary
course of business trade receivables; (k) any Investment by a Restricted
Subsidiary of the Company or any Investment by the Company or a Restricted
Subsidiary of the Company in a Restricted Subsidiary of the Company; (l)
Investments deemed to have been made as a result of the acquisition of a
Person that at the time of such acquisition held instruments constituting
Investments that were not acquired in contemplation of, or in connection
with, the acquisition of such Person; and (m) Investments in or acquisitions
of Capital Stock, Debt, securities or other property of Persons (other than
Affiliates of the Company) received by the Company or any of its Restricted
Subsidiaries in the bankruptcy or reorganization of or by such Person or any
exchange of such Investment with the issuer thereof or taken in settlement
of or other resolution of claims or disputes, and, in each case, extensions,
modifications and renewals thereof.
"Permitted Liens" means (a) Liens securing Vendor Debt and Debt
incurred under the Credit Agreement, provided that such Debt was incurred in
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compliance with clauses (a) and (b), respectively, of the definition of
Permitted Debt; (b) Liens securing Telecommunications Assets Debt; (c) Liens
on property of a Person existing at the time such Person is merged with or
into, or consolidated with, the Company or becomes a Restricted Subsidiary
of the Company (and not incurred in anticipation of such transaction);
provided that such Liens are not extended to the property and assets of the
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Company and its Restricted Subsidiaries, other than the acquired Restricted
Subsidiary; (d) Liens existing as of the Issue Date; (e) Liens on property
or assets acquired by the Company or any of its Restricted Subsidiaries,
provided that such Liens were not incurred in connection with, or in
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contemplation of such acquisition and do not extend to any other property or
assets; (f) Liens in respect of Interest Swap Obligations and Currency Hedge
Obligations permitted under the Indenture; (g) Liens in favor of the Company
or any of its Restricted Subsidiaries; (h) Liens securing the Notes and the
Senior Notes, or any Guarantees thereof; (i) any interest or title of a
lessor in the property subject to any Capitalized Lease Obligation or
operating lease; (j) Liens securing reimbursement obligations with respect
to letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof; (k) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business; (l) Liens on the
property or assets or Capital Stock of Accounts Receivable Subsidiaries and
Liens arising out of any sale of accounts receivable in the ordinary course
(including in connection with a financing transaction) to or by an Accounts
Receivable Subsidiary or to Persons that are not Affiliates of the Company;
(m) Liens on the Pledged Securities in favor of the Senior Notes Trustee and
the holders of the Senior Notes; and (n) any extension, renewal,
refinancing, refunding or replacement of any Permitted Lien (or any
arrangement to which such Permitted Lien relates), provided that such new
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Lien, pledge or deposit is limited to the property or assets that secured
(or under the arrangement under which the original Permitted Lien arose,
could secure) the obligations to which such Liens relate.
"Permitted Temporary Investments" means (a) all Eligible Cash
Equivalents except that the term "not more than one year and one day after
the date of acquisition" is changed to "not more than two years after the
Issue Date" and (b) debt securities with an investment grade rating by
Standard & Poor's Rating Services and Moody's Investors Service, Inc. issued
by any Person and maturing within two years after the Issue Date.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, limited liability corporation or government or any agency or
political subdivision thereof.
"Physical Notes" has the meaning set forth in Section 201.
"Pledged Securities" means the securities purchased by the
Company with a portion of the net proceeds from the offering of the Senior
Notes as set forth in the Offering Memorandum.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Private Placement Legend" has the meaning set forth in Section
202.
"Proportionate Interest" in any issuance of Capital Stock of a
Restricted Subsidiary means a ratio (i) the numerator of which is the
aggregate amount of all Investments in Capital Stock of such Restricted
Subsidiary by the Company and (ii) the denominator of which is the aggregate
amount of all Investments in Capital Stock of such Restricted Subsidiary by
all Persons.
"Qualified Capital Stock" of any Person means a class of Capital
Stock other than Redeemable Capital Stock.
"QIB" means a "Qualified Institutional Buyer" within the meaning
of Rule 144A under the Securities Act.
"Redeemable Capital Stock" of any Person means any equity
security of such Person that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or otherwise
(including on the happening of an event), is required to be redeemed or is
redeemable at the option of the holder thereof, in whole or in part
(including by operation of a sinking fund), or is exchangeable for Debt
(other than at the option of such Person), in whole or in part, at any time
prior to the Stated Maturity of the Notes.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by
or pursuant to this Indenture and the terms of the Notes.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture and the terms of the Notes.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of February 20, 1998 among the Company and the Initial
Purchasers.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date", for the interest payable on any interest
payment date, means the February 15 or August 15 (whether or not a Business
Day), as the case may be, next preceding such interest payment date.
"Regulation S" means Regulation S under the General Regulations
of the Securities Act.
"Replacement Assets" means, with respect to any Asset Sale,
properties or assets that, as determined by the Board of Directors, as
evidenced by a Board Resolution, are used or shall be used in the
Telecommunications Business of the Company or a Restricted Subsidiary of the
Company.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the
chairman or any vice-chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer
or assistant trust officer, the controller or any assistant controller or
any other officer of the Trustee duly authorized and 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 duly authorized officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means (i) a dividend or other distribution
declared and paid on the Capital Stock of the Company or to the Company's
stockholders (in their capacity as such), or declared and paid to any Person
other than the Company or a Restricted Subsidiary of the Company on the
Capital Stock of any Restricted Subsidiary of the Company, in each case,
other than dividends, distributions or payments made solely in Qualified
Capital Stock of the Company or such Restricted Subsidiary (and other than
pro rata dividends or distributions on Qualified Capital Stock of such
Restricted Subsidiaries), (ii) a payment made by the Company or any of its
Restricted Subsidiaries (other than a payment to the Company or any
Restricted Subsidiary of the Company) to purchase, redeem, acquire or retire
any Capital Stock of the Company or of a Restricted Subsidiary of the
Company, (iii) a payment made by the Company or any of its Restricted
Subsidiaries to redeem, repurchase, defease (including an in-substance or
legal defeasance) or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled sinking fund or mandatory redemption payment,
any Subordinated Debt of the Company, (iv) an Investment in any Person,
including an Unrestricted Subsidiary, other than (a) a Permitted Investment,
(b) an Investment by the Company in a Restricted Subsidiary of the Company
or (c) an Investment by a Restricted Subsidiary of the Company in the
Company or a Restricted Subsidiary of the Company or (v) a payment of
principal, interest or other payment on or in respect of Subordinated
Stockholder Debt. For calculation purposes upon any Person becoming a
Restricted Subsidiary of the Company, no investments in that Person shall be
considered to be Restricted Payments.
"Restricted Subsidiary" of any Person means (i) any corporation
other than an Unrestricted Subsidiary more than 50% of the outstanding
shares of Voting Stock of which is owned or controlled, directly or
indirectly, by such Person or (ii) any limited partnership other than an
Unrestricted Subsidiary of which such Person or any Restricted Subsidiary of
such Person is a general partner or (iii) any other Person (other than a
corporation or limited partnership) other than an Unrestricted Subsidiary in
which such Person, or one or more other Restricted Subsidiaries of such
Person, or such Person and one or more other Restricted Subsidiaries
thereof, directly or indirectly, have more than 50% of the outstanding
partnership or similar interests or have the power, by contract or
otherwise, to direct or cause the direction of the policies, management and
affairs thereof.
"Rule 144A" means Rule 144A under the General Regulations of the
Securities Act.
"Sale and Leaseback Transaction" means, with respect to any
Person, any direct or indirect arrangement pursuant to which property is
sold or transferred by such Person or a Restricted Subsidiary of such Person
and is thereafter leased back from the purchaser or transferee thereof by
such Person or one of its Restricted Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" has the meaning set forth in the recitals herein.
"Senior Notes Indenture" means the indenture dated November 26,
1997 by and between the Trustee and the Company governing the Senior Notes.
"Senior Notes Trustee" means the Person named as the "Trustee"
in the first paragraph of the Senior Notes Indenture until a successor
Trustee shall have become such pursuant to the applicable provisions of the
Senior Notes Indenture, and thereafter "Senior Notes Trustee" shall mean
such successor Trustee.
"Shelf Registration Statement" means the Shelf Registration
Statement, as defined in the Registration Rights Agreement.
"Significant Restricted Subsidiary" means a Restricted
Subsidiary that is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act, or that owns
or holds a Federal Communications Commission license for the transmission of
wireless telecommunications services.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to a Note or any
installment of interest thereon, means the date specified in such Note as
the fixed date on which the principal of such Note or such installment of
interest is due and payable.
"Subordinated Debt" means Debt of the Company that is
subordinated in right of payment to the Notes.
"Subordinated Stockholder Debt" means Debt of the Company to a
Permitted Holder, provided that, except to the extent expressly permitted by
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Section 1012, such Debt shall not (by its terms or by the terms of any
security into which it is convertible or for which it is exchangeable)
(including upon the happening of any event) pay principal, premium, if any,
or interest (upon acceleration or otherwise) until the earlier of (a) six
months after the Stated Maturity of the Notes and (b) the payment in full in
cash of all the Notes and provided further that (i) such Debt shall be
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subordinated to the Notes pursuant to the terms of a Subordinated Note in
the form attached hereto and (ii) the Company shall have delivered one or
more opinions of counsel in the form attached hereto as to the validity and
enforceability of such Subordinated Note.
"Subsidiary" means, with respect to any Person, (i) any
corporation more than 50% of the outstanding shares of Voting Stock of which
is owned, directly or indirectly, by such Person, or by one or more other
Subsidiaries of such Person, or by such Person and one or more other
Subsidiaries of such Person, (ii) any general partnership, joint venture or
similar entity, more than 50% of the outstanding partnership or similar
interests of which are owned, directly or indirectly, by such Person, or by
one or more other Subsidiaries of such Person, or by such Person and one or
more other Subsidiaries of such Person and (iii) any limited partnership of
which such Person or any Subsidiary of such Person is a general partner.
"Subsidiary Guarantee" means a Guarantee of the Notes or the
Senior Notes, as the case may be, by a Restricted Subsidiary and required
pursuant to Section [1014] hereof.
"Subsidiary Guarantor" means a Restricted Subsidiary that has
executed a Subsidiary Guarantee.
"Telecommunications Assets" means all assets, rights
(contractual or otherwise) and properties, whether tangible or intangible,
used or useful in connection with a Telecommunications Business.
"Telecommunications Assets Debt" means any Debt of the Company
or any of its Restricted Subsidiaries to finance the acquisition,
construction, expansion or development of Telecommunications Assets;
provided that, at the time of incurrence, such Debt does not exceed 100% of
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the lesser of cost or Fair Market Value of the Telecommunications Assets to
be so acquired, constructed, expanded or developed.
"Telecommunications Business" means, when used in reference to
any Person, that such Person is engaged primarily in the business of (i)
transmitting or providing services relating to the transmission of voice,
video or data through owned or leased transmission facilities, (ii)
creating, developing or marketing communications related network equipment,
software and other devices for use in a Telecommunications Business or (iii)
evaluating, participating in or pursuing any other activity or opportunity
that is related to those identified in (i) or (ii) above; provided that the
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determination of what constitutes a Telecommunications Business shall be
made in good faith by the Board of Directors of the Company.
"Transactions" means (i) the acquisition by the Company of all
of the outstanding stock of FirstMark Communications, Inc. pursuant to a
stock contribution agreement dated as of March 10, 1997 among Teligent,
L.L.C., FirstMark Communications, Inc. and the sole stockholder of FirstMark
Communications, Inc., (ii) the capital contributions in an aggregate amount
of $60 million to Teligent, L.L.C. by the original members of Teligent,
L.L.C., (iii) the contribution of Associated Communications of Los Angeles
to Teligent, L.L.C. by The Associated Group, Inc., (iv) the assignment of
certain licenses held by certain of the Company's members or affiliates to
the Company, (v) the grant by the Federal Communications Commission of
pending applications to provide 24 GHz wireless services in Boston, MA and
New York, NY, (vi) the investment by Nippon Telegraph and Telephone
Corporation of $100.0 million in the Company pursuant to a securities
purchase agreement dated September 30, 1997 between the Company and Nippon
Telegraph and Telephone Corporation and (vii) the merger of Teligent, L.L.C.
with and into the Company, with the Company surviving the merger.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939 as in effect from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"U.S. Global Note" has the meaning set forth in Section 201.
"U.S. Government Obligations" means (x) securities that are (i)
direct obligations of the United States of America for the payment of which
the full faith and credit of the United States of America is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which securities, in either case under clause (i)
or (ii) above, are not callable or redeemable at the option of the issuer
thereof, and (y) depository receipts issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation that is specified in clause (x) above and held by such
bank for the account of the holder of such depository receipt, or with
respect to any specific payment of principal or interest on any U.S.
Government Obligation that is so specified and held, provided that (except
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as required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest of the U.S.
Government Obligation evidenced by such depository receipt.
"U.S. Physical Note" has the meaning set forth in Section 201.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company (a) that at the time of determination shall be an Unrestricted
Subsidiary (as designated by the Board of Directors of the Company, as
provided below), (b) that shall be engaged in the same or similar line of
business as the Company and its Restricted Subsidiaries, and (c) all the
Debt of which shall be non-recourse to the Company and its Subsidiaries
other than its Unrestricted Subsidiaries and (ii) any Subsidiary of an
Unrestricted Subsidiary; provided that notwithstanding clause (i)(c) above,
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the Company or a Restricted Subsidiary of the Company may Guarantee,
endorse, agree to provide funds for the payment or maintenance of, or
otherwise become directly or indirectly liable with respect to, Debt of an
Unrestricted Subsidiary but only to the extent that the Company or such
Restricted Subsidiary could make an Investment in such Unrestricted
Subsidiary pursuant to Section 1012 and any such Guarantee, endorsement or
agreement shall be deemed an incurrence of Debt by the Company for purposes
of Section 1010. The Board of Directors of the Company may designate any
newly acquired or newly formed Subsidiary to be an Unrestricted Subsidiary
unless such Subsidiary owns any capital stock of, or owns or holds any Lien
on any property of, any other Subsidiary of the Company that is not an
Unrestricted Subsidiary (other than an Subsidiary of the type referred to in
clause (ii) above). Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions. The Company's Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary (a "Revocation");
provided, however, that immediately after giving effect to such designation,
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no Default or Event of Default shall have occurred and be continuing,
including, without limitation, under Sections 1010 and 1011, assuming the
incurrence by the Company and its Restricted Subsidiaries at the time of
such designation of all existing Debt and Liens of the Unrestricted
Subsidiary to be so designated as a Restricted Subsidiary of the Company.
"Vendor Debt" means any Debt incurred (x) pursuant to the
facility contemplated by the Financing Commitment Letter and/or the
Arrangement Commitment Letter or (y) pursuant to any agreement with one or
more other vendors, suppliers or lessors of equipment (including any
facility entered into with any vendor, supplier or lessor or any financial
institution acting on behalf of any vendor, supplier or lessor as such
agreement may be amended, modified, supplemented, refunded, refinanced,
restructured, renewed or replaced from time to time (whether in whole or in
part, whether with the original agent or lenders or other agents or lenders
and whether provided under the original agreement or otherwise).
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president".
"Voting Stock" means, with respect to any Person, securities of
any class or classes of Capital Stock in such Person entitling the holders
thereof (whether at all times or at the times that such class of Capital
Stock has voting power by reason of the happening of any contingency) to
vote in the election of members of the board of directors or comparable body
of such Person.
SECTION 102. Compliance Certificates and Opinions.
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Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any,
have been complied with, except that in the case of any such application or
request as to which the furnishing of such documents is specifically
required by any provision of this Indenture relating to such particular
application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, 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 complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon (x) a certificate or opinion of, or representations
by, an officer or officers of the Company stating that the information with
respect to such factual matters is in the possession of the Company, unless
such counsel knows that the certificate or opinion or representations with
respect to such matters are erroneous or (y) one or more certificates of
public officials.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by agents
duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and conclusive in
favor of the Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other
than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner that the Trustee
deems sufficient.
(c) The principal amount and serial numbers of Notes held by any
Person, and the date of holding the same, shall be proved by the Note
Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to a Board Resolution,
fix in advance a record date for the determination of Holders entitled to
give such request, demand, authorization, direction, notice, consent, waiver
or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record
date specified in or pursuant to such Board Resolution, which shall be a
date not earlier than the date 30 days prior to the first solicitation of
Holders generally in connection therewith and not later than the date such
solicitation is completed. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other Act may
be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for
the purposes of determining whether Holders of the requisite proportion of
Outstanding Notes have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and
for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such authorization, agreement or consent by the
Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee,
any Paying Agent or the Company in reliance thereon, whether or not notation
of such action is made upon such Note.
SECTION 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Department, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this Indenture,
or at any other address previously furnished in writing to the Trustee
by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice of any event to Holders
by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Note Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect
to other Holders. Any notice mailed to a Holder in the manner herein
prescribed shall be conclusively deemed to have been received by such
Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived
in writing by the Person entitled to receive such notice, either before or
after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be
impracticable to mail notice of any event to Holders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Trustee shall
be deemed to be a sufficient giving of such notice for every purpose
hereunder.
SECTION 107. Effect of Headings, Table of Contents and Recitals.
--------------------------------------------------
The Article and Section headings herein, the Table of Contents
and the Recitals are for convenience only and shall not affect the
construction hereof.
SECTION 108. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company
and the Trustee shall bind their respective successors and assigns, whether
so expressed or not.
SECTION 109. Separability Clause.
-------------------
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 110. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, (other than the parties hereto, any Paying Agent,
any Notes Registrar and their successors hereunder, and the Holders) any
benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 111. Governing Law.
-------------
This Indenture and the Notes shall be governed by and construed
in accordance with the law of the State of New York (without giving effect
to the conflict of laws principles thereof). The Trustee, the Company, and
(by their acceptance of the Notes) the Holders, agree to submit to the non-
exclusive jurisdiction of any United States federal or state court located
in the Borough of Manhattan, in the City of New York in any action or
proceeding arising out of or relating to this Indenture or the Notes. Upon
the effectiveness of the Shelf Registration Statement or the consummation of
the Exchange Offer, this Indenture will be subject to the provisions of the
Trust Indenture Act that are required to be part of this Indenture and
shall, to the extent applicable, be governed by such provisions.
SECTION 112. Legal Holidays.
--------------
In any case where any Interest Payment Date, date established
for the payment of defaulted interest, Redemption Date, Change of Control
Payment Date, Asset Sale Offer Purchase Date or Stated Maturity or Maturity
of any Note shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Notes) payment of principal (or
premium, if any) or interest need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date, date established for the payment of
defaulted interest, Redemption Date, Change of Control Payment Date, Asset
Sale Offer Purchase Date or at the Stated Maturity or Maturity; provided
--------
that no interest shall accrue for the period from and after such Interest
Payment Date, date established for the payment of defaulted interest,
Redemption Date, Change of Control Payment Date, Asset Sale Offer Purchase
Date, Stated Maturity or Maturity, as the case may be.
SECTION 113. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal of, or premium, if
any, or interest on, any of the Notes or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any of the
Notes, or because of the creation of any Debt represented thereby, shall be
had against any incorporator, stockholder, officer, director, employee,
controlling person of the Company or of a Subsidiary of the Company or of
any successor Person of the Company or of a Subsidiary of the Company. Each
Holder by accepting a Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the
Notes.
SECTION 114. Exhibits and Schedules.
----------------------
All exhibits and schedules attached hereto are by this reference
made a part hereof with the same effect as if herein set forth in full.
SECTION 115. Counterparts.
------------
This Indenture may be executed in any number of counterparts,
each of which shall be an original; but such counterparts shall together
constitute but one and the same instrument.
SECTION 116. Duplicate 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 117. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this
Indenture. Any terms incorporated by reference in this Indenture that are
defined by the TIA, defined by TIA reference to another statute or defined
by Commission rule under the TIA, have the meanings so assigned to them
therein.
ARTICLE TWO
NOTES FORMS
SECTION 201. Forms Generally.
---------------
The Initial Notes shall be known as the "11 1/2% Senior Discount
Notes due 2008" and the Exchange Notes shall be known as the "11 1/2% Series B
Senior Discount Notes due 2008", in each case, of the Company. The Notes
and the Trustee's certificate of authentication shall be in substantially
the forms set forth in this Article, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted
by this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange, law,
governmental rule or regulation, depository rule or usage, or other
customary usage or as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note. Each Note
shall be dated the date of its authentication.
The definitive Notes shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Notes, as evidenced
by their execution of such Notes.
Initial Notes offered and sold in reliance on Rule 144A under
the Securities Act shall be issued initially in the form of one or more
permanent global Notes in substantially the form set forth herein and
contain each of the legends set forth in Section 203 (collectively the "U.S.
Global Notes"), registered in the name of the nominee of the Depositary,
deposited with the Trustee, as custodian for the Depositary or its nominee,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. 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 or its nominee, as hereinafter
provided.
Initial Notes offered and sold in offshore transactions in
reliance on Regulation S under the Securities Act shall be issued initially
in the form of a single global Note in substantially the form set forth in
Exhibit A and contain each of the legends set forth in Section 203 (the
"Offshore Global Note"), registered in the name of the nominee of the
Depositary, deposited with the Trustee, as custodian for the Depositary or
its nominee, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of the Offshore
Global Note may from time to time be increased or decreased by adjustments
made in the records of the Trustee, as custodian for the Depositary or its
nominee, as herein provided. Initial Notes issued pursuant to Section 305
in exchange for or upon transfer of beneficial interests in the U.S. Global
Note or the Offshore Global Note shall be in the form of permanent
certificated Notes substantially in the form set forth herein (the "U.S.
Physical Notes" and the "Offshore Physical Notes" respectively), as
hereinafter provided.
The Offshore Physical Notes and U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes." The U.S.
Global Note and the Offshore Global Note are sometimes collectively referred
to as the "Global Notes."
SECTION 202. Restrictive Legends.
Unless and until the earlier of (A) the date which is two years
(or such shorter period of time as permitted by rule 144 under the
Securities Act and any successor provision thereunder) after the later of
the original issue date of the Initial Notes or the last day on which the
company or any affiliate of the company was the owner of an Initial Note or
(B) the date that (i) an Initial Note is sold pursuant to an effective Shelf
Registration Statement or (ii) an Initial Note is exchanged for an Exchange
Note in an Exchange Offer pursuant to an effective Exchange Offer
Registration Statement, in each case pursuant to the Registration Rights
Agreement, (x) each U.S. Global Note and U.S. Physical Note shall bear the
following legend set forth below (the "Private Placement Legend") on the
face thereof and (y) the Offshore Physical Notes and the Offshore Global
Note shall bear the Private Placement Legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE
TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2) AGREES
THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES
ACT AND ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND
(Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS
(THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE
UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D)
OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note, whether or not an Initial Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE COMPANY 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 CEDE & CO. 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 SECTIONS 311 AND 312 OF THE INDENTURE
DATED AS OF FEBRUARY 20, 1998 BETWEEN THE COMPANY AND FIRST UNION
NATIONAL BANK AS TRUSTEE.
SECTION 203. Form of Face of Note and Exchange Note.
--------------------------------------
TELIGENT, INC
[Series B]* 11 1/2% Senior Discount Notes due 2008
No. _____ $__________
CUSIP No.____
Teligent, Inc., a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE
& CO., or its registered assigns, the principal sum of __________ Dollars on
- ----------------------------
* Include only for Exchange Notes
March 1, 2008 at the office or agency of the Company referred to below, and
to pay interest thereon on March 1, 2003 and semi-annually thereafter, on
March 1 and September 1 in each year, from March 1, 2003, or from the most
recent Interest Payment Date to which interest has been paid or duly
provided for, at the rate of 11 1/2% per annum, until the principal hereof is
paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Notes from the
date on which such overdue interest becomes payable to the date on which
payment of such interest has been made or duly provided for. The principal
of this Note shall not accrue interest until March 1, 2003 except in the
case of a default in payment of the amount due at Stated Maturity, in which
case the amount due on this Note shall bear interest at the rate borne by
the Notes (to the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such default to the date
the payment of such amount has been made or duly provided for. The interest
so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest, which shall
be the February 15 or August 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to
the Holder on such Regular Record Date, and such defaulted interest, and (to
the extent lawful) interest on such defaulted interest at the rate borne by
the Notes, may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Notes not less than 10
days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest on this
Note will be made at the office or agency of the Company maintained for that
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
-------- -------
interest may be made at the option of the Company (i) by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Note Register or (ii) by transfer to an account maintained by the payee
located in the United States.
The following information is supplied for purposes of
Sections 1273 and 1275 of the Internal Revenue Code:
Issue Date: February 20, 1998 Original issue discount under
Section 1273
of the Internal Revenue Code
(for each $1,000 principal
amount at maturity): $1005.22
Issue Price (for each $1,000 Yield to Maturity: 11 1/2%
Principal amount at
maturity): $569.78
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual
signature, this Note shall not be entitled to any benefit under the
Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
Dated: 1998 TELIGENT, INC.
------- ---,
By
---------------------
Attest: Title:
Authorized Signature
SECTION 204. Form of Reverse of Note.
-----------------------
This Note is one of a duly authorized issue of securities of the
Company designated as its 11 1/2% [Series B]* Senior Discount Notes due 2008
- ----------------------
* Include only for Exchange Notes
(herein called the "Notes"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount at maturity to
$440,000,000, that may be issued under a Senior Discount Notes Indenture
(herein called the "Indenture") dated as of February 20, 1998 between the
Company and First Union National Bank, as trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Trustee
and the Holders of the Notes, and of the terms upon which the Notes are, and
are to be, authenticated and delivered.
The Notes are subject to redemption, upon not less than 30 nor
more than 60 days' notice, at any time on or after March 1, 2003, as a whole
or in part, at the election of the Company, at a Redemption Price equal to
the percentage of the principal amount at Stated Maturity set forth below if
redeemed during the 12-month period beginning March 1 of the years indicated
below, together in each case with accrued and unpaid interest, if any, to
the Redemption Date, all as provided in the Indenture:
Year.............................. Redemption Price
---------------
2003 ............................. 105.750%
2004 ............................. 103.833%
2005 ............................. 101.917%
2006 and thereafter .............. 100%
Upon the occurrence of a Change of Control, the Holder of this
Note may require the Company, subject to certain limitations provided in the
Indenture, to repurchase this Note at a purchase price in cash in an amount
equal to (i) 101% of the Accreted Value of this Note as of the Change of
Control Payment Date, if such Change of Control Payment Date occurs prior to
March 1, 2003, or (ii) 101% of the principal amount at Stated Maturity of
this Note as of the Change of Control Payment Date, if such Change of
Control Payment Date occurs on or after March 1, 2003, plus accrued and
unpaid interest, if any, to such Change of Control Payment Date.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated February 20, 1998, among the Company
and the Initial Purchasers named therein (the "Registration Rights
Agreement"). In the event that either (a) the Exchange Offer Registration
Statement (as such term is defined in the Registration Rights Agreement) is
not filed with the Securities and Exchange Commission on or prior to the
90th calendar day following the date of original issue of the Notes, (b) the
Exchange Offer Registration Statement (as such term is defined in the
Registration Rights Agreement) has not been declared effective on or prior
to the 150th calendar day following the date of original issue of the Notes
or (c) the Exchange Offer is not consummated or a Shelf Registration
Statement (as such terms are defined in the Registration Rights Agreement)
is not declared effective on or prior to the 180th calendar day following
the date of original issue of the Notes, cash interest ("Additional
Interest") will accrue and become payable on this Note (in addition to the
accrual of original issue discount on this Note) at a rate per annum equal
to one-quarter of one percent of the Accreted Value of the Note following
such 90-day period in the case of (a) above, following such 150-day period
in the case of (b) above or following such 180-day period in the case of
(c) above, which rate will be increased by an additional 0.25% per annum for
each 90-day period that any additional interest continues to accrue;
provided that the aggregate increase in such annual interest rate shall in
- --------
no event exceed 1%. Such Additional Interest shall become payable
semiannually on each March 1 and September 1, as applicable, following the
periods set forth in clause (i), (ii) or (iii) above. Upon (x) the filing
of the Exchange Offer Registration Statement after the 90-day period
described in clause (a) above, (y) the effectiveness of the Exchange Offer
Registration Statement after the 150-day period described in clause (b)
above or (z) the consummation of the Exchange Offer or the effectiveness of
a Shelf Registration Statement, as the case may be, after the 180-day period
described in clause (c) above, the Additional Interest borne by this Note
from the date of such filing, effectiveness or consummation, as the case may
be, will be reduced to the original interest rate set forth above if the
Company is otherwise in compliance with this paragraph; provided, however,
-------- -------
that, if after any such reduction in interest rate, a different event
specified in clause (a), (b) or (c) above occurs, the interest rate will
again be increased pursuant to the foregoing provisions.]*
In the case of any redemption of Notes, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable
to the Holders of such Notes, or one or more Predecessor Notes, of record at
the close of business on the relevant Regular Record Date referred to on the
face hereof. Notes (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
In the event of redemption of this Note in part only, a new Note
or Notes for the unredeemed portion hereof shall be issued in the name of
the Holder hereof upon the cancellation hereof.
- --------------------------
* Include only for Initial Notes.
If an Event of Default shall occur and be continuing, the
principal of all the Notes and any accrued and unpaid interest thereon may
be declared due and payable in the manner and with the effect provided in
the Indenture and in an amount equal to (i) the Accreted Value of the Notes
as of the date on which the Notes first become due and payable, if such date
occurs prior to March 1, 2003, or (ii) 100% of the principal amount at
Stated Maturity of the Notes as of the date on which the Notes first become
due and payable plus accrued and unpaid interest, if any, to such date, if
such date occurs on or after March 1, 2003.
The Indenture contains provisions for defeasance at any time of
(a) the entire indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture
at any time by the Company and the Trustee with the consent of the Holders
of a majority in aggregate principal amount at Stated Maturity of the Notes
at the time Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal amount at Stated
Maturity of the Notes at the time Outstanding, on behalf of the Holders of
all the Notes, to waive compliance by the Company with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Note at the times, place, and rate,
and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note
Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose
in The City of New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount at Stated
Maturity, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth, the
Notes are exchangeable for a like aggregate principal amount at Stated
Maturity of Notes of a different authorized denomination, as requested by
the Holder surrendering the same.
No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to the time of due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any agent shall be
affected by notice to the contrary.
All terms used in this Note that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
No recourse for the payment of the principal of, or premium, if
any, or interest on, any of the Notes or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in the Indenture or in any of the
Notes, or because of the creation of any Debt represented thereby, shall be
had against any incorporator, stockholder, officer, director, employee,
controlling person of the Company or of a Subsidiary of the Company or of
any successor Person of the Company or of a Subsidiary of the Company. Each
Holder by accepting a Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the
Notes.
The Indenture and this Note shall be governed by, and construed
in accordance with, the internal laws of the State of New York (without
giving effect to the conflict of laws principles thereof). The Trustee, the
Company, and (by their acceptance of the Notes) the Holders agree to submit
to the non-exclusive jurisdiction of any United States federal or state
court located in the Borough of Manhattan, in the City of New York, in any
action or proceeding arising out of or relating to the Indenture of this
Note.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Teligent,
Inc., 8065 Leesburg Pike, Vienna, VA 22182, Attention: Chief Financial
Officer.
SECTION 205. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: ____________________
This is one of the Notes referred to in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By
----------------------------
Authorized Officer
SECTION 206. Form of Transfer Notice for the Notes.
-------------------------------------
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ---------------------------------
- --------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
REPRESENTING INITIAL NOTES]
In connection with any transfer of this Note occurring prior to
the date which is the earlier of the date of an effective Registration
Statement or February 20, 2000; i.e., the end of the period referred to in
Rule 144(k) under the Securities Act, the undersigned confirms that without
utilizing any general solicitation or general advertising that:
Check One
---------
[ ] this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note
Registrar shall not be obligated to register this Note in the name of any
Person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Sections 311 and 312
of the Indenture shall have been satisfied.
Date:
---------------------
-----------------------------
NOTICE: The signature to this
assignment must correspond with
the name as written upon the face
of the within-mentioned instrument
in every particular, without
alteration or any change
whatsoever.
Signature Guarantee:
----------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:
------------------------ ----------------------------
NOTICE: To be executed by an
executive officer
[THE FOLLOWING PROVISIONS SHALL APPLY TO ALL OF THE NOTES]
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 1009 or Section 1016 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1009 or Section 1016 of the Indenture, state the
amount (in original principal amount at Stated Maturity) below:
$ .
-------------------
Date:
----------------------
Your Signature:
---------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
---------------
The aggregate principal amount at Stated Maturity of Notes that
may be authenticated and delivered under this Indenture is limited to
$440,000,000, except for Notes authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Notes pursuant to
Section 303, 304, 305, 306, 906, 1012 or 1013.
The Notes shall be known and designated as the "11 1/2% Senior
Discount Notes due 2008" and the Exchange Notes shall be known and
designated as the "11 1/2% Series B Senior Discount Notes due 2008," in each
case, of the Company. Their Stated Maturity shall be March 1, 2008 and they
shall bear interest at the rate of 11 1/2% per annum from March 1, 2003 or from
the most recent Interest Payment Date to which interest has been paid or
duly provided for, payable in cash on March 1, 2003 and semi-annually
thereafter on March 1 and September 1 in each year and at said Stated
Maturity until the principal thereof is paid or duly provided for. The
Notes will be issued at a discount to their aggregate principal amount at
maturity. The principal of the Notes shall not accrue interest until March
1, 2003 except in the case of a default in payment of the amount due at
Stated Maturity, in which case the amount due on the Notes shall bear
interest at the rate borne by the Notes (to the extent that the payment of
such interest shall be legally enforceable), which shall accrue from the
date of such default to the date the payment of such amount has been made or
duly provided for. Interest on any overdue principal amount shall be
payable on demand.
The principal of (and premium, if any) and interest on the Notes
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose; provided, however, that, at
-------- -------
the option of the Company, interest may be paid (i) by check mailed to
addresses of the Persons entitled thereto as such addresses shall appear on
the Note Register or (ii) by transfer to an account maintained by the payee
located in the United States.
Holders shall have the right to require the Company to purchase
their Notes, in whole or in part, in the event of a Change in Control
pursuant to Section 1009. The Notes shall be subject to repurchase pursuant
to an Asset Sale Offer as provided in Section 1016.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
-------------
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Notes shall be executed on behalf of the Company by its
Chairman, its President or a Vice President and attested by its Secretary or
an Assistant Secretary. The signature of any of these officers on the Notes
may be manual or facsimile signatures of the present or any future such
authorized officer and may be imprinted or otherwise reproduced on the
Notes.
Notes bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or
did not hold such offices at the date of such Notes.
On Company Order, the Trustee shall authenticate for original
issue Initial Notes in an aggregate principal amount at Stated Maturity not
to exceed $440,000,000. On Company Order, the Trustee shall authenticate
for original issue Exchange Notes in an aggregate principal amount at Stated
Maturity not to exceed $440,000,000; provided that such Exchange Notes shall
--------
be issuable only upon the valid surrender for cancellation of Initial Notes
of a like aggregate principal amount at Stated Maturity in accordance with
an Exchange Offer pursuant to the Registration Rights Agreement. In each
case, the Trustee shall be entitled to receive an Officers' Certificate and
an Opinion of Counsel of the Company that it may reasonably request in
connection with such authentication of Notes. Such order shall specify the
amount of Notes to be authenticated and the date on which the original issue
of Notes is to be authenticated.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Notes, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Notes.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized officer,
and such certificate upon any Note shall be conclusive evidence, and the
only evidence, that such Note has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of its properties and assets
substantially as an entirety to any Person, and the successor Person
resulting from such consolidation, or surviving such merger, or into which
the Company shall have been merged, or the Person that shall have received a
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed an indenture supplemental hereto with the Trustee pursuant to
Article Eight, any of the Notes authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Notes executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Notes surrendered for such exchange and of like principal
amount at Stated Maturity; and the Trustee, upon Company Request of the
successor Person, shall authenticate and deliver Notes as specified in such
request for the purpose of such exchange. If Notes shall at any time be
authenticated and delivered in any new name of a successor Person pursuant
to this Section in exchange or substitution for or upon registration of
transfer of any Notes, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all
Outstanding Notes for Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
---------------
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes that are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by
their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive
Notes upon surrender of the temporary Notes at the office or agency of the
Company designated for such purpose pursuant to Section 1002, without charge
to the Holder. Upon surrender for cancellation of any one or more temporary
Notes, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount at Stated Maturity of
definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for
the registration of Notes and of transfers of Notes. The Note Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. At all reasonable times, the Note
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Note Registrar") for the
purpose of registering Notes and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 1002, the
Company shall 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 of a like aggregate
principal amount at Stated Maturity.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal
amount at Stated Maturity, upon surrender of the Notes to be exchanged
(including an exchange of Initial Notes for Exchange Notes), at such office
or agency. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes
that the Holder making the exchange is entitled to receive; provided that no
--------
exchange of Initial Notes for Exchange Notes shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission, the Trustee shall have received an Officers' Certificate
confirming that the Exchange Offer Registration Statement has been declared
effective by the Commission and the Initial Notes to be exchanged for the
Exchange Notes have been cancelled by the Trustee.
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.
Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Note Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in
the form attached to the Note or otherwise satisfactory to the Company and
the Note Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer
or exchange or redemption of Notes, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Section 304, 906, 1012, 1013 or 1108
not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, (ii) to register the transfer of or exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (iii) to issue,
register, transfer or exchange any Note during a Change of Control Offer or
an Asset Sale Offer, if such Note is tendered pursuant to such Change of
Control Offer or Asset Sale Offer and not withdrawn.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
-------------------------------------------
If (i) any mutilated Note is surrendered to the Trustee, or
(ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Note, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to the
Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver, in exchange for any such mutilated Note or
in lieu of any such destroyed, lost or stolen Note, a replacement Note of
like tenor and principal amount at Stated Maturity, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a replacement Note, pay such Note.
Upon the issuance of any replacement Note under this Section,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every replacement Note issued pursuant to this Section in lieu
of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Company, whether or not
the mutilated, destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all benefits of this
Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Note that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name such Note (or one or more Predecessor Notes) is registered at
the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to
Section 1002; provided, however, that each installment of interest may at
-------- -------
the Company's option be paid by (i) mailing a check for such interest,
payable to or upon the written order of the Person entitled thereto pursuant
to Section 308, to the address of such Person as it appears in the Note
Register or (ii) transfer to an account located in the United States
maintained by the payee.
Any interest on any Note that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith
cease to be payable to the Holder on the Regular Record Date by virtue of
having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Notes
(such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Note and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements reasonably
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in
this clause (1) provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date, and in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor to be given in the manner provided for in Section 106,
not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so given, such Defaulted Interest shall be
paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, that were carried by such other Note.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to and at the time of the due presentment of a Note for
registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such Note is
registered as the owner of such Note for the purpose of receiving payment of
principal of (and premium, if any) and (subject to Sections 305 and 307)
interest on such Note and for all other purposes whatsoever, whether or not
such Note be overdue, and none of the Company, the Trustee or any agent of
the Company or the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it.
The Company may at any time deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder that the Company may
have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Notes
previously authenticated hereunder that the Company has not issued and sold,
and all Notes so delivered shall be promptly cancelled by the Trustee. No
Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes held by the Trustee shall be disposed of by
the Trustee in accordance with its customary procedures and certification of
their disposal delivered to the Company unless by Company Order the Company
shall direct that cancelled Notes be returned to it. The Trustee shall
provide the Company with a list of all Notes that have been cancelled from
time to time as requested by the Company.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such
Depositary and (iii) bear legends as set forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any 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 beneficial owner of any Note. The
registered holder of a Global Note may grant proxies and otherwise authorize
any person, including Agent Members and persons that may hold interests
through Agent Members, to take any action which a Holder is entitled to take
under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global Note
shall be limited to transfers of such Global Note in whole, but not in part,
to the Depositary, its successors or their respective nominees, except
(i) as otherwise set forth in Section 312 and (ii) U.S. Physical Notes or
Offshore Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in the U.S. Global Note or the
Offshore Global Note, respectively, in the event that the Depositary
notifies the Company that it is unwilling or unable to continue as
Depositary for the applicable Global Note or the Depositary ceases to be a
"Clearing Agency" registered under the Exchange Act and a successor
depositary is not appointed by the Company within 90 days or an Event of
Default has occurred and is continuing and the Note Registrar has received a
request from the Depositary. In connection with a transfer of an entire
Global Note to beneficial owners pursuant to clause (ii) of this paragraph
(b), the applicable Global Note shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the applicable Global
Note, an equal aggregate principal amount at Stated Maturity of U.S.
Physical Notes (in the case of the U.S. Global Note) or Offshore Physical
Notes (in the case of the Offshore Global Note), as the case may be, of
authorized denominations.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such
Global Note and become an interest in the other Global Note and,
accordingly, will thereafter be subject to all transfer restrictions, if
any, and other procedures applicable to beneficial interests in such other
Global Note for as long as it remains such an interest.
(d) Any U.S. Physical Note delivered in exchange for an interest
in the U.S. Global Note pursuant to paragraph (b) of this Section shall,
unless such exchange is made on or after the Resale Restriction Termination
Date and except as otherwise provided in Section 312, bear the Private
Placement Legend.
SECTION 312. Transfer Provisions.
-------------------
Unless and until the earlier of (A) the date which is two years
(or such shorter period of time as permitted by rule 144 under the
Securities Act and any successor provision thereunder) after the later of
the original issue date of the Initial Notes or the last day on which the
Company or any affiliate of the Company was the owner of an Initial Note or
(B) the date on which (i) an Initial Note is sold pursuant to an effective
Registration Statement, or (ii) an Initial Note is exchanged for an Exchange
Note in the Exchange Offer pursuant to an effective Registration Statement,
in each case, pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) General. The provisions of this Section 312 shall apply to
all transfers involving any Physical Note and any beneficial interest
in any Global Note.
(b) Certain Definitions. As used in this Section 312 only,
"delivery" of a certificate by a transferee or transferor means the
delivery to the Note Registrar by such transferee or transferor of the
applicable certificate duly completed; "holding" includes both
possession of a Physical Note and ownership of a beneficial interest
in a Global Note, as the context requires; "transferring" a Global
Note means transferring that portion of the principal amount of the
transferor's beneficial interest therein that the transferor has
notified the Note Registrar that it has agreed to transfer; and
"transferring" a Physical Note means transferring that portion of the
principal amount thereof that the transferor has notified the Note
Registrar that it has agreed to transfer.
As used in this Indenture, "Regulation S Certificate" means a
Certificate substantially in the form set forth in Section 313; "Rule
144A Certificate" means a certificate substantially in the form set
forth in Section 314; and "Non-Registration Opinion and Supporting
Evidence" means a written opinion of counsel reasonably acceptable to
the Company to the effect that, and such other certification or
information as the Company may reasonably require to confirm that, the
proposed transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act.
(c) [Intentionally Omitted]
(d) Deemed Delivery of a Rule 144A Certificate in Certain
-----------------------------------------------------
Circumstances.
--------------
A Rule 144A Certificate, if not actually delivered, will be deemed
delivered if (A) (i) the transferor advises the Company and the
Trustee in writing that the relevant offer and sale were made
in accordance with the provisions of Rule 144A (or, in the case of a
transfer of a Physical Note, the transferor checks the box provided on
the Physical Note to that effect) and (ii) the transferee advises the
Company and the Trustee in writing that (x) it and, if applicable,
each account for which it is acting in connection with the relevant
transfer, is a qualified institutional buyer within the meaning of
Rule 144A, (y) it is aware that the transfer of Notes to it is being
made in reliance on the exemption from the provisions of Section 5 of
the Securities Act provided by Rule 144A, and (z) prior to the
proposed date of transfer it has been given the opportunity to obtain
from the Company the information referred to in Rule 144A(d)(4), and
has either declined such opportunity or has received such information
(or, in the case of a transfer of a Physical Note, the transferee
signs the certification provided on the Physical Note to that effect);
or (B) the transferor holds the Global Note and is transferring to a
transferee that will take delivery in the form of the Global Note.
(e) Procedures and Requirements. If the proposed transferor
holds: ---------------------------
(1) a U.S. Physical Note which is surrendered to the
Note Registrar, and the proposed transferee or transferor,
as applicable:
(A) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee requests
delivery in the form of a U.S. Physical Note, then
the Note Registrar shall (x) register such transfer
in the name of such transferee and record the date
thereof in its books and records, (y) cancel such
surrendered U.S. Physical Note and (z) deliver a new
U.S. Physical Note to such transferee duly
registered in the name of such transferee in
principal amount equal to the principal amount being
transferred of such surrendered U.S. Physical Note;
(B) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the Note Registrar shall
(x) cancel such surrendered U.S. Physical Note, (y)
record an increase in the aggregate principal amount
of the U.S. Global Note equal to the principal
amount being transferred of such surrendered U.S.
Physical Note and (z) notify the Depositary in
accordance with the procedures of the Depositary
that it approves of such transfer; or
(C) delivers a Regulation S Certificate, then
the Note Registrar shall cancel such surrendered
U.S. Physical Note and at the direction of the
transferee, either:
(i) register such transfer in the name of
such transferee, record the date thereof in
its books and records and deliver a new
Offshore Physical Note to such transferee duly
registered in the name of such transferee in
principal amount equal to the principal amount
being transferred of such surrendered U.S.
Physical Note, or
(ii) if the proposed transferee is or is
acting through an Agent Member, record an
increase in the aggregate principal amount of
the Offshore Global Note equal to the
principal amount being transferred of such
surrendered U.S. Physical Note and notify the
Depositary in accordance with the procedures
of the Depositary that it approves of such
transfer.
In any of the cases described in this Section
312(e)(1)(A), (B) or (C)(i), the Note Registrar
shall deliver to the transferor a new U.S. Physical
Note duly registered in the name of such transferor
in principal amount equal to the principal amount
not being transferred, if any, of such surrendered
U.S. Physical Note, as applicable.
(2) a beneficial interest in the U.S. Global Note,
and the proposed transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee requests
delivery in the form of a U.S. Physical Note, then
the Note Registrar shall (w) register such transfer
in the name of such transferee and record the date
thereof in its books and records, (x) record a
decrease in the aggregate principal amount of the
U.S. Global Note in an amount equal to the
beneficial interest therein being transferred, (y)
deliver a new U.S. Physical Note to such transferee
duly registered in the name of such transferee in
principal amount equal to the amount of such
decrease and (z) notify the Depositary in accordance
with the procedures of the Depositary that it
approves of such transfer;
(B) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the transfer shall be
effected in accordance with the procedures of the
Depositary therefor; or
(C) delivers a Regulation S Certificate, then
the Note Registrar shall (x) record a decrease in
the aggregate principal amount of the U.S. Global
Note in an amount equal to the beneficial interest
therein being transferred, (y) notify the Depositary
in accordance with the procedures of the Depositary
that it approves of such transfer and (z) at the
direction of the transferee, either:
(i) register such transfer in the name of
such transferee, record the date thereof in
its books and records and deliver a new
Offshore Physical Note to such transferee duly
registered in the name of such transferee in
principal amount equal to the amount of such
decrease, or
(ii) if the proposed transferee is or is
acting through an Agent Member, record an
increase in the aggregate principal amount of
the Offshore Global Note equal to the amount
of such decrease.
(3) an Offshore Physical Note which is surrendered to
the Note Registrar, and the proposed transferee or
transferor, as applicable:
(A) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the Note Registrar shall
(x) cancel such surrendered Offshore Physical Note,
(y) record an increase in the aggregate principal
amount of the U.S. Global Note equal to the
principal amount being transferred of such
surrendered Offshore Physical Note and (z) notify
the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer;
(B) where the proposed transferee is or is
acting through an Agent Member, requests that the
proposed transferee receive a beneficial interest in
the Offshore Global Note, then the Note Registrar
shall (x) cancel such surrendered Offshore Physical
Note, (y) record an increase in the aggregate
principal amount of the Offshore Global Note equal
to the principal amount being transferred of such
surrendered Offshore Physical Note and (z) notify
the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer;
(C) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee requests
delivery in the form of a U.S. Physical Note, then
the Note Registrar shall (x) register such transfer
in the name of such transferee and record the date
thereof in its books and records, (y) cancel such
surrendered Offshore Physical Note and (z) deliver a
new U.S. Physical Note to such transferee duly
registered in the name of such transferee in
principal amount equal to the principal amount being
transferred of such surrendered U.S. Physical Note; or
(D) does not make a request covered by Section
312(e)(3)(A), (B) or(C), then the Note Registrar
shall (x) register such transfer in the name of such
transferee and record the date thereof in its books
and records, (y) cancel such surrendered Offshore
Physical Note and (z) deliver a new Offshore
Physical Note to such transferee duly registered in
the name of such transferee in principal amount
equal to the principal amount being transferred of
such surrendered Offshore Physical Note.
In any of the cases described in this Section
312(e)(3), the Note Registrar shall deliver to the
transferor a new Offshore Physical Note duly
registered in the name of such transferor in
principal amount equal to the principal amount not
being transferred of such surrendered Offshore
Physical Note, as applicable.
(4) a beneficial interest in the Offshore Global
Note, and the proposed transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the Note Registrar shall
(x) record a decrease in the aggregate principal
amount of the Offshore Global Note in an amount
equal to the beneficial interest therein being
transferred, (y) record an increase in the aggregate
principal amount of the U.S. Global Note equal to
the amount of such decrease and (z) notify the
Depositary in accordance with the procedures of the
Depositary that it approves of such transfer;
(B) where the proposed transferee is or is
acting through an Agent Member, requests that the
proposed transferee receive a beneficial interest in
the Offshore Global Note, then the transfer shall be
effected in accordance with the procedures of the
Depositary therefor; or
(C) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee requests
delivery in the form of a U.S. Physical Note, then
the Note Registrar shall (w) register such transfer
in the name of such transferee and record the date
thereof in its books and records, (x) record a
decrease in the aggregate principal amount of the
Offshore Global Note in an amount equal to the
beneficial interest therein being transferred, (y)
deliver a new U.S. Physical Note to such transferee
duly registered in the name of such transferee in
principal amount equal to the amount of such
decrease and (z) notify the Depositary in accordance
with the procedures of the Depositary that it
approves of such transfer;
(D) does not make a request covered by Section
312(e)(4)(A), (B) or (C), then the Note Registrar
shall (w) register such transfer in the name of such
transferee and record the date thereof in its books
and records, (x) record a decrease in the aggregate
principal amount of the Offshore Global Note in an
amount equal to the beneficial interest therein
being transferred, (y) deliver a new Offshore
Physical Note to such transferee duly registered in
the name of such transferee in principal amount
equal to the amount of such decrease and (z) notify
the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer.
(f) Execution, Authentication and Delivery of Physical Notes. In
--------------------------------------------------------
any case in which the Note Registrar is required to deliver a Physical
Note to a transferee or transferor, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, such
Physical Note.
(g)Certain Additional Terms Applicable to Physical Notes. Any
-----------------------------------------------------
transferee entitled to receive a Physical Note may request that the
principal amount thereof be evidenced by one or more Physical Notes in
any authorized denomination or denominations and the Note Registrar
shall comply with such request if all other transfer restrictions are
satisfied.
(h)Transfers Not Covered by Section 312(e). The Note Registrar
---------------------------------------
shall effect and record, upon receipt of a written request from the
Company so to do, a transfer not otherwise permitted by Section
312(e), such recording to be done in accordance with the otherwise
applicable provisions of Section 312(e), upon the furnishing by the
proposed transferor or transferee of a Non-Registration Opinion and
Supporting Evidence.
(i)General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in the Indenture. The Note Registrar shall not
register a transfer of any Note unless such transfer complies with the
restrictions with respect thereto set forth in this Indenture. The
Note Registrar shall not be required to determine (but may rely upon a
determination made by the Company) the sufficiency or accuracy of any
such certifications, legal opinions, other information or document.
(j) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the
Note Registrar shall deliver Notes that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Notes
bearing the Private Placement Legend, the Note Registrar shall deliver
only Notes that bear the Private Placement Legend unless (i) the
requested transfer is at least two years after the original issue date
of the Initial Note (ii) there is delivered to the Note Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act or (iii) such Notes are
exchanged for Exchange Notes pursuant to an Exchange Offer.
SECTION 313. Form of Regulation S Certificate.
--------------------------------
Regulation S Certificate
------------------------
To: First Union National Bank
901 East Cary Street
Richmond, VA 23219
Attention: Corporate Trust Department
Re: Teligent, Inc. (the "Company")
11 1/2% Senior Discount Notes due 2008 (the "Notes")
---------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate
------
principal amount of Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S ("Regulation S") under the
Securities Act of 1933, as amended (the "Securities Act"), and accordingly,
we hereby certify as follows:
1. The offer of the Notes was not made to a person in the United
States (unless such person or the account held by it for which it is
acting is excluded from the definition of "U.S. person" pursuant to
Rule 902(o) of Regulation S under the circumstances described in Rule
902(i)(3) of Regulation S) or specifically targeted at an identifiable
group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the buyer
was outside the United States or we and any person acting on our
behalf reasonably believed that the buyer was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market, and neither we
nor any person acting on our behalf knows that the transaction was
pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf has made any directed selling efforts in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable.
4. The proposed transfer of Notes is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
5. If we are an officer or director of the Company or a
distributor, we certify that the proposed transfer is being made in
accordance with the provisions of Rules 903 and 904(c) of
Regulation S.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate or a copy hereof
to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[NAME OF SELLER]
By:
---------------------
Name:
Title:
Address:
Date of this Certificate: , 199
---------- -- -----
SECTION 314. Form of Rule 144A Certificate.
-----------------------------
Rule 144A Certificate
---------------------
To: First Union National Bank
901 East Cary Street
Richmond, VA 23219
Attention: Corporate Trust Department
Re: Teligent, Inc. (the "Company")
11 1/2% Senior Discount Notes due 2008 (the "Notes")
---------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate
----
principal amount of Notes, we confirm that such purchase has been effected
pursuant to and in accordance with Rule 144A ("Rule 144A") under the
Securities Act of 1933, as amended (the "Securities Act"). We are aware
that the transfer of Notes to us is being made in reliance on the exemption
from the provisions of Section 5 of the Securities Act provided by Rule
144A. Prior to the date of this Certificate we have been given the
opportunity to obtain from the Company the information referred to in Rule
144A(d)(4), and have either declined such opportunity or have received such
information.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate or a copy hereof
to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:
--------------------------
Name:
Title:
Address:
Date of this Certificate: , 199
---------- -- -----
SECTION 315. CUSIP Numbers.
-------------
The Company in issuing the Notes may use "CUSIP" numbers (if
then generally in use) in addition to serial numbers and, if so, the Trustee
shall use such "CUSIP" numbers in addition to serial numbers in notices of
redemption, repurchase or other notices to Holders as a convenience to
Holders; provided that any such notice may state that no representation is
made as to the correctness of such CUSIP numbers either as printed on the
Notes or as contained in any notice of a redemption or repurchase and that
reliance may be placed only on the serial or other identification numbers
printed on the Notes, and any such redemption or repurchase shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
----------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or
exchange of Notes expressly provided for herein or pursuant hereto) and the
Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this
Indenture when
(1) either
(a) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 306
and (ii) Notes for whose payment money has theretofore been
deposited in trust with the Trustee or any Paying Agent or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided
in Section 1003) have been delivered to the Trustee for
cancellation; or
(b) all such Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for such purpose United States dollars
in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Notes
that have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with. (Such
Opinion of Counsel may, as to all matters of fact, rely on, among
other things, such Officers' Certificate).
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 607
and, if money shall have been deposited with the Trustee pursuant to
subclause (b) of clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
---------------------------
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
------------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any installment of interest on the
Notes when it becomes due and payable and the continuance of such
default for a period of 30 days;
(b) default in the payment of the principal of (or premium, if
any, on) any Note at its Stated Maturity, upon repurchase,
acceleration, optional redemption, required repurchase (including
pursuant to a Change of Control Offer or an Asset Sale Offer) or
otherwise, or the failure to make an offer to purchase as therein
required;
(c) failure by the Company to perform or comply with the
provisions of Article Eight of this Indenture;
(d) default in the performance, or breach, of any covenant or
warranty of the Company under this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is
specifically dealt with in (a), (b) or (c) above) and continuance of
such default or breach for a period of 60 days after specified written
notice thereof has been given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% of the
aggregate principal amount at Stated Maturity of the Outstanding
Notes;
(e) Debt of the Company or any Restricted Subsidiary of the
Company is not paid when due within the applicable grace period, if
any, or is accelerated by the holders thereof and, in either case, the
principal amount of such unpaid or accelerated Debt exceeds $15.0
million;
(f) the entry by a court of competent jurisdiction of one or more
judgments or orders against the Company or any Restricted Subsidiary
of the Company in an uninsured or unindemnified aggregate amount in
excess of $15.0 million, which remains undischarged, unwaived,
unstayed, unbonded or unsatisfied for a period of 60 consecutive days;
(g) the entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Company or any
Significant Restricted Subsidiary of the Company in an involuntary
case or proceeding under U.S. bankruptcy laws, as now or hereafter
constituted, or any other applicable federal, state, or foreign
bankruptcy, insolvency, or other similar law or (ii) a decree or order
adjudging the Company or any Significant Restricted Subsidiary of the
Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant
Restricted Subsidiary of the Company under U.S. bankruptcy laws, as
now or hereafter constituted, or any other applicable federal, state,
or foreign bankruptcy, insolvency, or similar law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Significant Restricted
Subsidiary of the Company or of any substantial part of the property
or assets of the Company or any Significant Restricted Subsidiary of
the Company or ordering the winding up or liquidation of the affairs
of the Company or any Significant Restricted Subsidiary of the
Company, 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; or
(h) (i) the commencement by the Company or any Significant
Restricted Subsidiary of the Company of a voluntary case or proceeding
Under U.S. bankruptcy laws, as now or hereafter constituted, or any
other applicable federal, state, or foreign bankruptcy, insolvency or
other similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or (ii) the consent by the Company or any
Significant Restricted Subsidiary of the Company to the entry of a
decree or order for relief in respect of the Company or any
Significant Restricted Subsidiary of the Company in an involuntary
case or proceeding under U.S. bankruptcy laws, as now or hereafter
constituted, or any other applicable federal, state or foreign
bankruptcy, insolvency, or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against the Company or
any Significant Restricted Subsidiary of the Company, or (iii) the
filing by the Company or any Significant Restricted Subsidiary of the
Company of a petition or answer or consent seeking reorganization or
relief under U.S. bankruptcy laws, as now or hereafter constituted, or
any other applicable federal, state, or foreign bankruptcy, insolvency
or other similar law, or (iv) the consent by the Company or any
Significant Restricted Subsidiary of the Company to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or any Significant Restricted Subsidiary of
the Company or of any substantial part of the property or assets of
the Company or any Significant Restricted Subsidiary of the Company,
or the making by the Company or any Significant Restricted Subsidiary
of the Company of an assignment for the benefit of creditors, or (v)
the admission by the Company or any Significant Restricted Subsidiary
of the Company in writing of its inability to pay its debts generally
as they become due, or (vi) the taking of corporate action by the
Company or any Significant Restricted Subsidiary of the Company in
furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
---------------------------------------------------
If an Event of Default (other than an Event of Default specified
in Section 501(g) or 501(h)) above with respect to the Company) occurs and
is continuing, then and in every such case the Trustee or the Holders of not
less than 25% of the outstanding aggregate principal amount at Stated
Maturity of Notes may declare the Default Amount (as defined below) and any
accrued and unpaid interest on all such Notes then outstanding to be
immediately due and payable, by a notice in writing to the Company (and to
the Trustee if given by Holders), and upon any such declaration, such
Default Amount and any accrued and unpaid interest will become and be
immediately due and payable. If any Event of Default specified in Sections
501(g) and 501(h) above with respect to the Company occurs, the Default
Amount and any accrued and unpaid interest on all such Notes then
outstanding, shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. Prior to
March 1, 2003, the Default Amount with respect to the Notes shall equal the
Accreted Value of the Notes as of such date. On or after March 1, 2003, the
Default Amount with respect to the Notes shall equal 100% of the principal
amount at Stated Majority of the Notes.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter provided in this Article, the Holders
of a majority in principal amount of the Notes Outstanding, by written
notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest on all Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Notes that has become due otherwise than by such
declaration of acceleration, and interest on such unpaid
principal at the rate borne by the Notes,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Notes, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts
of principal of (or premium, if any, on) or interest on Notes that
have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Debt and Suits for Enforcement by Trustee.
--------------------------------------------------------
The Company covenants that if an Event of Default specified in
Section 501(a) or (b) occurs, the Company will, upon demand of the Trustee,
pay to the Trustee for the benefit of the Holders of such Notes, the whole
amount then due and payable on such Notes for principal (and premium, if
any) and interest, and interest on any overdue principal (and premium, if
any) and, to the extent that payment of such interest shall be legally
enforceable, upon any overdue installment of interest, at the rate borne by
the Notes, and, in addition thereto, 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.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other similar judicial proceeding relative to the Company or
any other obligor upon the Notes or the property of the Company or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal,
premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Notes and to file such 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 of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay the Trustee any amount due 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 607.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession
of any of the Notes or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought
in its own name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Holders of the Notes
in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Notes
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal
(and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Company.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount at
Stated Maturity of the Outstanding Notes shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount at Stated Maturity of the
Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 508. Unconditional Right of Holders to Receive
-----------------------------------------
Principal, Premium and Interest.
-------------------------------
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment, as provided herein (including, if
applicable, Article Thirteen) and in such Note of the principal of (and
premium, if any) and (subject to Section 307) interest on such Note on the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case,
subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
SECTION 512. Control by Holders.
------------------
The Holders of not less than a majority in principal amount at
Stated Maturity of the Outstanding Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee,
provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture or any Note,
(2) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction, and
(3) the Trustee need not take any action that might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount at
Stated Maturity of the Outstanding Notes may on behalf of the Holders of all
the Notes waive (including by way of consents obtained with a purchase of,
or a tender or exchange offer for, Notes) any past default hereunder and its
consequences, except a default
(1) in respect of the payment of the principal of (or premium, if
any) or interest on any Note, or
(2) in respect of a covenant or provision hereof that under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
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 benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 515. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Note
by such Holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require in any suit for the enforcement of any
right or remedy under this Indenture or the Notes, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 515
shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount at Stated Maturity of the Outstanding Notes or
to any suit instituted by any Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on any Note on or after the
respective Stated Maturity expressed in such Note.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
(1) Except during the continuance of an Event of Default,
(a) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee
may rely conclusively, 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; but in the case of any such
certificates or opinions that by any provision hereof
specifically are required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture.
(2) If an Event of Default has occurred and is continuing, the
Trustee shall exercise 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 such person's own affairs.
(3) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that
(a) this Subsection shall not be construed to limit the
effect of Subsection (1) of this Section;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
principal amount at Stated Maturity of the Outstanding Notes
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under
this Indenture; and
(d) the Trustee shall not be required to expend or risk its
own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably
assured to it.
SECTION 602. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default hereunder,
the Trustee shall transmit in the manner and to the extent provided in TIA
Section 313(c), notice of such Default hereunder known to the Trustee,
unless such Default shall have been cured or waived; provided, however,
that, except in the case of a Default in the payment of the principal of (or
premium, if any) or interest on any Note, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of
such notice is in the interest of the Holders; and provided further that in
the case of any Default of the character specified in Section 501(d), no
such notice to Holders shall be given until at least 60 days after the
occurrence thereof.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document reasonably believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of 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 reliance thereon;
(5) 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 pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit; and
(7) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney (other
than an agent or attorney who is an employee of the Trustee) appointed
with due care by it hereunder.
SECTION 604. Trustee Not Responsible for Recitals or Issuance
------------------------------------------------
of Notes.
--------
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Notes and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility and Qualification on
Form T-1 supplied to the Company are true and accurate, subject to the
qualifications set forth therein. The Trustee shall not be accountable for
the use or application by the Company of Notes or the proceeds thereof.
SECTION 605. May Hold Notes.
--------------
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Note Registrar or
such other agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder shall, until used
or applied as herein provided, be held in trust for the purposes for which
it was received, but need not be segregated from other funds except to the
extent required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed
with the Company.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may arise from or be attributable to its negligence or bad faith;
and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part or on the part of its directors, officers,
employees and agents, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself, and of indemnifying its directors,
officers, employees and agents, against any claim or liability in
connection with the exercise or performance of any of the Trustee's
powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. The
obligations of the Company under this Section to compensate the Trustee, to
pay or reimburse the Trustee for expenses, disbursements and advances and to
indemnify and hold harmless the Trustee shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of
this Indenture. As security for the performance of such obligations of the
Company, the Trustee shall have a claim prior to the Notes upon all property
and funds held or collected by the Trustee as such, except funds held in
trust for the payment of principal of (and premium, if any) or interest on
particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(g) or (h), the
expenses (including the reasonable charges and expenses of its counsel) of
and the compensation for such services are intended to constitute expenses
of administration under any applicable Federal or State bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the termination of
this Indenture.
SECTION 608. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall be at all times a Trustee hereunder that shall be
eligible to act as Trustee under TIA Section 310(a)(1) and 310(a)(5) and
shall have a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of Federal, State, territorial or District of
Columbia supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 609. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with
the applicable requirements of Section 610.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 610 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of not less than a majority in principal amount at Stated Maturity of the
Outstanding Notes, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Note for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove
the Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been
a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall
be appointed by Act of the Holders of a majority in principal amount at
Stated Maturity of the Outstanding Notes delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and
accepted appointment in the manner hereinafter provided, any Holder who has
been a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Notes in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
SECTION 610. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee; but,
on request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of
the retiring Trustee and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder. Upon reasonable request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 611. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
--------
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise qualified
and eligible under this Article, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case
any Notes shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes
so authenticated with the same effect as if such successor Trustee had
itself authenticated such Notes. In case at that time any of the Notes
shall not have been authenticated, any successor Trustee may authenticate
such Notes either in the name of any predecessor hereunder or in the name of
the successor Trustee. In all such cases such certificates shall have the
full force and effect that this Indenture provides for the certificate of
authentication of the Trustee; provided, however, that the right to adopt
-------- -------
the certificate of authentication of any predecessor Trustee or to
authenticate Notes in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 612. Conflicting Interests.
---------------------
The Trustee shall be subject to and comply with the provisions
of Section [310(b)] of the TIA.
SECTION 613. Preferential Collection of Claims Against Issuers.
-------------------------------------------------
The Trustee shall comply with Section 311(a) of the TIA,
excluding any creditor relationship listed in Section 311(b) of the TIA. If
the present or any future Trustee shall resign or be removed, it shall be
subject to Section 311(a) of the TIA to the extent provided therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Notes, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Holders in accordance with TIA Section 312, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made
under TIA Section 312(b).
SECTION 702. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Notes, the Trustee shall transmit
to the Holders, in the manner and to the extent provided in TIA Section
313(c), a brief report dated as of such May 15 if required by TIA Section
313(a).
SECTION 703. Reports by Company.
------------------
The Company shall:
(1) whether or not the Company is subject to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, or any
successor provision thereto, file with the Commission the annual
reports, quarterly reports and other documents that the Company would
have been required to file with the Commission pursuant to such
Section 13(a), 15(d) or any successor provision thereto if the Company
were subject thereto and shall file such documents with the Commission
on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required to file them;
(2) whether or not the Company is subject to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, or any
successor provision thereto, within 15 days of each Required Filing
Date, file with the Trustee copies of the annual reports, quarterly
reports and other documents (without exhibits) that the Company would
have been required to file with the Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or
any successor provisions thereto if the Company was subject thereto;
(3) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(4) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), within 15 days after the filing
thereof with the Commission, such summaries of any information,
documents and reports required to be filed by the Company pursuant to
paragraphs (1), (2) and (3) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission.
If the Company is not permitted under the Exchange Act to file
with the Commission such reports and other information referred to in
Section 703(1), the Company shall promptly upon written request supply
copies of such documents (without exhibits) to prospective purchasers of the
Notes or their representatives.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not, in any transaction or series of
transactions, consolidate with or merge into any other Person (other than a
merger of a Restricted Subsidiary into the Company in which the Company is
the continuing corporation), or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of the property and assets of
the Company and its Restricted Subsidiaries taken as a whole to any other
person, and the Company shall not permit any of its Restricted Subsidiaries
to enter into any such transaction or series of related transactions if such
transaction or series of related transactions, in the aggregate, would
result in a sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the property and assets of the
Company and its Restricted Subsidiaries, taken as a whole, to another
Person, unless:
(a) either (i) the Company shall be the continuing corporation or
(ii) the corporation (if other than the Company) formed by such
consolidation or into which the Company is merged, or the Person that
acquires, by sale, assignment, conveyance, transfer, lease or
disposition, all or substantially all of the property and assets of
the Company and its Restricted Subsidiaries taken as a whole (such
corporation or Person, the "Surviving Entity"), shall be a corporation
organized and validly existing under the laws of the United States of
America, any political subdivision thereof or any state thereof or the
District of Columbia, and shall expressly assume, by a supplemental
indenture, the due and punctual payment of the principal of (and
premium, if any) and interest on all the Notes and the performance of
the Company's covenants and obligations under this Indenture;
(b) immediately before and after giving effect to such
transaction or series of transactions on a pro forma basis (including,
without limitation, any Debt incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and
be continuing or would result therefrom;
(c) immediately after giving effect to any such transaction or
series of transactions on a pro forma basis (including, without
limitation, any Debt incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of
transactions), as if such transaction or series of transactions had
occurred on the first day of the determination period, the Company (or
the Surviving Entity if the Company is not continuing) would be
permitted to incur $1.00 of additional Debt pursuant to clause (o) of
the definition of "Permitted Debt"; and
(d) the Company or such Person shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, transfer or lease
and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with this Article and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
Notwithstanding the foregoing, the Company may merge with an
Affiliate incorporated or organized for the sole purpose of reincorporating
or reorganizing the Company in another jurisdiction to realize tax or other
benefits provided such merger meets the requirements of clauses (a), (b) and
(d) of the preceding paragraphs.
Upon any transaction or series of transactions that are of the
type described in, and are effected in accordance with, the foregoing
paragraphs, the Surviving Entity (if other than the Company) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect as if such
Surviving Entity had been named as the Company herein; and when a Surviving
Person duly assumes all of the obligations and covenants of the Company
pursuant to this Indenture and the Notes, except in the case of a lease, the
predecessor Person shall be relieved of all such obligations.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or
lease of the properties and assets of the Company substantially as an
entirety to any Person in accordance with Section 801, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, transfer or lease is made shall succeed to, and be
substituted for, 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, and in the event of any such conveyance or
transfer, the Company (which term shall for this purpose mean the Person
named as the "Company" in the first paragraph of this Indenture or any
successor Person that shall theretofore become such in the manner described
in Section 801), except in the case of a lease, shall be discharged of all
obligations and covenants under this Indenture and the Notes and may be
dissolved and liquidated.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without notice to or the consent of any Holders, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may amend, waive or supplement this Indenture and the Notes
and (if necessary) enter into one or more indentures supplemental hereto, in
form reasonably satisfactory to the Trustee, for any of the following
purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company contained herein or in the Notes, or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company, or
(3) to add any additional Events of Default, or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 610, or
(5) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein or in
the Notes, or to add any other provisions with respect to matters or
questions arising under this Indenture or the Notes; provided that
--------
such action shall not adversely affect the interests of the Holders in
any material respect, or
(6) to secure the Notes pursuant to the requirements of
Section 1015 or otherwise, or
(7) to provide for uncertificated Notes in addition to or in
place of certificated Notes, or
(8) to change or eliminate any of the provisions herein or in the
Notes; provided that any such change or elimination shall become
--------
effective only when there is not Outstanding any Note created prior to
the execution of such amendment, waiver or supplemental indenture that
is entitled to the benefit of such provision, or
(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent (including consents obtained with a purchase
of, or a tender or exchange offer for, Notes) of the Holders of not less
than a majority in principal amount at Stated Maturity of the Outstanding
Notes, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may amend,
waive or supplement this Indenture and the Notes and (if necessary) enter
into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that no such supplemental
-------- -------
indenture shall, without the consent (including consents obtained with a
purchase of, or a tender or exchange offer for, Notes) of the Holder of each
Outstanding Note affected thereby:
(1) change the Stated Maturity of the principal of or any
installment of interest on any Note, or reduce the principal amount
thereof (or premium, if any) or the rate of interest thereon or reduce
the amount that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502 or the
amount thereof provable in bankruptcy pursuant to Section 504 or
change the coin or currency in which any Note or any premium or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount at Stated Maturity
of the Outstanding Notes, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences
provided for in this Indenture, or
(3) modify the obligations of the Company to make offers to
purchase Notes in accordance with Sections 1009 and 1016, or
(4) subordinate in right of payment, or otherwise subordinate,
the Notes to any other Debt, or
(5) modify any provisions of this Indenture relating to the
calculation of Accreted Value, or
(6) modify any of the provisions of this Section or Sections 513
and 1018, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Note
affected hereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this
Article, 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.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in
effect if this Indenture shall then be required to be qualified under the
TIA.
SECTION 906. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, replacement Notes so modified as to conform, in the opinion of
the Trustee and the Company, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
---------------------------------
Reasonably promptly after the execution by the Company and the
Trustee of any supplemental indenture pursuant to the provisions of Section
902, the Company shall give notice thereof to the Holders of each
Outstanding Note affected, in the manner provided for in Section 106,
setting forth in general terms the substance of such supplemental indenture.
Any failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any supplemental
indenture or effectiveness of any such amendment, supplement or waiver.
SECTION 908. Effect of Consents.
------------------
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of that Note or portion of that Note that evidences the
same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. After an amendment, supplement or waiver becomes
effective, it shall bind every Holder of Notes.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.
---------------------------------------------------
The Company covenants and agrees for the benefit of the Holders
that it will duly and punctually pay the principal of (and premium, if any)
and interest on the Notes in accordance with the terms of the Notes and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in The City of New York, an office or
agency where Notes may be presented or surrendered for payment, 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 Trustee's New York Corporate Trust Office at
40 Broad Street, 5th Floor, Suite 550, New York, New York 10004 shall be
such office or agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any 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, and the Company hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no
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such designation or rescission shall in any manner relieve the Company of
its obligation to maintain an office or agency in The City of New York for
such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and any change in the location of any
such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
-------------------------------------------
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Notes, it will, on or before each due date of the principal of (or
premium, if any) or interest on any Notes, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
The Company will cause each Paying Agent (other than the Company
or the Trustee) to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further
liability with respect to such sums.
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 (or
premium, if any) or interest on any Note and remaining unclaimed for two
years after such principal, premium or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent
with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease.
SECTION 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Restricted Subsidiary of the Company; provided, however,
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that the Company shall not be required to preserve any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and its Restricted Subsidiaries as a whole and that the loss thereof would
not materially adversely affect the Company's ability to perform its
obligations under this Indenture and the Notes; provided further, however,
-------- ------- -------
that the foregoing shall not prohibit a liquidation, dissolution, merger,
consolidation, sale, transfer, conveyance or other disposition of a
Restricted Subsidiary of the Company or any of its assets or Capital Stock
in compliance with the other terms of this Indenture.
SECTION 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or
any of its Restricted Subsidiaries or upon the income, profits or property
of the Company or any of its Restricted Subsidiaries and (b) all lawful
claims for labor, materials and supplies that, if unpaid, might by law
become a lien upon the property of the Company or any of its Restricted
Subsidiaries (other than any Permitted Lien or other Lien permitted by this
Indenture); provided, however, that the Company shall not be required to pay
-------- -------
or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested
in good faith by appropriate proceedings or where the failure to effect such
payment or discharge would not materially adversely affect the Company's
ability to perform its obligations under the Indenture and the Notes.
SECTION 1006. Maintenance of Properties.
-------------------------
The Company will cause all material properties owned by the
Company or any of its Restricted Subsidiaries or used or held for use in the
conduct of its business or the business of any of its Restricted
Subsidiaries to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all reasonably
necessary equipment and will cause to be made all reasonably necessary
repairs, renewals, replacements, betterments and improvements thereof, all
as in the judgment of the Company reasonably may be necessary so that the
business carried on in connection therewith may be conducted at all times in
the ordinary course; provided, however, that nothing in this Section shall
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prevent the Company from discontinuing the maintenance of any of such
properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any of its
Restricted Subsidiaries or if such discontinuance or disposal is not
materially adverse to the ability of the Company to satisfy its obligations
hereunder.
SECTION 1007. Insurance.
---------
The Company will at all times keep all of its and its Restricted
Subsidiaries' properties that are of an insurable nature insured with
insurers, believed by the Company to be responsible, against loss or damage
to the extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties (which may
include self-insurance, if reasonable and in comparable form to that
maintained by companies similarly situated).
SECTION 1008. Statement by Officers as to Default.
-----------------------------------
(a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year, a brief certificate from the principal
executive officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance with all
conditions and covenants under this Indenture. For purposes of this Section
1008(a), such compliance shall be determined without regard to any period of
grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of Debt
of the Company or any Subsidiary gives any notice or takes any other action
with respect to a claimed default (other than with respect to Debt in the
principal amount of less than $15,000,000), the Company shall deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 1009. Purchase of Notes upon Change of Control.
----------------------------------------
(a) Upon the occurrence of a Change of Control, each Holder will
have the right to require the Company repurchase such Holder's Outstanding
Notes (the "Change of Control Offer") in whole or in part in integral
multiples of $1,000, at a purchase price (the "Purchase Price") in cash in
an amount equal to 101% of the Accreted Value of such Notes as of any Change
of Control Payment Date (as defined below), occuring prior to March 1, 2003
plus any accrued and unpaid cash interest not otherwise included in the
Accreted Value to such Change of Control Payment Date, or 101% of the
principal amount on any Change of Control Payment Date occuring on or after
March 1, 2003, plus accrued and unpaid interest, if any, to such Change of
Control Payment Date, in accordance with the procedures set forth in
paragraphs (b) and (c) of this Section 1009; provided, however, that
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notwithstanding the occurrence of a Change of Control, the Company shall not
be obligated to purchase the Notes pursuant to this Section 1009 in the
event that it has exercised its right to redeem all the Notes under Article
Eleven.
(b) Unless the Company has exercised its right to redeem all of
the Notes under Article Eleven, within 30 days following any Change of
Control, the Company shall give to each Holder of the Notes in the manner
provided in Section 106 a notice stating:
(1) that a Change of Control has occurred and a Change of Control
Offer is being made as described in this Section 1009, and that,
although Holders are not required to tender their Notes, all Notes
that are tendered in accordance with paragraph (c) of this Section
1009 shall be accepted for payment;
(2) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro
forma historical income, cash flow and capitalization after giving
effect to such Change of Control);
(3) the Purchase Price and the date of purchase, which shall be
no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date");
(4) the instructions and any other information necessary to
enable Holders to tender their Notes and have such Notes repurchased
in accordance with paragraph (d) of this Section; and
(5) that, unless the Company defaults in the payment of the
Purchase Price for the Notes payable pursuant to such Change of
Control Offer, any Notes accepted for payment pursuant to such Change
of Control Offer shall cease to accrete or accrue interest after the
Change of Control Payment Date.
(c) Holders electing to have Notes purchased will be required to
surrender such Notes to the Company at the address specified in the notice
at least five Business Days prior to the Change of Control Payment Date.
Holders will be entitled to withdraw their election if the Company receives,
not later than three 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 at Stated Maturity of the Notes
delivered for purchase by the Holder as to which his election is to be
withdrawn and a statement that such Holder is withdrawing his election to
have such Notes purchased. Holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount at Stated Maturity to the
unpurchased portion of the Notes surrendered.
In the event that a Change of Control occurs and the Company is
required to purchase Notes as described above, the Company will comply with
the applicable tender offer rules, including the requirements of Section
14(e) and Rule 14e-1 under the Exchange Act and any other securities laws
and regulations to the extent such laws and regulations are applicable, and
will be deemed not to be in violation of any of its covenants under this
Indenture to the extent such compliance is in conflict with such covenants.
On and after a Change of Control Payment Date, the Notes or
portions thereof accepted for payment shall cease to accrete or accrue
interest unless the Company defaults in the payment of the purchase price
therefor.
(d) Notwithstanding paragraphs (a) and (b), the Company shall not
be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in this Section
1009 applicable to a Change of Control Offer made by the Company and, in
accordance with paragraph (c) of this Section 1009, purchases all Notes
validly tendered under the Change of Control Offer and not withdrawn.
SECTION 1010. Limitation on Debt.
------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, incur any Debt
(including Acquired Debt) unless (i) after giving effect to such incurrence
of Debt and the contemporaneous application of the proceeds thereof, no
Default or Event of Default shall have occurred and be continuing at the
time or would occur as a consequence of the incurrence of such Debt, and
(ii) such Debt is Permitted Debt.
SECTION 1011. Limitation on 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 of any kind (other than Permitted Liens) on or with
respect to any of its property or assets, including any shares of stock or
Debt of any Restricted Subsidiary of the Company, whether owned at the Issue
Date or thereafter acquired, or any income, profits or proceeds therefrom,
or assign or otherwise convey any right to receive income thereon, where
such Lien, assignment or conveyance secures Debt, unless (x) in the case of
any Lien securing Subordinated Debt, the Notes are secured by a Lien on such
property, assets or income, profits or proceeds that is senior in priority
to such Lien and (y) in the case of any other Lien, the Notes are equally
and ratably secured with the obligation or liability secured by such Lien.
Any such Lien thereby created in favor of the Notes shall be automatically
and unconditionally released and discharged upon (i) the release and
discharge of the Lien or Liens to which it relates, or (ii) any sale,
exchange or transfer to any Person not an Affiliate of the Company of the
property or assets secured by such Lien or Liens, or of all of the Capital
Stock held by the Company or any of its Restricted Subsidiaries in, or all
or substantially all the assets of, any Restricted Subsidiary creating such
Lien or Liens.
SECTION 1012. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment unless, at the time of and after giving effect to the proposed
Restricted Payment, (i) no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof; (ii) after giving
effect, on a pro forma basis, to such Restricted Payment and the incurrence
of any Debt the net proceeds of which are used to finance such Restricted
Payment, the Company could incur at least $1.00 of additional Debt pursuant
to clause (o) of the definition of Permitted Debt; and (iii) after giving
effect to such Restricted Payment on a pro forma basis, the aggregate amount
expended or declared for all Restricted Payments on or after the Issue Date
does not exceed the sum of (A) cumulative EBITDA of the Company and its
Restricted Subsidiaries (or, if the cumulative EBITDA is negative, minus
100% of such negative amount) less 1.5 times cumulative Consolidated
Interest Expense of the Company and its Restricted Subsidiaries, in each
case for the period (treated as one accounting period) beginning on the
first day of the Company's fiscal quarter after which the Issue Date occurs,
and ending on the last day of the Company's fiscal quarter for which
financial statements are available immediately preceding such proposed
Restricted Payment, (B) the aggregate Net Cash Proceeds received by the
Company subsequent to the Issue Date either (x) as capital contributions to
the Company in the form of or with respect to Common Stock of the Company or
(y) from the issuance or sale (other than to a Restricted Subsidiary of the
Company) of Qualified Capital Stock of the Company (including Qualified
Capital Stock issued upon conversion of convertible Debt or convertible
Redeemable Capital Stock) or Subordinated Stockholder Debt or any options,
warrants or rights to purchase such Qualified Capital Stock of the Company,
less 50% of Debt incurred pursuant to clause (l) of the definition of
Permitted Debt, and (C) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date
(including by redesignation of an Unrestricted Subsidiary of the Company to
a Restricted Subsidiary of the Company), an amount equal to the lesser of
the return of capital with respect to such Investment and the initial amount
of such Investment, in either case, less the cost of the disposition of such
Investment.
The foregoing limitations do not prevent (i) the payment of a
dividend or similar distribution on the Capital Stock of the Company or any
of its Restricted Subsidiaries at any time within 60 days after the
declaration thereof if, on the declaration date, the Company could have paid
such dividend in compliance with this Indenture; (ii) the making of
Permitted Investments by the Company or any of its Restricted Subsidiaries;
(iii) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or Subordinated Debt of the Company in exchange for (including
any such exchange pursuant to the exercise of a conversion right or
privilege in which cash is paid in lieu of fractional shares or scrip), or
out of the Net Cash Proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Company) of, Qualified Capital Stock
of the Company; (iv) the purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Debt of the Company in
exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in which cash is paid in lieu of fractional
shares or scrip), or out of the Net Cash Proceeds of a substantially
concurrent incurrence (other than to a Restricted Subsidiary of the Company)
of, new Subordinated Debt of the Company so long as (A) the principal amount
of such new Subordinated Debt does not exceed the principal amount (or, if
such Subordinated Debt being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination) of
the Subordinated Debt being so purchased, redeemed, defeased, acquired or
retired, plus the lesser of the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Subordinated
Debt being refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing, plus, in either
case, the amount of expenses of the Company incurred in connection with such
refinancing, (B) such new Subordinated Debt is subordinated to the Notes to
the same extent as such Subordinated Debt so purchased, redeemed, defeased,
acquired or retired, and (C) such new Subordinated Debt has an Average Life
longer than the Average Life of the Subordinated Debt being refinanced and a
final Stated Maturity of principal later than the final Stated Maturity of
principal of the Subordinated Debt being refinanced; (v) any purchase or
defeasance of Subordinated Debt to the extent required upon a change of
control or asset sale (as defined therein) by the indenture or other
agreement or instrument pursuant to which such Subordinated Debt was issued,
but only if the Company (x) in the case of a Change of Control, has complied
with its obligations under Section 1009 or (y) in the case of an Asset Sale,
has applied the Net Cash Proceeds from such Asset Sale in accordance with
Section 1016; (vi) the repurchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from
departing or deceased directors, officers or employees of the Company or its
Subsidiaries in an aggregate amount not to exceed $1.0 million in any fiscal
year, provided that the Company may carry forward the unused portion of the
--------
$1.0 million in any fiscal year to the next fiscal year, and provided further
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that the Company may not carry forward more than $2.0 million to any
subsequent fiscal year; and (vii) the purchase, redemption, acquisition,
cancellation or other retirement for value of shares of Capital Stock of the
Company to the extent necessary, in the judgment of the Board of Directors
of the Company, to prevent the loss or secure the removal or reinstatement
of any license held by the Company or any Restricted Subsidiary from any
governmental agency as a result of laws limiting foreign ownership of the
Company's Capital Stock.
Restricted Payments made pursuant to clauses (i), (iii), (vi)
and (vii) of the immediately preceding paragraph shall reduce the amount
that would otherwise be available for Restricted Payments under clause (iii)
of the second preceding paragraph and Restricted Payments made pursuant to
clauses (ii), (iv) and (v) of the immediately preceding paragraph shall not
reduce the amount that would otherwise be available for Restricted Payments
under clause (iii) of the second preceding paragraph, provided that any
--------
Permitted Investments made pursuant to clause (a) of the definition of
Permitted Investments shall be deemed to be Restricted Payments for the
purposes of clause (iii) of the second preceding paragraph.
For purposes of this Section 1012, if a particular Restricted
Payment involves a non-cash payment, including a distribution of assets,
then such Restricted Payment shall be deemed to be an amount equal to the
cash portion of such Restricted Payment, if any, plus an amount equal to the
Fair Market Value of the non-cash portion of such Restricted Payment as
determined by the Board of Directors of the Company, whose good faith
determination shall be conclusive and evidenced by a Board Resolution.
SECTION 1013. Limitation on Dividend and Other Payment
----------------------------------------
Restrictions Affecting Restricted Subsidiaries.
----------------------------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, cause or suffer to exist
or become effective or enter into any consensual encumbrance or restriction
on the ability of any Restricted Subsidiary of the Company (i) to pay
dividends or make any other distributions in respect of its Capital Stock or
pay any Debt or other obligation owed to the Company or any other Restricted
Subsidiary of the Company; (ii) to make loans or advances to the Company or
any Restricted Subsidiary of the Company; or (iii) to transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except:
(a) any encumbrance or restriction pursuant to an agreement in
effect at the Issue Date or any amendment, restatement, renewal or
replacement of such agreement, so long as the encumbrances and
restrictions are not materially more restrictive than those in the
agreement in effect on the Issue Date;
(b) any encumbrance or restriction pursuant to an agreement
relating to an acquisition of property, so long as the encumbrances or
restrictions in any such agreement relate solely to the property so
acquired (and are not or were not created in anticipation of or in
connection with the acquisition thereof);
(c) any encumbrance or restriction relating to any Debt of any
Restricted Subsidiary of the Company at the date on which such
Restricted Subsidiary was acquired by the Company or any Restricted
Subsidiary of the Company (other than Debt incurred by such Restricted
Subsidiary in connection with or in anticipation of its acquisition);
(d) any encumbrance or restriction pursuant to an agreement
effecting a permitted refinancing of Debt issued pursuant to an
agreement referred to in the foregoing clauses (a) through (c), or
permitted replacement or increase of Debt referred to in the foregoing
clause (a) so long as the encumbrances and restrictions contained in
any such refinancing agreement are not materially more restrictive
than the encumbrances and restrictions contained in the agreements
governing the Debt being so refinanced;
(e) customary provisions restricting subletting or assignment of
any lease, license or similar contract of the Company or any
Restricted Subsidiary of the Company or provisions in agreements that
restrict the assignment of such agreement or any rights thereunder;
(f) any encumbrance or restriction arising out of any sale of
accounts receivable in the ordinary course (including in connection
with a financing transaction) to or by (i) an Accounts Receivable
Subsidiary or (ii) to Persons that are not Affiliates of the Company
or any Subsidiary of the Company;
(g) any encumbrance or restriction on the sale or other
disposition of assets or property securing Debt as a result of a
Permitted Lien on such assets or property (including, without
limitation, customary restrictions relating to assets securing the
Credit Agreement, any Vendor Debt or any Telecommunications Assets
Debt under the applicable security documents); and
(h) any encumbrance or restriction contained in contracts for
sales of assets permitted by Section 1016 with respect to the assets
to be sold pursuant to such contract.
Nothing contained in this Section 1013 shall prevent the Company
or any of its Restricted Subsidiaries from (1) creating, incurring, assuming
or suffering to exist any Liens otherwise permitted in Section 1011 or (2)
restrictions on the sale or other disposition of property or assets of the
Company or any of its Restricted Subsidiaries to the extent that such
property or assets secure Debt of the Company or any of its Restricted
Subsidiaries not incurred or secured in violation of this Indenture.
SECTION 1014. Limitation on Issuances of Certain Guarantees by,
------------------------------------------------
and Debt Securities of, Restricted Subsidiaries.
-----------------------------------------------
The Company shall not permit any of its Restricted Subsidiaries
to (i) directly or indirectly Guarantee any Debt Securities of the Company,
or (ii) issue any Debt Securities, unless, in either such case, such
Restricted Subsidiary (such Restricted Subsidiary, a "Subsidiary Guarantor")
simultaneously executes and delivers a Guarantee (a "Subsidiary Guarantee")
of the Notes. Any such Subsidiary Guarantee shall not be subordinate in
right of payment to any Debt of the Restricted Subsidiary providing the
Subsidiary Guarantee. A Restricted Subsidiary shall be deemed released from
all of its obligations under its Subsidiary Guarantee at any such time that
such Restricted Subsidiary is released from all of its obligations under all
of its Guarantees in respect of Debt Securities of the Company or its
obligations under its Debt Securities, as applicable. The obligations of
each Restricted Subsidiary under a Subsidiary Guarantee shall be limited to
the maximum amount, as shall, after giving effect to all other contingent
and fixed liabilities of such Restricted Subsidiary, result in the
obligations of such Restricted Subsidiary under the Subsidiary Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under applicable
law. Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms that it shall
be automatically and unconditionally released and discharged upon the sale
or other disposition, by way of merger or otherwise, to any Person not an
Affiliate of the Company, of all of the Company's and its Restricted
Subsidiaries' Capital Stock in such Restricted Subsidiary. In addition, any
Subsidiary Guarantee shall be automatically and unconditionally released and
discharged upon the merger or consolidation of the applicable Restricted
Subsidiary with and into the Company or another Restricted Subsidiary that
has guaranteed the Notes and that is the surviving Person in such merger or
consolidation.
SECTION 1015. Limitation on Issuances and Sales of Capital
--------------------------------------------
Stock in Restricted Subsidiaries.
--------------------------------
The Company (a) shall not permit any of its Restricted
Subsidiaries to issue any Capital Stock (other than to the Company or a
Restricted Subsidiary of the Company) unless the Company acquires at the
same time not less than its Proportionate Interest in such issuance of
Capital Stock and (b) shall not permit any Person (other than the Company or
a Restricted Subsidiary of the Company) to own any Capital Stock in any
Restricted Subsidiary of the Company; provided, however, that this Section
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1015 shall not prohibit (i) the sale or other disposition of all, but not
less than all, of the issued and outstanding Capital Stock in any Restricted
Subsidiary owned by the Company or any Restricted Subsidiary of the Company
in compliance with the other provisions of this Indenture, (ii) the
ownership of Capital Stock issued as permitted by clause (a) above, (iii)
the ownership by directors of directors' qualifying shares or the ownership
by foreign nationals of Capital Stock in any Restricted Subsidiary of the
Company, to the extent mandated by applicable law, (iv) the ownership of
Capital Stock of a Restricted Subsidiary issued and outstanding prior to the
time that such Person becomes a Restricted Subsidiary of the Company so long
as such Capital Stock was not issued in contemplation of such Person's
becoming a Restricted Subsidiary of the Company or otherwise being acquired
by the Company, (v) the issuance or sale of Capital Stock of a Restricted
Subsidiary of the Company in a transaction that complies with Section 1016,
provided that such Restricted Subsidiary would remain a Restricted
- --------
Subsidiary after such transaction, or, if not a Restricted Subsidiary of the
Company after such transaction, the remaining Capital Stock held by the
Company must be treated as an Investment made at that time and must comply
with Section 1012 or constitute a Permitted Investment, and (vi) the
ownership of Qualified Capital Stock of a Restricted Subsidiary issued in
exchange for, or the proceeds of which are used to refinance, Capital Stock
of a Restricted Subsidiary owned by a Person other than the Company or a
Restricted Subsidiary as permitted by clause (iv), provided that (x) the
--------
liquidation value of such Qualified Capital Stock so issued that is
preferred stock shall not exceed the liquidation value of the Capital Stock
so exchanged or refinanced and (y) the Qualified Capital Stock so issued
that is preferred stock (I) shall not have a Stated Maturity earlier than
the Stated Maturity of the Capital Stock being exchanged or refinanced and
(II) shall not have an Average Life less than the remaining Average Life of
the Capital Stock being exchanged or refinanced. Notwithstanding the
foregoing, each Restricted Subsidiary of the Company that owns or holds a
Federal Communications Commission license for the transmission of wireless
telecommunications services shall at all times remain a wholly owned
Restricted Subsidiary of the Company and shall not, directly or indirectly,
sell, convey, transfer, lease or otherwise dispose of any assets or property
used or useful in the operation of the business of the Company or any of its
Restricted Subsidiaries, other than (i) to the Company or another wholly
owned Restricted Subsidiary of the Company or (ii) in a transaction that
complies with Section 1016.
SECTION 1016. Limitation on Asset Sales.
-------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
or such Restricted Subsidiary, as the case may be, receives consideration
(including by way of relief from, or by any Person other than the Company or
any of its Restricted Subsidiaries assuming responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Sale at
least equal to the Fair Market Value (as evidenced by a Board Resolution,
which determination shall be conclusive (including as to the value of all
non-cash consideration)) of the property or assets sold or otherwise
disposed of, (ii) at least 75% of the consideration received by the Company
or such Restricted Subsidiary for such property or assets consists of cash
or Eligible Cash Equivalents and (iii) the Company or such Restricted
Subsidiary of the Company, as the case may be, uses the Net Cash Proceeds in
the manner set forth in the next paragraph; provided, however, that for
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purposes of this Section 1016, "cash" shall include (i) the amount of any
liabilities (other than liabilities that are by their terms subordinated to
the Notes) of the Company or such Restricted Subsidiary (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) that are assumed by the transferee of any such assets or
other property in such Asset Sale or are no longer the liability of the
Company or any Restricted Subsidiary (and excluding any liabilities that are
incurred in connection with or in anticipation of such Asset Sale), but only
to the extent that such assumption is effected on a basis under which there
is no further recourse to the Company or any of its Restricted Subsidiaries
with respect to such liabilities, and (ii) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary in
connection with such Asset Sale that are converted by the Company or such
Restricted Subsidiary into cash within 60 days of receipt.
Within 360 days after any Asset Sale, the Company or such
Restricted Subsidiary of the Company, as the case may be, may at its option
(a) reinvest an amount equal to the Net Cash Proceeds (or any portion
thereof) from such disposition in Replacement Assets, provided that if such
--------
Investment is in a project authorized by the Board of Directors of the
Company that shall take longer than such 360 day period to complete, the
Company shall be entitled to utilize 90 additional days to apply such Net
Cash Proceeds, and/or (b) apply an amount equal to such Net Cash Proceeds
(or remaining Net Cash Proceeds) to the permanent reduction of any Debt of
the Company ranking pari passu with the Notes (including the Notes) or Debt
of any Restricted Subsidiary of the Company. Any Net Cash Proceeds from any
Asset Sale that are not used to reinvest in Replacement Assets and/or repay
any such pari passu Debt of the Company or Debt of its Restricted
Subsidiaries constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds $10.0
million Date", the Company shall, as soon as practicable, but in any event
within 20 Business Days, make an offer to the extent of the Excess Proceeds
to purchase (an "Asset Sale Offer"), on a pro rata basis, the Notes and the
other Debt described in the next sentence, at a price in cash for the Notes
equal to 100% of the Accreted Value thereof on any Asset Sale Purchase Date
occurring prior to March 1, 2003, plus any accrued and unpaid cash interest
not otherwise included in Accreted Value to such Asset Sale Purchase Date,
or 100% of the principal amount thereof at Stated Maturity on any Asset Sale
Purchase Date occurring on or after March 1, 2003, plus accrued and unpaid
interest, if any, to such Asset Sale Purchase Date, in accordance with the
procedures set forth in this Indenture. Any Asset Sale Offer shall include
a pro rata offer under similar circumstances to purchase all other unsecured
Debt of the Company ranking pari passu with the Notes, which Debt contains
similar provisions requiring the Company to purchase such Debt. To the
extent that any amount of Excess Proceeds remains after completion of such
offer to purchase, the Company or such Restricted Subsidiary of the Company
may use such remaining amount for general corporate purposes and the amount
of Excess Proceeds shall be reset to zero.
Notwithstanding the three immediately preceding paragraphs, the
Company and its Restricted Subsidiaries shall be permitted to consummate an
Asset Sale without complying with such paragraphs to the extent that (i) at
least 75% of the consideration for such Asset Sale consists of
Telecommunications Assets and (ii) such Asset Sale is for Fair Market Value;
provided that any such acquisition of Telecommunications Assets that is an
- --------
Investment is made in compliance with Section 1012 or constitutes a
Permitted Investment, other than pursuant to clause (h) of the definition
thereof, and any Net Cash Proceeds received by the Company or any of its
Restricted Subsidiaries in connection with any such Asset Sale shall be
subject to the provisions of the three immediately preceding paragraphs.
Notice of an Asset Sale Offer shall be prepared and mailed by
the Company with a copy to the Trustee not later than the 20th Business Day
after the related Asset Sale Offer Trigger Date to each Holder at such
Holder's registered address, stating:
(1) that an Asset Sale Offer Trigger Date has occurred and that the
Company is offering to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds to the extent to be
applied to an offer to purchase Notes (as provided in the second
preceding paragraph), at an offer price in cash in an amount equal to
(i) 100% of the Accreted Value thereof on any Asset Sale Offer
Purchase Date occurring prior to March 1, 2003 or (ii) 100% of the
principal amount thereof at Stated Maturity on any Asset Sale Offer
Purchase Date occurring on or after March 1, 2003, plus accrued and
unpaid interest, if any, to the date of the purchase (the "Asset Sale
Offer Purchase Date"), which shall be a Business Day, specified in
such notice, that is not earlier than 30 days or later than 60 days
from the date such notice is mailed;
(2) the amount of accrued and unpaid interest, if any, as of the Asset
Sale Offer Purchase Date;
(3) that any Note not tendered will continue to accrue interest in
accordance with the terms thereof;
(4) that, unless the Company defaults in the payment of the purchase
price for the Notes payable pursuant to the Asset Sale Offer, any
Notes accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete or accrue interest after the Asset Sale Offer
Purchase Date;
(5) that Holders electing to have Notes purchased pursuant to an Asset
Sale Offer will be required to surrender their Notes to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the third Business Day prior to the Asset Sale
Offer Purchase Date and must complete any form letter of transmittal
proposed by the Company (which letter must be completed correctly by
such Holder) and reasonably acceptable to the Trustee and the Paying
Agent;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time,
on the third Business Day prior to the Asset Sale Offer Purchase Date,
a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder delivered
for purchase, the Note certificate number (if any) and a statement
that such Holder is withdrawing its election to have such Notes
purchased;
(7) that Holders whose Notes are purchased only in part will be issued
Notes equal in principal amount at Stated Maturity to the unpurchased
portion of the Notes surrendered; and
(8) the instructions that Holders must follow in order to tender their
Notes.
Prior to 10:00 a.m., New York City time, on the Asset Sale Offer
Purchase Date, the Company will (i) accept for payment the maximum principal
amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer that can be purchased out of Excess Proceeds from such Asset Sale that
are to be applied to an Asset Sale Offer (to the extent provided in the
second preceding paragraph), (ii) deposit with the Trustee or a Paying Agent
(or, if the Company is acting as its own Paying Agent, segregate and hold in
trust as provided in Section 1003) an amount in cash equal to the aggregate
purchase price of all Notes or portions thereof accepted for payment and any
accrued and unpaid interest on such Notes as of the Asset Sale Offer
Purchase Date, and (iii) deliver or cause to be delivered to the Trustee all
Notes tendered pursuant to the Asset Sale Offer.
If less than all Notes tendered pursuant to the Asset Sale Offer
are accepted for payment by the Company for any reason consistent with this
Indenture, selection of the Notes to be purchased by the Company shall be 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 or by lot or any other method as the Trustee
shall deem fair and appropriate and that may provide for the selection for
purchase of portions of the principal of Notes; provided, however, that
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Notes accepted for payment in part shall be purchased only in integral
multiples of $1,000 of principal amount at Stated Maturity. The Paying
Agent shall as promptly as practicable after the Asset Sale Offer Purchase
Date mail to each Holder of Notes or portions thereof accepted for payment
an amount in cash equal to the purchase price for such Notes plus any
accrued and unpaid interest thereon, and the Trustee shall authenticate
promptly and mail to such Holder of Notes accepted for payment in part a new
Note equal in principal amount to any unpurchased portion of the Notes, and
any Note not accepted for payment in whole or in part shall be returned
promptly to the Holder of such Note.
On and after an Asset Sale Offer Purchase Date, the Notes or
portions thereof accepted for payment will cease to accrete or accrue
interest, unless the Company defaults in the payment of the purchase price
therefor. The Company will announce the results of the Asset Sale Offer on
or as soon as practicable after the Asset Sale Offer Purchase Date.
The Company shall comply with the applicable tender offer rules,
(including, without limitation, any applicable requirements of Rule 14e-1
under the Exchange Act), and all other applicable securities laws and
regulations in connection with any Asset Sale Offer and will be deemed not
to be in violation of any of its covenants under this Indenture to the
extent such compliance is in conflict with such covenants.
SECTION 1017. Transactions with Affiliates.
----------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, but not
limited to, the purchase, sale or exchange of property, the making of any
Investment, the giving of any Guarantee or the rendering of any service)
with any Affiliate of the Company or such Restricted Subsidiary, as the case
may be, unless (i) such transaction or series of related transactions is on
terms that taken as a whole are no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with a Person that is not such an Affiliate and
(ii) (a) with respect to a transaction or series of related transactions
that involves aggregate payments equal to, or in excess of, $5.0 million but
less than $10.0 million, the Company delivers to the Trustee an Officers'
Certificate stating that such transaction or series of related transactions
complies with clause (i) above; and (b) with respect to a transaction or
series of related transactions that involves aggregate payments equal to, or
in excess of, $10.0 million, the Company delivers to the Trustee an
Officers' Certificate stating that such transaction or series of related
transactions complies with clause (i) above, and either (x) such transaction
or series of related transactions is approved by a majority of the Board of
Directors (including a majority of the Disinterested Directors, or in the
event there is only one Disinterested Director, by such Disinterested
Director), which approval is set forth in a resolution delivered to the
Trustee or (y) the Company obtains an opinion from a nationally recognized
investment banking firm, accounting firm or appraisal firm stating that such
transaction or series of related transactions complies with clause (i) above
or is fair to the Company or such Restricted Subsidiary from a financial
point of view and delivers such opinion to the Trustee.
Notwithstanding the foregoing, this Section 1017 shall not apply
to (i) any transaction entered into by or among the Company or one of its
Restricted Subsidiaries with one or more Restricted Subsidiaries of the
Company, (ii) any Restricted Payment not prohibited by Section 1012, or any
Permitted Investment, (iii) the payment of reasonable and customary fees to
directors of the Company and its Restricted Subsidiaries who are not
employees of the Company or its Subsidiaries, (iv) loans or advances made to
directors, officers or employees of the Company or any Restricted
Subsidiary, or Guarantees in respect thereof or otherwise made on their
behalf (including any payments under such Guarantees), in respect of travel,
entertainment or moving-related expenses incurred in the ordinary course of
business, in an aggregate principal amount not to exceed $500,000 in any
fiscal year, (v) the granting and performance of registration rights for
shares of Capital Stock of the Company, (vi) transactions pursuant to the
Administrative Services Agreement between the Company and Associated, as in
effect on the Issue Date and as such agreement may be amended from time to
time in a manner no less favorable to the Holders of the Notes (vii)
transactions pursuant to the Technical Services Agreement between the
Company and NTT America, Inc., as in effect on the Issue Date and as such
agreement may be amended from time to time in a manner no less favorable to
the Holders of the Notes, or (viii) transactions pursuant to the
Stockholders' Agreement among the Company, Nippon Telegraph and Telephone
Corporation and certain other stockholders of the Company, as in effect on
the Issue Date and as such agreement may be amended from time to time in a
manner no less favorable to the Holders of the Notes.
SECTION 1018. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 1005 through 1017,
inclusive, if before or after the time for such compliance the Holders of at
least a majority in principal amount at Stated Maturity of the Outstanding
Notes, by Act of such Holders (including by way of consents obtained with a
purchase of, or a tender or exchange offer for, Notes), waive such
compliance in such instance with such term, provision or condition, but no
such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 1019. Provision of Financial Information.
----------------------------------
Whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, or any successor provision thereto, the Company shall
file with the Commission the annual reports, quarterly reports and other
documents that the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Company were subject thereto and shall file such
documents with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required to
file them. The Company shall also in any event (a) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders, and
(ii) file with the Trustee copies of the annual reports, quarterly reports
and other documents (without exhibits) that the Company would have been
required to file with the Commission pursuant to Section 13(a) and 15(d) of
the Exchange Act or any successor provisions thereto if the Company was
subject thereto and (b) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request supply copies of such documents (without exhibits) to any
prospective Holder.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.
-------------------
The Notes may be redeemed, at the election of the Company, as a
whole or from time to time in part, at any time after March 1, 2003 subject
to the conditions and at the Redemption Prices specified in the form of
Note, together with accrued and unpaid interest to the Redemption Date.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Notes at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made
in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount at Stated Maturity of Notes to
be redeemed and shall deliver to the Trustee such documentation and records
as shall enable the Trustee to select the Notes to be redeemed pursuant to
Section 1104.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee from the Outstanding Notes not previously
called for redemption 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 then listed on a national securities exchange, on a pro
rata basis or by lot or any other method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of
portions of the principal of Notes; provided, however, that no such partial
-------- -------
redemption shall reduce the portion of the principal amount at Stated
Maturity of a Note not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount at Stated Maturity thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion
of the principal amount at Stated Maturity of such Note that has been or is
to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner provided for
in Section [106] not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the
principal amounts at Stated Maturity) of the particular Notes to be
redeemed,
(4) in case any Note is to be redeemed in part only, the notice
that relates to such Note shall state that on and after the Redemption
Date, upon surrender of such Note, the holder will receive, without
charge, a new Note or Notes of authorized denominations for the
principal amount at Stated Maturity thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in
Section 1107) will become due and payable upon each such Note, or the
portion thereof, to be redeemed, and that interest thereon will cease
to accrue on and after said date, and
(6) the place or places where such Notes are to be surrendered
for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to 10:00 a.m., New York City time, on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust
as provided in Section 1003) an amount of money sufficient to pay the
Redemption Price of, and accrued interest on, all the Notes that are to be
redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
--------------------------------
Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price therein specified (together with accrued interest, if
any, to the Redemption Date), and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Notes shall cease to bear interest. Upon surrender of any
such Note for redemption in accordance with said notice, such Note shall be
paid by the Company at the Redemption Price, together with accrued interest,
if any, to the Redemption Date; provided, however, that installments of
-------- -------
interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Notes, or one or more Predecessor Notes,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of any accrued and unpaid interest on Notes called for
redemption shall have been made available in accordance with Section 1106,
the Notes called for redemption will cease to accrue interest and the only
right of the Holders of such Notes will be to receive payment of the
Redemption Price of and, subject to the provision in the preceding
paragraph, any accrued and unpaid interest on such Notes to the Redemption
Date.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
SECTION 1108. Notes Redeemed in Part.
----------------------
Any Note that is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such
purpose pursuant to Section [1002] (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holders attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in aggregate principal
amount at Stated Maturity equal to and in exchange for the unredeemed
portion of the principal of the Note so surrendered.
ARTICLE TWELVE
[Intentionally omitted]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
----------
The Company may, at its option by Board Resolution, at any time,
with respect to the Notes, elect to have either Section 1302 or Section 1303
be applied to all Outstanding Notes and Subsidiary Guarantees upon
compliance with the conditions set forth below in this Article Thirteen.
Either Section 1302 or Section 1303 may be applied to the Notes to any
Redemption Date or the Stated Maturity of the Notes.
SECTION 1302. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes, and
the Subsidiary Guarantors, if any, shall be deemed to have been discharged
from their respective obligations under their respective Subsidiary
Guarantees, on the date the conditions set forth in Section 1304 are
satisfied (hereinafter, "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, which thereafter
shall be deemed to be "Outstanding" only for the purposes of Section 1305
and the other Sections of this Indenture referred to in (A) and (B) below,
and the Company and the Subsidiary Guarantors, if any, shall be deemed to
have satisfied all their other respective 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: (A) the rights of Holders of
Outstanding Notes to receive, solely from the trust fund described in
Section 1304 and as more fully set forth in such Section, payments in
respect of the principal of (and premium, if any, on) and interest on such
Notes when such payments are due, (B) the Company's obligations with respect
to such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (D) this
Article Thirteen; provided, however, that the Company's rights pursuant to
-------- -------
Section 1101 shall not be terminated or discharged hereunder. Subject to
compliance with this Article Thirteen, the Company may exercise its option
under this Section 1302 notwithstanding the prior exercise of its option
under Section 1303 with respect to the Notes.
SECTION 1303. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company and the Subsidiary Guarantors,
if any, shall be released from their respective obligations under any
covenant contained in Section 801(c) and in Sections 1005 through 1017 with
respect to the Outstanding Notes on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the
Notes shall thereafter be deemed not to be "Outstanding" for the purposes of
any direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to the
Outstanding Notes, the Company and the Subsidiary Guarantors, if any, may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision
herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 501, but, except
as specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section [608] who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Notes, (A) money in an amount, or
(B) U.S. Government Obligations that through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants or a nationally recognized investment banking firm
expressed in a written certification thereof delivered to the Trustee,
to pay and discharge, and which shall be applied by the Trustee (or
other qualifying trustee) to pay and discharge, the Accreted Value of,
premium, if any, on and interest on the Outstanding Notes to the
Stated Maturity (or Redemption Date, if applicable) of such principal
(and premium, if any) or installment of interest on the day on which
such payments are due and payable in accordance with the terms of this
Indenture and of such Notes; provided that the Trustee shall have been
--------
irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to said payments with respect to the
Notes. Before such a deposit, the Company may give to the Trustee, in
accordance with Section 1103 hereof, a notice of its election to
redeem all of the Outstanding Notes at a future date in accordance
with Article Eleven hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given effect in
applying the foregoing.
(2) No Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the
incurrence of Debt, the proceeds of which are applied to such deposit)
or, insofar as paragraphs (g) and (h) of Section 501 hereof are
concerned, at any time during the period ending on the 91st day after
the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
(other than a Default or Event of Default resulting from the
incurrence of Debt, the proceeds of which are applied to such deposit)
or any other material agreement or instrument to which the Company is
a party or by which it is bound.
(4) In the case of an election under Section 1302 and in the
event that such election shall occur more than twelve months prior to
the Stated Maturity of the Outstanding Notes, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since February 20, 1998,
there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion shall
state to the effect that, the Holders of the Outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as
a result of such 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 defeasance had not occurred.
(5) In the case of an election under Section 1303 and in the
event that such election shall occur more than twelve months prior to
the Stated Maturity of the Outstanding Notes, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect 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.
(6) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the Company's
deposit, the trust funds shall not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization, or similar laws
affecting creditors' rights generally.
(7) 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 either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with. In rendering such Opinion
of Counsel, counsel may rely on such Officers' Certificate as to any
matters of fact (including as to compliance with the foregoing clauses
(1), (2) and (3)).
SECTION 1305. Deposited Money and U.S. Government Obligations
-----------------------------------------------
to Be Held in Trust; Other Miscellaneous Provisions.
---------------------------------------------------
Subject to the provisions of the last paragraph of Section 1003,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 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 its own 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 the lesser of Accreted Value or principal amount at Stated Maturity (and
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 U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge
that by law is for the account of the Holders of the Outstanding Notes.
Anything in this Article Thirteen to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon
Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 that, in the opinion of a nationally recognized
firm of independent public accountants or a nationally recognized
investment banking firm expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent defeasance or
covenant defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement.
-------------
If the Trustee or any Paying Agent is unable to apply any money
in accordance with Section 1305 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 1302 or 1303, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 1305; provided, however, that if the
-------- -------
Company makes any payment of the Accreted Value or principal amount at
Stated Maturity (or 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed and attested, all as of the day and year first
above written.
TELIGENT, INC.
By
-------------------------
Title:
Attest:
--------------------------
Title:
FIRST UNION NATIONAL BANK
By
-------------------------
Title:
Attest:
---------------------------
Title:
===========================================================================
TELIGENT, INC.
TO
FIRST UNION NATIONAL BANK,
Trustee
-------------------------
Indenture
Dated as of February 20, 1998
-------------------------
$440,000,000
11 1/2% Senior Discount Notes
due 2008
===========================================================================
TELIGENT, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of February 20, 1998
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
ss 310(a)(1) .......................................................... 608
(a)(2) .......................................................... 608
(a)(4) .......................................................... 608
(a)(5) .......................................................... 608
(b) .......................................................... 609
ss 311(a) .......................................................... 613
(b) .......................................................... 613
(b)(2) .......................................................... 613
ss 312(c) .......................................................... 701
ss 313(a) .......................................................... 702
(b) .......................................................... 702
(c) .......................................................... 702
(d) .......................................................... 702
ss 314(a) .......................................................... 703
(a)(4) .......................................................... 1008(a)
(c)(1) .......................................................... 102
(c)(2) .......................................................... 102
(c)(3) .......................................................... 102
(e) .......................................................... 102
ss 315(b) .......................................................... 602
(e) .......................................................... 515
ss 316(a)(last
sentence) .......................................................... 101 ("Outstanding")
(a)(1)(A) .......................................................... 502, 512
(a)(1)(B) .......................................................... 513
(b) .......................................................... 508
(c) .......................................................... 104(d)
ss 317(a)(1) .......................................................... 503
(a)(2) .......................................................... 504
(b) .......................................................... 1003
ss 318(a) .......................................................... 111
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
PARTIES................................................................... 1
RECITALS OF THE COMPANY .................................................. 1
<CAPTION>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
<S> <C>
SECTION 101. Definitions ................................................ 2
Accounts Receivable Subsidiary ........................................... 2
Accreted Value ........................................................... 2
Acquired Debt ............................................................ 3
Act ...................................................................... 3
Affiliate ................................................................ 3
Arrangement Commitment Letter ........................................... 4
Asset Sale ............................................................... 4
Asset Sale Offer ......................................................... 5
Attributable Debt ........................................................ 5
Average Life ............................................................. 5
Board of Directors ...................................................... 5
Board Resolution ......................................................... 5
Business Day ............................................................. 5
Capital Lease Obligation ................................................. 5
Capital Stock ............................................................ 5
Change of Control ........................................................ 6
Closing Date ............................................................. 6
Commission ............................................................... 6
Common Stock ............................................................. 7
Company .................................................................. 7
Company Request" or "Company Order ...................................... 7
Consolidated Interest Expense ........................................... 7
Note: This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
Consolidated Net Income .................................................. 7
Corporate Trust Office ................................................... 8
Corporation .............................................................. 8
Credit Agreement ......................................................... 8
Currency Hedge Obligations ............................................... 8
Debt ..................................................................... 8
Debt Securities .......................................................... 9
Debt to Annualized EBITDA Ratio .......................................... 10
Default .................................................................. 10
Defaulted Interest ....................................................... 10
Depositary ............................................................... 10
Disinterested Director ................................................... 10
EBITDA ................................................................... 11
Eligible Cash Equivalents ................................................ 11
Event of Default ......................................................... 11
Exchange Act ............................................................. 12
Exchange Notes ........................................................... 12
Exchange Offer ........................................................... 12
Exchange Offer Registration Statement .................................... 12
Fair Market Value ........................................................ 12
Federal Communications Commission ........................................ 12
Financing Commitment Letter .............................................. 12
GAAP ..................................................................... 12
Global Notes ............................................................. 13
Guarantee ................................................................ 13
Holder ................................................................... 13
incur .................................................................... 13
Indenture ................................................................ 13
Initial Notes ............................................................ 13
Interest Payment Date .................................................... 13
Interest Swap Obligations ................................................ 14
Invested Capital ......................................................... 14
Investment ............................................................... 14
Issue Date ............................................................... 14
Lien ..................................................................... 14
Maturity ................................................................. 14
Net Cash Proceeds ........................................................ 15
Non-U.S. Person .......................................................... 16
Note Register" and "Note Registrar ....................................... 16
Notes .................................................................... 16
Officers' Certificate .................................................... 16
Offshore Global Note ..................................................... 16
Offshore Physical Note ................................................... 16
Opinion of Counsel ....................................................... 16
Outstanding .............................................................. 16
Paying Agent ............................................................. 17
Permitted Debt ........................................................... 17
Permitted Holder ......................................................... 20
Permitted Investments .................................................... 20
Permitted Liens .......................................................... 20
Permitted Temporary Investments .......................................... 21
Person ................................................................... 21
Physical Notes ........................................................... 21
Pledged Securities ....................................................... 22
Predecessor Note ......................................................... 22
Private Placement Legend ................................................. 22
Proportionate Interest ................................................... 22
Qualified Capital Stock .................................................. 22
QIB ...................................................................... 22
Redeemable Capital Stock ................................................. 22
Redemption Date .......................................................... 22
Redemption Price ......................................................... 22
Registration Rights Agreement ............................................ 22
Registration Statement ................................................... 23
Regular Record Date ...................................................... 23
Regulation S ............................................................. 23
Replacement Assets ....................................................... 23
Responsible Officer ...................................................... 23
Restricted Payment ....................................................... 23
Restricted Subsidiary .................................................... 24
Rule 144A ................................................................ 24
Sale and Leaseback Transaction ........................................... 24
Securities Act ........................................................... 24
Senior Notes ............................................................. 24
Senior Notes Indenture ................................................... 24
Senior Notes Trustee ..................................................... 24
Shelf Registration Statement ............................................. 24
Significant Restricted Subsidiary ........................................ 24
Special Record Date ...................................................... 25
Stated Maturity .......................................................... 25
Subordinated Debt ........................................................ 25
Subordinated Stockholder Debt ............................................ 25
Subsidiary ............................................................... 25
Subsidiary Guarantee ..................................................... 25
Subsidiary Guarantor ..................................................... 25
Telecommunications Assets ................................................ 26
Telecommunications Assets Debt ........................................... 26
Telecommunications Business .............................................. 26
Transactions.............................................................. 26
Trust Indenture Act" or "TIA ............................................. 26
Trustee .................................................................. 26
U.S. Global Note ......................................................... 26
U.S. Government Obligations .............................................. 27
U.S. Physical Note ....................................................... 27
Unrestricted Subsidiary .................................................. 27
Vendor Debt .............................................................. 28
Vice President ........................................................... 28
Voting Stock ............................................................. 28
SECTION 102. Compliance Certificates and Opinions ....................... 28
SECTION 103. Form of Documents Delivered to Trustee ..................... 29
SECTION 104. Acts of Holders ............................................ 29
SECTION 105. Notices, Etc., to Trustee and Company ...................... 31
SECTION 106. Notice to Holders; Waiver .................................. 31
SECTION 107. Effect of Headings,
Table of Contents and Recitals ........................... 32
SECTION 108. Successors and Assigns ..................................... 32
SECTION 109. Separability Clause ........................................ 32
SECTION 110. Benefits of Indenture ...................................... 32
SECTION 111. Governing Law .............................................. 32
SECTION 112. Legal Holidays ............................................. 32
SECTION 113. No Recourse Against Others ................................. 33
SECTION 114. Exhibits and Schedules ..................................... 33
SECTION 115. Counterparts ............................................... 33
SECTION 116. Duplicate Originals ........................................ 33
SECTION 117. Incorporation by Reference of TIA .......................... 33
<CAPTION>
ARTICLE TWO
NOTES FORMS
<S> <C>
SECTION 201. Forms Generally ............................................ 34
SECTION 202. Restrictive Legends ........................................ 35
SECTION 203. Form of Face of Note ....................................... 37
SECTION 204. Form of Reverse of Note .................................... 39
SECTION 205. Form of Trustee's Certificate of Authentication ............ 43
SECTION 206. Form of Transfer Notice for Initial Notes .................. 44
<CAPTION>
ARTICLE THREE
THE NOTES
<S> <C>
SECTION 301. Title and Terms ............................................ 46
SECTION 302. Denominations .............................................. 47
SECTION 303. Execution, Authentication, Delivery and Dating ............. 47
SECTION 304. Temporary Notes ............................................ 49
SECTION 305. Registration, Registration of
Transfer and Exchange .................................... 49
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes ................ 51
SECTION 307. Payment of Interest; Interest Rights Preserved ............. 51
SECTION 308. Persons Deemed Owners ...................................... 53
SECTION 309. Cancellation ............................................... 53
SECTION 310. Computation of Interest .................................... 53
SECTION 311. Book-Entry Provisions for Global Notes ..................... 53
SECTION 312. Transfer Provisions ........................................ 55
SECTION 313. Form of Regulation S Certificate ........................... 61
SECTION 314. Form of Rule 144A Certificate .............................. 63
SECTION 315. CUSIP Numbers .............................................. 64
<CAPTION>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
<S> <C>
SECTION 401. Satisfaction and Discharge of Indenture .................... 64
SECTION 402. Application of Trust Money ................................. 65
<CAPTION>
ARTICLE FIVE
REMEDIES
<S> <C>
SECTION 501. Events of Default .......................................... 66
SECTION 502. Acceleration of Maturity; Rescission
and Annulment ............................................ 68
SECTION 503. Collection of Debt and Suits for
Enforcement by Trustee ................................... 69
SECTION 504. Trustee May File Proofs of Claim ........................... 69
SECTION 505. Trustee May Enforce Claims Without
Possession of Notes ...................................... 70
SECTION 506. Application of Money Collected ............................. 71
SECTION 507. Limitation on Suits ........................................ 71
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest .......................... 72
SECTION 509. Restoration of Rights and Remedies ......................... 72
SECTION 510. Rights and Remedies Cumulative ............................. 72
SECTION 511. Delay or Omission Not Waiver ............................... 72
SECTION 512. Control by Holders ......................................... 73
SECTION 513. Waiver of Past Defaults .................................... 73
SECTION 514. Waiver of Stay or Extension Laws ........................... 74
SECTION 515. Undertaking for Costs ...................................... 74
<CAPTION>
ARTICLE SIX
THE TRUSTEE
<S> <C>
SECTION 601. Certain Duties and Responsibilities ........................ 74
SECTION 602. Notice of Defaults ......................................... 75
SECTION 603. Certain Rights of Trustee .................................. 76
SECTION 604. Trustee Not Responsible for Recitals or
Issuance of Notes ........................................ 77
SECTION 605. May Hold Notes ............................................. 77
SECTION 606. Money Held in Trust ........................................ 77
SECTION 607. Compensation and Reimbursement ............................. 77
SECTION 608. Corporate Trustee Required; Eligibility .................... 78
SECTION 609. Resignation and Removal; Appointment of
Successor ................................................ 79
SECTION 610. Acceptance of Appointment by Successor ..................... 80
SECTION 611. Merger, Conversion, Consolidation or
Succession to Business ................................... 81
SECTION 612. Conflicting Interests ...................................... 81
SECTION 613. Preferential Collection of Claims Against
Issuers .................................................. 81
<CAPTION>
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
<S> <C>
SECTION 701. Disclosure of Names and Addresses of Holders ............... 81
SECTION 702. Reports by Trustee ......................................... 82
SECTION 703. Reports by Company ......................................... 82
<CAPTION>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
<S> <C>
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms ............................................ 83
SECTION 802. Successor Substituted ...................................... 84
<CAPTION>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
<S> <C>
SECTION 901. Supplemental Indentures Without Consent of
Holders .................................................. 85
SECTION 902. Supplemental Indentures with Consent of Holders ............ 86
SECTION 903. Execution of Supplemental Indentures ....................... 87
SECTION 904. Effect of Supplemental Indentures .......................... 87
SECTION 905. Conformity with Trust Indenture Act ........................ 87
SECTION 906. Reference in Notes to Supplemental Indentures .............. 87
SECTION 907. Notice of Supplemental Indentures .......................... 88
SECTION 908. Effect of Consents ......................................... 88
<CAPTION>
ARTICLE TEN
COVENANTS
<S> <C>
SECTION 1001. Payment of Principal, Premium, if Any,
and Interest ............................................ 88
SECTION 1002. Maintenance of Office or Agency ........................... 88
SECTION 1003. Money for Note Payments to Be Held in Trust ............... 89
SECTION 1004. Corporate Existence ....................................... 90
SECTION 1005. Payment of Taxes and Other Claims ......................... 91
SECTION 1006. Maintenance of Properties ................................. 91
SECTION 1007. Insurance ................................................. 91
SECTION 1008. Statement by Officers as to Default ....................... 92
SECTION 1009. Purchase of Notes upon Change of Control .................. 92
SECTION 1010. Limitation on Debt ........................................ 94
SECTION 1011. Limitation on Liens ....................................... 94
SECTION 1012. Limitation on Restricted Payments.......................... 94
SECTION 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries ....................... 97
SECTION 1014. Limitation on Issuances of Certain Guarantees by,
and Debt Securities of, Restricted Subsidiaries ......... 98
SECTION 1015. Limitation on Issuances and Sales of Capital
Stock in Restricted Subsidiaries ........................ 99
SECTION 1016. Limitation on Asset Sales.................................. 100
SECTION 1017. Transactions with Affiliates............................... 103
SECTION 1018. Waiver of Certain Covenants ............................... 104
SECTION 1019. Provision of Financial Information......................... 105
<CAPTION>
ARTICLE ELEVEN
REDEMPTION OF NOTES
<S> <C>
SECTION 1101. Right of Redemption ....................................... 105
SECTION 1102. Applicability of Article .................................. 105
SECTION 1103. Election to Redeem; Notice to Trustee...................... 106
SECTION 1104. Selection by Trustee of Notes to Be Redeemed............... 106
SECTION 1105. Notice of Redemption ...................................... 106
SECTION 1106. Deposit of Redemption Price ............................... 107
SECTION 1107. Notes Payable on Redemption Date .......................... 107
SECTION 1108. Notes Redeemed in Part..................................... 108
<CAPTION>
ARTICLE TWELVE
[Intentionally omitted]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
<S> <C>
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance ..................................... 109
SECTION 1302. Defeasance and Discharge .................................. 109
SECTION 1303. Covenant Defeasance ....................................... 110
SECTION 1304. Conditions to Defeasance or Covenant
Defeasance .............................................. 110
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous
Provisions .............................................. 112
SECTION 1306. Reinstatement ............................................. 113
TESTIMONIUM .............................................................. 115
SIGNATURES AND SEALS ..................................................... 115
</TABLE>
Note: Certain material has been omitted from this document
pursuant to a request for confidential treatment and has been
filed separately with the SEC. Notations of [redacted] have
been used to indicate such an omission.
NETWORK PRODUCTS PURCHASE AGREEMENT
Northern Telecom Inc., a Delaware corporation having offices at
5555 Windward Parkway, Suite B, Alpharetta, Georgia 30201-3895
("Nortel") and Teligent, Inc., a Virginia corporation, having
its principal offices and place of business at 8065 Leesburg
Pike, Suite 400, Vienna, Virginia 22182 ("Teligent") agree as
follows:
1. SCOPE AND TERM
1.1 Certain terms used in this Agreement shall be defined
as set forth in Attachment A. In the case of any
conflict between the main text of this Agreement and
the Attachments hereto, the main text shall govern.
1.2 Scope
1.2.1 This Agreement sets forth the terms and
conditions under which Teligent shall purchase
and/or license, as applicable, certain
Deliverables as set forth herein.
[redacted]
[redacted]
1.3 This Agreement shall be binding on the Parties from
the date executed, except that if on or prior to
January 31, 1998 or such other date as Nortel and
Teligent may mutually agree upon (the "Determination
Date"), Nortel and Teligent have not entered into the
Finance Agreement and the security documents
contemplated thereby for any reason (a "Termination
Event"), either Party shall have the right to
terminate all the rights and obligations of both
Parties under this Agreement, except those with
respect to Core Deliverables ordered by Teligent, by
delivery of five (5) days prior written notice of such
termination.
With respect to such Core Deliverables, Teligent may
elect within fifteen (15) days after termination either (a)
to keep the Core Deliverables, and in which case, Teligent
shall pay Nortel for the purchase price of the Core
Deliverables, less [redacted] and Nortel's support obligations
shall survive and continue in full force and effect with
respect to such Core Deliverables; or (b) to return the
Core Deliverables, paying a re-stocking fee of [redacted]
of the Core Deliverables returned.
If Teligent shall fail to make any such election, Teligent
shall be deemed to have elected to return the Core
Deliverables to Nortel. Notwithstanding any election by
Teligent to keep the Core Deliverables, Teligent may within
fifteen (15) days after such election elect to return all
Core Deliverables with respect to which it has not yet paid
the reduced purchase price described in clause (a) above
(such purchase price with respect to any item of Core
Deliverables, the "Item Purchase Price") otherwise as
provided in clause (b) above.
If Teligent fails to pay the Item Purchase Price, or any
portion thereof, for any item of Core Deliverables (each an
"Item") within thirty (30) days after receipt of Notice
from Nortel that such amounts were not paid when due, a
"Return Event" shall be deemed to have occurred. At any
time after the occurrence and during the continuation of a
Return Event, Nortel may demand the return of the Item with
respect to which such Return Event has occurred and
Teligent shall promptly provide for the return of such Item
to Nortel as provided below. Upon the return of any Item
to Nortel, Nortel shall promptly refund to Teligent an
amount equal to all payments received by it in respect of
the Item Purchase Price for such Item [redacted] of such
Item Purchase Price.
If Teligent shall, for any reason, be required to return
any Item under this Section 1. 3, Teligent shall make such
Item available for return on the premises or facility where
such Item is then located and Nortel shall be entitled to
remove such Item during normal business hours or, if
requested by Nortel, Teligent shall, at Nortel's sole
expense, deliver such Item, or cause such Item to be
delivered, to any location in the continental United States
requested by Nortel.
Except as expressly set forth in this Section 1.3, Teligent
shall have no obligation or liability whatsoever in
connection with the return of any Core Deliverables
(including, without limitation, in connection with a Return
Event) arising out of a Termination Event. Unless Teligent
expressly elects to keep certain Core Deliverables as
provided in this Section 1.3, nothing contained in this
Section 1.3 or in Section 4.6 shall constitute, or be
deemed to constitute, an obligation of Teligent to purchase
any Item or to pay any purchase price in respect of an
Item; provided, that if no Termination Event shall have
occurred on or prior to the Determination Date, this
Section 1.3 shall no longer apply and shall have no further
effect.
[redacted]
[redacted]
[redacted]
1.5 Turn-Key Services
1.5.1 Nortel shall offer Buyer the option to purchase
from Nortel Services on both a full turn-key
(including engineering services but excluding
civil works) and a partial turn-key basis as set
forth in the Statement of Work, attached hereto
as Attachment H.
1.5.2 Buyer shall be responsible for any and all civil
works required under this Agreement, including
those set forth in the Buyer's Obligation Section
of the Statement of Work, as set forth in
Attachment H. Nortel and Buyer shall mutually
agree upon civil works ready dates when
developing detailed Core Deliverables schedules.
1.5.3 Nortel shall use only its own personnel or
Nortel-qualified third-party service contractors
and Nortel shall warrant their performance as set
forth in Section 10. Buyer may reasonably
request the removal of any Nortel personnel or
third-party service contractor and Nortel shall
promptly comply.
1.6 Nortel shall use all reasonable efforts to furnish and
install Core Deliverables so that such Core
Deliverables shall comply in all material respects
with all federal, state and local laws and regulations
in force on the date of execution of this Agreement,
which directly impose obligations upon the
manufacturer, seller or installer thereof. Notwithstanding
the foregoing, Buyer acknowledges that certain Core
Deliverables have not yet received required type
approval from the Federal Communications Commission
("FCC"). Nortel's obligation to furnish Core Deliverables to
Buyer is expressly conditioned upon Nortel or its
Teligent-Approved Radio Vendor receiving FCC Core Deliverables
type approval prior to delivery of such Core Deliverables,
unless Buyer can reasonably demonstrate to Nortel that such type
approval is not required for operation of such Core
Deliverables by Buyer, (e.g., situations where Buyer
operates the Core Deliverables under an FCC
experimental license). The failure of Nortel or its
Teligent-Approved Radio Vendor to receive necessary
Core Deliverables type approval from the FCC and to
meet other federal, state and local regulatory
requirements shall be regarded as a Force Majeure
event under Section 13 of this Agreement.
Nortel warrants that it and its Teligent-Approved
Radio Vendor are vigorously prosecuting the necessary FCC
type-approval application(s). Any failure by Nortel or its
Teligent-Approved Radio Vendor to use all reasonable
efforts to obtain FCC Type-approval prior to the General
Availability Dates for such Core Deliverables as specified
in Attachment F shall be grounds for Material Breach and
give rise to Teligent's right to terminate for cause.
1.7 Term
1.7.1 This Agreement shall be in effect on the date
last executed and continue for a period of five
(5) years thereafter ("Term"). This Agreement or
any part thereof may be terminated in accordance
with the express provisions of this Agreement
concerning termination or by written agreement of
the Parties.
1.7.2 The termination of this Agreement or any part
thereof shall not affect the obligations of
either Party thereunder which have not been fully
performed with respect to any accepted Order,
unless such Order is expressly terminated in
accordance with this Agreement or by written
agreement of the Parties.
2. PURCHASES OF CORE DELIVERABLES
2.1 Deliverables
2.1.1 For purposes of this Agreement, the definition of
"Core Deliverables" shall mean any Services,
Equipment and Software, including Radio Products,
drawings, documents, manuals and training,
supplied directly by Nortel including any
equipment not Nortel-branded ("OEM Equipment"),
even if such OEM Equipment is not part of
Nortel's standard product offerings.
2.1.2 For purposes of this Agreement, the definition of
"Adjunct Deliverables" shall mean any
telecommunications support products supplied by
third parties, including ancillary services,
directly to Teligent that are in the categories
described in Attachment E, attached hereto, and
used in connection with Core Deliverables.
Teligent shall have the right to acquire and
install in its network any Adjunct Deliverable if
it is compatible with the Core Deliverables and
in compliance with industry standard interfaces,
or if Teligent assumes the responsibility for
such equipment's non-compliance.
2.1.3 Before procuring any Adjunct Deliverables,
[redacted]. In the event Buyer purchases any
Adjunct Deliverable from Nortel, such equipment
shall be considered to be a Core Deliverable and
not an Adjunct Deliverable. Nortel shall provide
Buyer support of such equipment as if it were
non-OEM Equipment Core Deliverables.
2.1.4 Teligent further agrees that by the end of the
twelfth (12th) month from the effective date of
this Agreement, as defined in Section 1.7.1
herein, at least [redacted] percent [redacted]
of the total purchase price of Deliverables
financed by Nortel shall be Core Deliverables. By
the end of the [redacted] month of from the
effective date of this Agreement and on an annual
basis thereafter, Teligent agrees that at least
[redacted] of the total purchase price of all
Deliverables financed by Nortel from the
effective date of this Agreement shall be Core
Deliverables. These ratios shall include Core
Deliverables then on order for delivery under the
Standard Intervals set forth in Section 8. In
the event that at the end of the [redacted]
month from the effective date of this Agreement,
and for any following [redacted] month period
thereafter, Teligent has failed to purchase
enough Core Deliverables to meet the above
required percentages, then Teligent shall issue
within ninety (90) days additional Orders for
Core Deliverables for delivery within Standard
Intervals sufficient so as to meet the required
percentages.
2.2 Teligent-Approved Radio Vendor
2.2.1 Microwave transmission Products supplied as Core
Deliverables shall be made only by Teligent-
Approved Radio Vendors. Nortel shall be
responsible for managing Teligent-Approved Radio
Vendors in connection with this Agreement.
[redacted]
2.2.3 The process for establishing other Teligent-
Approved Radio Vendors shall be as follows:
- In consultation with Teligent senior
engineering staff, Nortel shall propose specific
new Microwave Product(s) to add to the Core
Deliverables in Attachment G, together with
pricing and specifications therefor.
- Teligent may elect to trial the equipment, with
Nortel and the vendor of the proposed Product,
according to mutually-agreed costs, tests and
scheduling, or Teligent may reject the proposal.
- If, based on the trial results and other
investigation of the proposed vendor's processes
and capabilities, Teligent is satisfied that the
Product should be added to the Core Deliverables
list, Teligent shall notify Nortel in writing
that the vendor is a Teligent-Approved Radio
Vendor for that Product and Attachment G shall
accordingly be modified.
- Teligent may refuse to certify a vendor or its
product in its sole, reasonable discretion and
shall provide Nortel the technical and business
reasons for such refusal to certify.
2.2.4 If a Teligent-Approved Radio Vendor is added or
dropped, the Parties recognize that changes may
be necessary to various terms of this Agreement
including the Future Deliverables set forth in
Attachment F. The Parties shall negotiate in
good faith on such changes.
3. FORECASTS, ORDERING AND ADMINISTRATION
3.1 Forecasts
3.1.1 Teligent hereby agrees that within one (1) week
of the effective date of this Agreement, Teligent
shall provide Nortel an initial forecast covering
four (4) quarters of Core Deliverables to be
purchased during the first year of this
Agreement. Such initial forecast shall also
include a firm Order for Teligent's Core
Deliverables as required to be purchased under
Section 3.1.2.
3.1.2 Teligent shall provide Nortel a rolling twelve
(12) month forecast ("Yearly Forecast") covering
Core Deliverables to be purchased. Such Yearly
Forecast shall detail the Core Deliverables by
product and quantities. Teligent shall update
the Yearly Forecast on a quarterly basis.
Teligent agrees that the first three (3) months
of such Yearly Forecast of Core Deliverables
shall represent a non-reducible binding purchase
commitment, and at least fifty percent (50%) of
the second three (3) months of each Yearly
Forecast of Core Deliverables shall also be
binding.
3.1.3 Nortel shall be obligated to deliver to Buyer up
to one hundred ten percent (110%) of the first
three (3) months of the Yearly Forecast for each
type of Core Deliverable products, if ordered, in
accordance with the Standard Intervals set forth
in Section 8. Core Deliverables in excess of one
hundred ten percent (110%) of the first three (3)
months of the Yearly Forecast for such Core
Deliverables shall be delivered in accordance
with Nortel's usual delivery intervals or as
mutually agreed by Nortel and Buyer.
3.2 Orders
3.2.1 All purchases of Core Deliverables pursuant to
this Agreement shall be made by means of Orders
issued from time to time by Buyer. Such Order
shall be accepted or rejected by Nortel in
writing within five (5) business days. If not
expressly rejected, an acknowledged Order will be
deemed accepted. All Orders shall reference this
Agreement and shall be governed solely by the
terms and conditions set forth herein.
3.2.2 When Buyer desires to order Core Deliverables, if
any, Buyer shall submit to Nortel's designated
representative as defined in Section 3.3, an
Order which shall at a minimum specify the
following, if applicable:
(i) the name of the Buyer placing the Order;
(ii) the types and quantities of Core
Deliverables, if any, to be furnished by
Nortel;
(iii) the applicable prices, charges and fees with
respect to such Core Deliverables, if any;
(iv) the location or facility to which the Core
Deliverables are to be delivered;
(v) the incorporation by reference of this
Agreement;
(vi) the location at which the Core Deliverables
are to be installed, if known;
(vii) the requested delivery date and/or in-
service date;
(viii) any other information required under this
Agreement to be included in an Order.
3.2.3 Orders shall specify if any Nortel installation
Services are required, and Buyer shall provide
Nortel all necessary information related to final
delivery destination and such installation
Services at least two (2) weeks prior to the
delivery date set forth in such Order.
3.2.4 An Order submitted pursuant to this Agreement,
and which Nortel has accepted, shall constitute a
Contract between the Buyer ordering and Nortel.
As long as this Agreement is effective, Nortel
may only reject an Order if such Order is not in
accordance with the provisions of Section 3.2.2
above, and in that event, Nortel shall
specifically identify the precise reasons under
which it rejects such Order. The foregoing does
not limit any rights Nortel may have under
Section 3.1.3.
3.2.5 Buyer may at any time request additions,
alterations, deductions or deviations to an Order
subject to the condition that such changes and
any adjustments resulting from such changes
including, but not limited to, schedules and
prices, shall be mutually agreed upon and, if so
agreed, subsequently detailed in a written
revision to the applicable Order ("Change
Order"). Buyer acknowledges that a premium
charge may be applied by Nortel should Nortel
agree to process a Change Order outside of its
standard Order processing cycle for a Core
Deliverable or in the event that a Change Order
requires an additional amount of work (such as
engineering) to be undertaken to comply with such
changes.
3.2.6 Buyer's original Order for each new System shall
be so identified. Buyer may place supplemental
Orders amending the original Order for each
System to add Node Equipment for sixty (60) days
from the issuance of the original Order, and to
add TAS equipment for ninety (90) days from the
issuance of the original Order, as long as the
TCO configuration is not changed, unless Nortel
shall consent to any configuration change. All
such Core Deliverables so ordered shall
constitute the System.
3.3 Administration
3.3.1 Each Party shall delegate a Program Manager
sufficient authority to administer day-to-day
contract administration matters.
3.3.2 Five (5) business days prior to the submission of
each quarterly forecast described in Section
3.1.2, Nortel's Program Manager shall submit to
Buyer's Program Manager an "Issues and Status
Report", identifying issues and matters requiring
resolution from Nortel's perspective.
Concurrently with the purchase forecasts
described in Section 3.1.2, the Buyer's Program
Manager shall submit to Nortel's Program Manager
an "Issues and Status Report" identifying issues
and matters requiring resolution from Buyer's
perspective. Within ten (10) business days after
receiving this report, both Program Managers
shall jointly prepare a report confirming the
current forecast and addressing the issues and
matters identified in the two (2) reports,
proposing specific steps to resolve them. These
reports shall be prepared in a manner appropriate
for submission to senior management responsible
for oversight of the Parties' relationship.
4. PRICES
4.1 Preferred Supplier Pricing
4.1.1 Price models for Teligent Central Offices
("TCOs") and Teligent Nodes ("Nodes"), as set
forth in Attachment G, include equipment
engineering, installation, commissioning and
testing services. Teligent Access Site ("TASs")
models, as set forth in Attachment G, are priced
with and without installation. If installation,
commissioning, engineering and professional
services and any other Core Deliverables,
including OEM Equipment, are separately priced
outside the Models, then they shall not be
subject to the discounts set forth in Section
4.1.2 or Section 4.2.
[redacted]
4.2 [redacted]
4.2.1 [redacted]
4.2.2 [redacted]
4.2.3 [redacted]
4.2.4 [redacted]
4.2.5 The percentage discount for Cumulative Purchase
Volumes shall be determined as follows:
[redacted]
4.2.6 [redacted]
4.2.7 [redacted]
4.3 Price Adjustments
4.3.1 Except as specifically provided in this Section,
the prices for Core Deliverables, whether
purchased in packaged or component form,
including Services, standard models, components
and Merchandise, as set forth in Attachment G,
[redacted]. If not included in Attachment G,
prices for Core Deliverables shall be provided to
Buyer on a quote by quote basis. [redacted]
4.3.2 Nortel agrees that pricing for the applicable
[redacted], as set forth in Attachment
G, with at least the functionality of Release
24B2.0 and 16 QAM, shall decline by [redacted]
effective the later of either two years after the
effective date of this Agreement or when Buyer's
aggregate purchases of [redacted],
including monies paid to Nortel for installation,
reaches [redacted].
4.3.3 For the applicable Radio Products, Nortel shall
offer Buyer additional functionality beyond
Release 24B2.0 under the same discount schedules
as applied to other Radio Products. Any future
features or functionality developed by Nortel for
such Radio Products shall not be used as a basis
for a price increase if they are: (a) not used by
Buyer, or (b) beyond those identified in
Attachment F if alternative Radio Products
conforming to the features identified in
Attachment F are not available from Nortel.
4.3.4 Buyer may request TCO pricing to include
technical support services as set forth in
Section 18.4 and Nortel shall offer Buyer TCO
pricing including such technical support for a
metropolitan area.
4.3.5 [redacted].
4.4 [redacted]
4.5 Nortel will prepay freight charges and the cost of any
insurance requested by Buyer and invoice Buyer for
these items at Nortel's [redacted]. These charges will appear
as separate line items on Nortel's invoice.
4.6 (a) In order to secure the Return Obligations (as
defined below), Buyer hereby grants Nortel a security
interest in all of its right, title and interest in
and to any item of the Core Deliverables in which it
has a right, title and interest. As used in the
Section 4.6, "Return Obligations" shall mean the
obligations of Teligent to provide for the return of
Core Deliverables if a Termination Event shall have
occurred and Teligent shall be required pursuant to
Section 1.3 to return said Core Deliverables to
Nortel.
(b) The Buyer shall not sell, lease or otherwise
dispose of any such item of Core Deliverables or any
portion thereof, except, (i) to any wholly-owned
subsidiary of the Buyer or any affiliate of the Buyer
that is wholly-owned by the parent of the Borrower, or
(ii) without the prior written consent of Nortel. The
Buyer shall not permit to exist any liens, security
interests or other encumbrances ("Liens") on any item of
Core Deliverables, possession of which has been
delivered to the Buyer, other than (a) the Liens created
or contemplated hereby, (b) Liens for taxes or
assessments, (c) any Liens arising by statute or
operation of law, (d) Liens of carriers, warehousemen,
mechanics, materialmen and repairmen, (e) Liens
contemplated by the Finance Agreement, and (f) and other
non-consensual Liens arising in the ordinary course of
business.
(c) Buyer agrees to execute such documents and to
take such other action reasonably requested by Nortel to
perfect, maintain and preserve Nortel's security
interest, including, without limitation, UCC financing
statements.
(d) If Teligent shall fail to provide for the
return of any Core Deliverables as provided in Section
1.3 (a "Default"), Nortel shall have all of the rights
and remedies of a secured party under the Uniform
Commercial Code ("UCC") consistent with the nature of
the Return Obligations. Upon the occurrence of a
Default, without limiting the generality of the
foregoing, to the extent permitted by, and in accordance
with, all applicable laws, Nortel may without demand or
notice to the Buyer, collect, receive or take possession
of the Core Deliverables or any part thereof and for
that purpose Nortel may enter upon any premises on which
the Core Deliverables subject to such Default are
located and remove the Core Deliverables subject to such
Default therefrom.
(e) Nortel's security interests in each item of
Core Deliverables granted pursuant to Section 4.6(a)
above (each such item, a "Secured Item", and such items
collectively, the "Secured Items") shall continue until
the earlier of (i) the purchase price of such Secured
Item is paid, or has been deemed to be paid, in full and
(ii) such Secured Item is required to be returned to
Nortel pursuant to Section 1.3 and such Secured Item has
been returned, at which time, with respect to such
Secured Item, (A) the Buyer's obligations and Nortel's
rights and remedies under this Section 4.6 shall
terminate and be of no further effect, (B) Nortel's
security interest in such Secured Item shall terminate
and hereby is terminated, and (C) Nortel shall execute
and deliver such documents and instruments and take such
other actions as may be reasonably requested by Teligent
or any lender under the Finance Agreement to effect or
evidence the termination of the obligations and security
interests under this Section 4.6, including, without
limitation, UCC termination statements. In order to
provide Teligent with more favorable terms under the
Finance Agreement, upon the request of Teligent or any
lender under the Finance Agreement, Nortel agrees that
it shall use reasonable commercial efforts to
accommodate the requests of Teligent or such lender with
respect to the priority of its security interests in the
Secured Items, and shall cooperate with Teligent and
such lender in amending the provisions hereof on such
terms as are mutually acceptable to all such Parties.
5. TERMS OF PAYMENT
5.1 Payments shall be due within [redacted] calendar days
from the invoice receipt, but penalties for late payment
shall not be assessed until [redacted] calendar days
from invoice receipt. Past due amounts shall accrue
interest at the lending rate made available to Teligent
as in the Finance Agreement. Notwithstanding the
foregoing, the final [redacted] payment on a System
shall not be due until the later of [redacted] after
invoice or [redacted] business days after all Punch
List items have been completed.
5.2 Invoicing Schedule
5.2.1 The Core Deliverables and Services in a System
shall be invoiced as follows:
[redacted] Upon delivery of Core
Deliverables and/or Services, if any;
[redacted] Upon completion of Turnover,
as set forth in Section 9.1.2; and
[redacted] Upon successful passage of the
applicable Soak Period and closure of service-
affecting items uncovered during the Soak Period.
[redacted]
5.2.2 Orders for Core Deliverables outside of a System,
including Merchandise, which require no
installation by Nortel shall be invoiced at
[redacted] upon delivery to Buyer.
Orders for TASs outside of a System in which
Nortel provides installation Services, or Orders
in which the purchase price of Core Deliverables
requiring Nortel installation Services is less
than [redacted], shall be invoiced at [redacted]
upon completion of installation and passage of
any relevant ATPs.
Orders for Nodes and TCO Expansions which are
not part of a System, and Orders requiring Nortel
installation Services which exceed [redacted]
shall be invoiced in accordance with the following
schedule:
[redacted] upon delivery;
[redacted] upon completion of installation
Services and passage of relevant ATPs; and
[redacted] upon closure of Punch List.
5.2.3 The initial list of spare parts for a System, as
provided in Nortel's recommended spares list set
forth in Attachment G shall be invoiced as set
forth in Section 5.2.1. Subsequent Orders for
individual Merchandise spare parts, Documentation
and software releases shall be invoiced [redacted]
upon delivery.
5.2.4 [redacted]
5.2.5 [redacted]
5.3 [redacted]
5.3.1 [redacted]
5.3.2 [redacted]
5.3.3 [redacted]
5.4 Nortel shall not be entitled to claim payment for
partial deliveries where the effect of the partial
delivery prevents Buyer from making beneficial use of
the facilities in question. If Buyer can make
beneficial use of the facilities in question, then
Nortel shall be entitled to payment for those goods or
services delivered and performed.
5.5 Where Core Deliverables that are part of a System Order
have not been installed at the time of System ATP
primarily due to circumstances within Buyer's control,
then such Core Deliverables shall be deemed installed
for purposes of invoicing and payment.
6. TAXES
Unless Buyer furnishes Nortel with tax exemption certificates
in a form acceptable to taxing authorities, Buyer shall, at
Nortel's direction and pursuant to a valid invoice therefor,
promptly pay to Nortel or pay directly to the applicable
government or taxing authority, if requested by Nortel, taxes
and charges which may be imposed by any federal, state, or
local governmental or taxing authority arising hereunder,
such as, but not limited to all such taxes and charges
relating to the purchase, license, ownership, possession,
use, operation and/or relocation of any Equipment, Software,
or Services furnished by Nortel pursuant to this Agreement,
excluding, however, all taxes computed upon the net income of
Nortel. Nortel shall cooperate with the electronic delivery
of Software if requested by Teligent. Teligent shall be
obligated to pay associated penalties and interest only if
such charges are imposed materially due to Teligent's
negligent or deliberate failure to pay after being given
adequate (at least thirty (30) days) notice of such tax
liability. Buyer's obligations pursuant to this Section 6
shall survive any termination of this Agreement.
Prices of imported equipment in the Core Deliverables, if
any, are destination duty paid and applicable duties, if any,
are included in the price.
7. RISK OF LOSS, TITLE AND DELIVERY
7.1 Risk of loss or damage and title to Core Deliverables
(excluding Software) shall pass to Buyer upon delivery
to the loading dock at the installation site or other
delivery location specified by Buyer in its Order, and
Buyer shall keep such Core Deliverables fully insured
for the total amount then due Nortel for such Core
Deliverables. Buyer shall cause its insurers with
respect to such Core Deliverables to name Nortel as loss
payee as Nortel's interests may appear. Nortel shall
remain responsible at all times for loss caused by
Nortel or its contractors.
7.2 Buyer shall receive a license to use Software subject to
the terms set forth in Attachment B.
7.3 When Buyer submits an Order requesting Nortel provide
installation, Nortel shall be responsible for all
staging and delivery of Core Deliverables to the job
site. When Nortel does not provide installation
Services, delivery of Core Deliverables, shall be made
to a designated Buyer warehouse. In the event Buyer
requests Nortel provide warehousing of Core Deliverables
and Nortel has sufficient warehouse space available,
Nortel shall make such warehouse space available and
Buyer shall pay the cost of such warehousing, subject to
the grace period and procedure set forth in Sections
8.2.1 and 8.2.2.
8. INSTALLATION INTERVALS
8.1 Installation Schedule
8.1.1 Prior to Buyer placing an Order for installation
Services for the First Commercial System, Nortel
and Teligent shall agree to an installation
schedule for such First Commercial System.
8.1.2 Subsequent Systems shall be scheduled based upon
the following lead times ("Standard Intervals").
These Standard Intervals shall only apply to
forecasted items:
TCO equipment for a System:
[redacted] from acceptance of Order to
completion of installation and passage
of the TCO ATPs.
Host Digital Terminals ("HDT") and Passport
equipment:
[redacted] from acceptance of Order to
completion of installation and passage
of relevant ATPs.
Node equipment and TCO expansion equipment:
[redacted] from acceptance of Order to
completion of installation and passage
of the Node ATPs.
TAS equipment:
[redacted] from acceptance of Order to
delivery of complete units; or
[redacted] from acceptance of Order to
completion of installation, if so
specified in the Order, and passage of
the TAS ATPs.
8.2 Installation Reschedule
8.2.1 [redacted]
8.2.2 In the event Buyer fails to provide Nortel advance
notice of its desire as set forth above, Nortel
shall be entitled to warehouse such Core
Deliverables and to invoice Buyer for all
reasonable and directly associated costs incurred
by Nortel for such warehousing associated with
such rescheduling.
9. ACCEPTANCE TESTING, TURNOVER AND ACCEPTANCE
9.1 Acceptance Testing
9.1.1 The Parties shall mutually develop acceptance test
procedures ("ATP") and pass/fail criteria for Core
Deliverables installed by Nortel. Such ATP shall
consist of separate test plans for each of the
major network elements provided by Nortel
hereunder and, with respect to a System, an
additional acceptance test plan for the System as
an integrated whole ("System ATP").
9.1.2 [redacted]
9.1.3 [redacted]
9.1.4 [redacted]
9.1.5 If Nortel does not install the Core Deliverables
furnished hereunder, Nortel shall, prior to
delivery of such, perform factory acceptance tests
in order to confirm that such Core Deliverables
are in accordance with the applicable
Specifications. Nortel shall include with the
shipment of any such Core Deliverables a certified
copy of the test results demonstrating passage of
such factory tests where normally available.
Unless Buyer notifies Nortel to the contrary
within [redacted] of the delivery of such Core
Deliverables, Buyer shall be deemed to have
accepted such Core Deliverables based upon such
tests and acceptance shall be deemed to have
occurred upon the delivery of such Core
Deliverables.
9.1.6 Merchandise equipment shall be deemed accepted upon
delivery to the Buyer. Services which are
purchased separately from a System shall be deemed
to be accepted upon completion of such Services.
9.1.7 [redacted]
9.1.8 [redacted]
9.1.9 [redacted]
9.1.10 [redacted]
9.1.11 In the event Buyer notifies Nortel of non-
acceptance of a Core Deliverable and Nortel
personnel travels to Buyer's installation site to
remedy such non-acceptance and determines that
non-acceptance is due primarily to a deficiency of
the nature described in Section 9.1.10, Nortel may
invoice Buyer for investigation of the matter,
including the standard labor rate for Nortel's
personnel who travel to Buyer's installation site
and reasonable travel and living expenses incurred
by such personnel.
9.2 Nortel acknowledges that Buyer may from time to time
install certain Adjunct Deliverables not purchased
through Nortel, and connect such Adjunct Deliverables to
Nortel's Core Deliverables through standardized
interfaces. Therefore, the Parties hereby agree, that
during such situations when Adjunct Deliverables are
installed, by either Nortel or Buyer, at the time of
acceptance testing, the System ATP shall verify the
proper function of the relevant standardized interface;
and where it is verified during such System ATP that
such Adjunct Deliverables comply with the relevant
interface specification, the attachment of such Adjunct
Deliverables to Core Deliverables shall not diminish
Nortel's warranty on the Core Deliverables.
9.3 [redacted]
9.3.1 [redacted]
9.3.2 [redacted]
9.4 Nortel agrees that the Core Deliverables, [redacted]
shall comply with open interface standards TR-08 and TR-
303 and other relevant Bellcore standards for switch
interfaces.
9.5 Nortel shall not ship Core Deliverables unless such Core
Deliverables have passed Nortel's standard factory
tests. Teligent shall have the right to inspect
Nortel's manufacturing facility upon reasonable notice.
Teligent shall also have the right to request from
Nortel an annual quality audit.
10. LIMITED WARRANTIES AND REMEDIES
10.1 Nortel warrants that the Core Deliverables shall meet or
exceed the performance Specifications in Attachment L,
or if Attachment L is silent, in Nortel's current
published specifications, for the lesser of [redacted]
from Turnover or [redacted] from delivery ("Warranty
Period") under normal use and service such equipment and
will be free from defective material and faulty
workmanship. The Warranty Period may be extended at
Teligent's option for an additional [redacted] upon
payment of a warranty extension fee. The foregoing
warranty shall not apply to items normally consumed
during operation of Core Deliverables such as, but not
limited to, lamps and fuses. Any installation Service
performed by Nortel will be free from defects in
workmanship for a period [redacted] from the completion
date of such Service. The performance by Nortel of any
of its obligations described herein shall not extend the
applicable Warranty Period.
10.2 Subject to Section 10.9, Nortel's obligation under the
warranty set forth in Section 10.1 above shall be
limited to the replacement or repair, at Nortel's option
and expense, of the defective Core Deliverables, or
correction of the defective installation Services.
Replacement Core Deliverables may be new or
reconditioned at Nortel's option, and shall be warranted
for the balance of the Warranty Period of the original
equipment, or for 90 days, whichever is longer.
10.3 If Core Deliverables are not free from defects in
material or workmanship and/or fail to comply with the
applicable Specifications during the Warranty Period,
Nortel shall repair, replace or modify the Core
Deliverables so that they do comply with the applicable
Specifications within [redacted] following receipt of
such defective Core Deliverables, or within [redacted]
on an emergency basis, if requested expressly by
Teligent as set forth in Section 18.3. Subject to the
provisions of Section 10.9, Nortel's obligation under
this Section 10.3 shall be limited to repair,
modification or replacement of the defective Core
Deliverables or correction of the defective installation
Services.
10.4 Nortel warrants that any Software licensed by Nortel to
Buyer under this Agreement shall function during the
Warranty Period of the Equipment (but in any event not
less than [redacted]) with respect to which such
Software is furnished without any material, service-
affecting nonconformance to the applicable
Specifications, provided that Buyer shall have paid all
Software support fees. If the Software fails to so
function, Buyer's sole remedy and Nortel's sole
obligation under this warranty is for Nortel to correct
promptly such failure to ensure that the Equipment
performs to Specifications, if the Specifications
adequately address the service-affecting aspects of the
failure, or, if the Specifications do not adequately
address the service-affecting failure, Nortel shall
correct promptly such failure to Teligent's reasonable
satisfaction, through, at Nortel's option, the
replacement or modification of the Software or such
other actions as Nortel reasonably determines to be
appropriate. Any continuing service-affecting Software
failure that materially affects the performance of Core
Deliverables shall be treated under Section 10.9, below.
10.5 Nortel's warranties in Section 10.4 above shall only
apply to the portion of the Software actually developed
by Nortel, its Affiliates or Teligent-Approved Radio
Vendors. All other Software shall be provided by Nortel
"AS IS". Nortel shall assign to Buyer on a nonexclusive
basis any warranty on such other Software provided to
Nortel by the developer of such other Software to the
extent of Nortel's legal right to do so. Nortel shall
identify any such Software and the extent to which such
warranties are assigned prior to shipment.
10.6 Major Outage Warranty
10.6.1 [redacted] During the System Availability
Warranty Period, Nortel warrants to Teligent that
Major Outages, as defined in Section 10.6.2,
not attributable to Teligent or a third
party's error, resulting from failures of Nortel's
Core Deliverables shall be limited to [redacted]
cumulative during any calendar quarter. Scheduled
outages for any given System shall not be counted
against this limit, as long as: (a) a scheduled
outage is of less than [redacted] duration, and
(b) there are no more than [redacted] scheduled
outages during a given calendar quarter.
[redacted] Excluded from this System Availability
Warranty are outages due to failure by personnel,
not contracted or certified by Nortel, to properly
maintain the Core Deliverables or to follow Nortel
documents provided to Buyer; third-party events or
equipment; and Force Majeure events. Such liquidated
damages are to be paid in credits that may be applied
against outstanding invoices and/or future Orders
placed by Teligent under this Agreement.
10.6.2 For purposes of this Agreement, "Major
Outages" shall mean (a) an unscheduled loss of
engineered and installed call or data processing
capacity (as measured by the most limiting
capacity parameter) in excess of [redacted] or
(b) or any unscheduled service-affecting failure
in [redacted] or more of the Nodes (but at least
[redacted] Nodes) at any one time (according to
the system logs).
10.6.3 The System Availability Warranty shall apply
only to Systems in which the Core Deliverables
affected by the Major Outage are purchased
according to the models shown in Attachment G, or
if the Core Deliverables are of non-standard
configurations or have been re-engineered for
growth, if the standard recommended spares in
connection therewith have been purchased and the
engineered redundancy in the Core Deliverables is
as recommended by Nortel, such engineered
redundancy to be consistent with that reflected in
the standard models.
10.6.4 In no event shall Nortel's liability for such
penalties pursuant to this Section 10.6 exceed
[redacted].
10.7 Parameter Warranty
[redacted]
10.8 Capacity Warranty
10.8.1 During the Term, Nortel warrants the capacity
of the Core Deliverables as specified in
Attachment L and its published Specifications.
For Radio Products, capacity is limited to that
specified in Section 10.7(d) minus necessary
overhead (i.e., for [redacted] available bandwidth
for payload (user data rate) is [redacted]. For
[redacted] the available payload is [redacted].)
[redacted] Nortel may reduce the capacity based
on the provisioning and priority given to
different traffic types, as long as it
demonstrates to Teligent's satisfaction how it
proposes such reduction be made. Additional
equipment and costs directly attributable to this
breach of this Warranty shall be negotiated by the
Parties in good faith.
10.8.2 If Teligent chooses to license a new Software
release, such upgrade may require changes to the
capacity or purchases of additional Equipment.
Each such Software release shall have a revised
capacity warranty based on Teligent's new
Equipment and Software configurations. The
warranty of the capacity of the Core Deliverables
shall be contingent upon Buyer having maintenance
on such Core Deliverables adequately and properly
performed.
10.9 During the Warranty Period, in the event Nortel is
unable to repair or replace a defective Core Deliverable
which is service affecting, and Nortel's inability to
repair or replace such material and service affecting
defective Core Deliverable exceeds a period of
[redacted] then, at Buyer's election, Nortel shall
remove such service affecting defective Core
Deliverable, at Nortel's expense, and reimburse Buyer
for any costs or expenses Buyer may incur as a result of
the reinstallation of equivalent non-defective product
or equipment as well as reimburse Buyer the full Order
price of the defective Core Deliverable. Buyer shall
submit to Nortel an invoice for such reinstallation
costs or expenses and Nortel shall pay Buyer for such
amounts. The obligations and remedies set forth herein
shall be subject to the conditions set forth in Section 12.
10.10 The obligations and remedies set forth in this Section
10 shall be conditional upon: the Buyer having properly
installed, repaired and maintained the Equipment using
Nortel-qualified personnel; the Software not having been
modified; no material failure of Buyer to comply with
Buyer's Obligations, as set forth in the Statement of
Work, any defect or nonconformance not being the result
of mishandling, abuse, misuse, improper storage,
maintenance or operation by other than Nortel (including
use in conjunction with any product which is
incompatible with the applicable Core Deliverables or of
inferior performance, except as provided in Section
9.2), and/or any error, act, or omission of Buyer
described in Section 12.5; the Core Deliverables not
having been damaged by fire, explosion, power failure,
power surge, or other power irregularity, lightning,
failure to comply with all applicable environmental
requirements for the Core Deliverables specified by
Nortel or any other applicable supplier, such as but not
limited to temperature or humidity ranges, or any act of
God, nature or public enemy; and written notice of the
defect having been given to Nortel within the applicable
Warranty Period.
10.11 The performance by Nortel of any of its obligations in
this Section shall not extend the applicable Warranty
Period, except as specifically stated otherwise herein.
10.12 Unless Nortel elects to repair or replace defective
Equipment at Buyer's facility, all Equipment to be
repaired or replaced, whether in or out of warranty,
shall be packed by Buyer in accordance with Nortel's
instructions and shipped at Buyer's expense and risk of
loss to a location designated by Nortel. Replacement
Equipment shall be returned to Buyer at Nortel's expense
and risk of loss. Buyer shall ship the defective
Equipment to Nortel within thirty (30) days of receipt
of the replacement Equipment. In the event Nortel fails
to receive such defective Equipment within such thirty
(30) day period, Nortel shall invoice Buyer for the
replacement Equipment at the then-current price in
effect therefor.
10.13 If the Core Deliverables returned to Nortel pursuant to
the immediately preceding paragraph are determined by
Nortel to be beyond repair or are outside the Warranty
Period, Nortel shall notify Buyer and if requested
Nortel shall sell Buyer replacement Core Deliverables at
the then-current contract price between the Parties for
such Core Deliverables or if no such contract exists, at
Nortel's then-current price for such Core Deliverables.
Such repair and replacement Service and notice of any
discontinuance of such repair and replacement Service
shall be available for a minimum period set forth in
Section 18. This provision shall survive the expiration
of this Agreement.
10.14 Buyer shall bear risk of loss and shall pay for all
transportation charges for Core Deliverables returned to
Nortel and Nortel shall bear such risk and pay for
transportation charges for repaired or replacement Core
Deliverables shipped to Buyer.
10.15 Subject to Section 2.1.3, with respect to any OEM
Equipment furnished by Nortel to Buyer pursuant to this
Agreement, Nortel shall assign to Buyer on a
nonexclusive basis any warranty granted by the party
that supplied such OEM Equipment to Nortel to the extent
of Nortel's right to do so.
10.16 Neither Nortel nor Nortel's suppliers, as appropriate,
shall have any responsibility for warranties offered by
Buyer to any of its customers. Buyer shall indemnify
Nortel and Nortel's suppliers, as appropriate, with
respect thereto.
10.17 THE WARRANTIES AND REMEDIES SET FORTH IN THIS SECTION
-----------------------------------------------------
CONSTITUTE THE ONLY WARRANTIES OF NORTEL WITH RESPECT TO
--------------------------------------------------------
THE CORE DELIVERABLES AND SERVICES AND BUYER'S EXCLUSIVE
--------------------------------------------------------
REMEDIES IN THE EVENT SUCH WARRANTIES ARE BREACHED.
--------------------------------------------------
THEY ARE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN OR
----------------------------------------------------
ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
-------------------------------------------------------
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS
-----------------------------------------------------
FOR A PARTICULAR PURPOSE. WITH RESPECT TO CLAIMS UNDER
-------------------------------------------------------
SECTION 10, NORTEL SHALL NOT BE LIABLE FOR ANY
----------------------------------------------
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE
-------------------------------------------------
WHATSOEVER, BEFORE OR AFTER THE PLACING OF ANY CORE
---------------------------------------------------
DELIVERABLE INTO SERVICE.
------------------------
11. LIABILITY FOR BODILY INJURY, PROPERTY DAMAGE AND PATENT
INFRINGEMENT
11.1 A party hereto shall defend the other party against any
suit, claim, or proceeding brought against the other
party for direct damages due to bodily injuries
(including death) or damage to tangible property which
allegedly result from the negligence, act or omission of
the defending party in the performance of this
Agreement. The defending party shall pay all litigation
costs, reasonable attorney's fees, settlement payments
and such direct damages awarded or resulting from any
such suit, claim or proceeding.
11.2 Nortel shall defend Buyer against any suit, claim or
proceeding brought against Buyer alleging that any Core
Deliverables, excluding OEM Equipment, furnished
hereunder infringe any patent, copyright, trademarks or
trade secrets enforceable in the United States. Nortel
shall pay all litigation costs, reasonable attorney's
fees, settlement payments and any damages awarded or
resulting from any such suit, claim or proceeding. With
respect to OEM Equipment, Nortel shall assign any rights
with respect to infringement of patents, copyrights,
trademarks, or trade secrets enforceable in the United
States granted to Nortel by the supplier of such OEM
Equipment to the extent of Nortel's right to do so.
11.3 The party entitled to defense pursuant to Section 11.1
or 11.2 shall promptly advise the party required to
provide such defense of the applicable suit, claim, or
proceeding and shall cooperate with such party in the
defense or settlement thereof. The party required to
provide such defense shall have sole control of the
defense of the applicable suit, claim, or proceeding and
of all negotiations for its settlement or compromise.
11.4 Upon providing Buyer with notice of a potential or
actual infringement claim, Nortel may (or in the case of
an injunction, shall), at Nortel's option, either
procure a right to use, replace or modify, or require
the return of the affected Core Deliverable for a full
refund of the purchase price for the Term of the
Agreement and a refund of the depreciated value of the
Core Deliverables thereafter.
11.5 The obligations of Nortel hereunder with respect to any
suit, claim, or proceeding described in Section 11.2
shall not apply with respect to Core Deliverables which
are (a) manufactured or supplied by Nortel in accordance
with any design or any special instruction furnished by
Buyer (excluding Buyer's requirement that Nortel's
products comply with usual and customary industry
standards), (b) used by Buyer in a manner or for a
purpose not contemplated by this Agreement, or (c) used
by Buyer in combination with other products not provided
by Nortel, including, without limitation, any software
developed solely by Buyer through the permitted use of
Core Deliverables furnished hereunder, provided the
infringement arises from such combination or the use
thereof. Buyer shall indemnify and hold Nortel harmless
against any loss, cost, expense, damage, settlement or
other liability, including, but not limited to,
attorneys' fees, which may be incurred by Nortel with
respect to any suit, claim, or proceeding described in
this Section 11.5.
11.6 The provisions of Sections 11.2 through 11.5 state the
entire liability of Nortel and its suppliers and the
exclusive remedy of Buyer with respect to any suits,
claims, or proceedings of the nature described in
Section 11.2. Nortel's total cumulative liability,
pursuant to Sections 11.2 shall for each infringement
claim not exceed [redacted] of the purchase price of the
Core Deliverables giving rise to such claim.
11.7 Each party's respective obligations pursuant to this
Section shall survive any termination of this Agreement.
12. REMEDIES AND LIMITATION OF LIABILITY
12.1 In the event of any material breach of this Agreement
which shall continue for thirty (30) or more days after
written notice of such breach (including a reasonably
detailed statement of the nature of such breach) shall
have been given to the breaching party by the aggrieved
party, the aggrieved party shall be entitled at its
option to avail itself of any and all remedies available
at law or equity, except as otherwise provided in this
Agreement.
12.2 In addition to any other remedy that may be available to
Buyer at law or equity, should Nortel fail to meet an
in-service date as set forth in an accepted Order, and
the cure period to remedy such failure shall have
expired without cure, Buyer shall be entitled to cancel
this Agreement upon thirty (30) days written notice to
Nortel. In the event of such cancellation, Buyer shall
pay Nortel for all Core Deliverables delivered by Nortel
prior to the cancellation of this Agreement which Buyer
desires to retain; and Teligent shall not be responsible
for any True-Up Amount, as set forth in Section 4.2.
12.3 Nortel shall have the right to suspend its performance
by written notice to Buyer and forthwith remove and take
possession of all Core Deliverables that shall have been
delivered to Buyer, if, prior to payment to Nortel of
any amounts due pursuant to this Agreement with respect
to such Core Deliverables, Buyer shall (a) become
insolvent or bankrupt or cease, be unable, or admit in
writing its inability, to pay all debts as they mature,
or make a general assignment for the benefit of, or
enter into any arrangement with, creditors, (b)
authorize, apply for, or consent to the appointment of,
a receiver, trustee, or liquidator of all or a
substantial part of its assets or have proceedings
seeking such appointment commenced against it which are
not terminated within ninety (90) days of such
commencement, or (c) file a voluntary petition under any
bankruptcy or insolvency law or under the reorganization
or arrangement provisions of the United States
Bankruptcy Code or any similar law of any jurisdiction
or have proceedings under any such law instituted
against it which are not terminated within ninety (90)
days of such commencement.
12.4 EXCEPT FOR A BREACH BY BUYER OF NORTEL'S SOFTWARE
LICENSE OR AN INDEMNIFICATION UNDER SECTION 11.1,
NOTHING IN THIS AGREEMENT SHALL MAKE EITHER PARTY LIABLE
FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL
DAMAGES OF ANY NATURE WHATSOEVER FOR ANY BREACH OF THIS
AGREEMENT WHETHER THE CLAIMS FOR SUCH DAMAGES ARISE IN
TORT, CONTRACT, OR OTHERWISE.
12.5 A Party shall not be liable for any additional costs and
expenses resulting from (a) errors, acts or omissions of
the other Party, including, but not limited to,
inaccuracy, incompleteness or untimeliness in the
provision of information by the other Party to the first
Party or (b) the fulfillment by the other Party of any
of its obligations under this Agreement. In such event,
the other Party shall pay the first Party the amount of
any such costs and expenses incurred by the first Party.
12.6 [redacted]
12.7 [redacted]
12.8 [redacted]
12.9 Dispute Resolution
12.9.1 If Nortel and Buyer are unable to resolve any
disagreement or dispute arising under this
Agreement, including without limitation, the
failure to agree upon any item requiring a mutual
agreement of the Parties hereunder, then Nortel
and Buyer resolve the disagreement or dispute as
follows:
12.9.2 Either party may refer the matter to a Vice
President or General Manager of the Parties by
giving the other party a notice. Within fifteen
(15) days after delivery of a notice, the relevant
officials of both Parties shall meet at a mutually
acceptable time and place to exchange relevant
information and to attempt to resolve the dispute.
12.9.3 If the matter has not been resolved within
thirty (30) days after delivery of a notice, or if
the relevant officials fail to meet within fifteen
(15) days after delivery of a notice, either party
may initiate mediation. The Parties shall submit
the dispute to a sole mediator selected by the
Parties or, any time at the option of a party, to
mediation by the American Arbitration Association
("AAA"). The mediation proceeding shall be in the
County of Fairfax, Virginia. Each party shall
bear its own expenses and equal share of the
mediator and fees of the AAA. The Parties, their
representatives, other participants and the
mediator shall hold the existence, content and
result of mediation in confidence. If such
dispute is not resolved by such mediation, the
Parties shall have the right to resort to any
remedies permitted by law. All such defenses
based on passage of time shall be tolled pending
the termination of the mediation. Nothing in this
clause shall be construed to preclude any party
from seeking injunctive relief in order to protect
its rights pending mediation. A request by a
party to a court for such injunctive relief shall
not be deemed a waiver of the obligation to
mediate.
12.9.4 The Parties shall agree to binding arbitration
under AAA rules under the Federal Arbitration Act
in Fairfax, Virginia, except for claims involving
antitrust, intellectual property rights and claims
where a third party can be impleaded.
13. FORCE MAJEURE
If the performance by a party of any of its obligations under
this Agreement shall be directly, materially and unavoidably
interfered with by reason of any circumstances beyond the
reasonable control of that party, including without
limitation, unavailability of supplies or sources of energy,
power failure, breakdown of machinery, or labor difficulties,
including without limitation, strikes, slowdowns, picketing
or boycotts, then that party shall be excused from such
performance for a period equal to the delay resulting from
the applicable circumstances and such additional period as
may be reasonably necessary to allow that party to resume its
performance, as long as that party has diligently pursued
alternative means of performance, if legally available to it.
With respect to labor difficulties as described above, a
party shall not be obligated to accede to any demands being
made by employees or other personnel. If Nortel's
performance is suspended or materially reduced due to force
majeure for more than six (6) months, Buyer may terminate
this Agreement for cause.
14. CONFIDENTIAL INFORMATION
Confidential Information exchanged under this Agreement shall
be governed by the terms and conditions of the Nondisclosure
Agreement between the Parties, dated June 6, 1997, attached
hereto as Attachment M, except that the term of the
Nondisclosure Agreement shall be extended to conform with the
Term of this Agreement, and the Parties' obligations under
the Nondisclosure Agreement shall survive any termination of
this Agreement.
15. ADDITIONAL OBLIGATIONS OF NORTEL
15.1 [redacted]
15.2 Nortel shall, upon Buyer's request, provide Buyer with
copies of its then current training catalogue and
schedule of courses whenever Nortel provides such
catalogue and schedule to Nortel's customers. Upon the
request of Buyer, Nortel shall provide Buyer such
additional training as Buyer requests, at a time and
place mutually agreed upon and at the prices to be
quoted for such training. The cancellation fee set forth
in the training catalogues shall apply.
15.3 Nortel shall include its standard Documentation package,
if any, with each shipment of a Core Deliverable.
Nortel shall make the Documentation available on its
choice of media, which may include CD-ROM. Nortel shall
provide Buyer with any other Documentation that is
ordered at its then-current pricing therefor.
Documentation provided via Nortel's CD-ROM media may be
printed and copied to the extent necessary for the
operation and maintenance of the Core Deliverables to
which the Documentation pertains. However, Buyer may
not press any copies of CD-ROM discs.
15.4 Nortel shall offer installation training to Teligent and
its contractors whereby such can become certified to
install Core Deliverables (except for DMS-500 based
equipment). Proper installations made by such certified
installers in accordance with Nortel's published
installation standards shall carry the same warranty on
the Core Deliverables as if the installation were made
by Nortel directly.
16. SPECIAL TERMS APPLICABLE TO CERTAIN PRODUCT LINES
[redacted]
[redacted]
[redacted]
[redacted]
16.2 Nortel agrees that the base line [redacted] Software
release to be initially licensed under this Agreement
and to which modifications and/or enhancements will be
made is expected to be [redacted]. For all Teligent-
Approved Radio Vendor Products, Nortel agrees to
maintain the compatibility of any new Software release
at the Node with existing TAS equipment in the field
without requiring a site visit for at least 2 previous
complete versions, or two (2) years, whichever period is
longer. The foregoing compatibility requirement applies
only when Radio Products are manufactured by the same
vendor. Teligent recognizes that the installed TAS
equipment base may not support new functionality or
features, but such installed equipment base shall
continue to interface and inter-operate at its then
current level of functionality and features with such
new Nodes or TCO software Core Deliverables contingent
upon the above criteria.
16.3 [redacted]
17. HAZARDOUS MATERIALS
17.1 Prior to issuing any Order for Services to be performed
at Buyer's facilities, Buyer shall identify and notify
Nortel in writing of the existence of all Hazardous
Materials which Nortel may encounter during the
performance of such Services, including, without
limitation, any Hazardous Materials known to Buyer
contained within any equipment to be removed by Nortel.
17.2 If Buyer breaches its obligations pursuant to Section
17.1, (a) Nortel may discontinue the performance of the
appropriate Services until all the applicable Hazardous
Materials have been removed or abated to Nortel's
satisfaction by Buyer at Buyer's sole expense, and (b)
Buyer shall defend, indemnify and hold Nortel harmless
from any and all damages, claims, losses, liabilities
and expenses, including, without limitation, attorneys'
fees, which arise out of Buyer's breach of such
obligations. Buyer's obligations pursuant to this
Section 17.2 shall survive any termination of this
Agreement.
17.3 Nortel warrants that it shall not knowingly introduce
any Hazardous Materials to the premises without Buyer's
knowledge and consent, and, if it does so, (a) removal
and abatement of same shall be at Nortel's sole expense
and (b) Nortel shall defend, indemnify and hold Buyer
harmless from any and all damages, claims, losses,
liabilities and expenses, including, without limitation,
attorneys' fees, which arise out of Nortel's breach of
such obligations. Nortel's obligations pursuant to this
Section 17.3 shall survive any termination of this
Agreement.
18. CONTINUING AVAILABILITY AND SUPPORT OF CORE DELIVERABLES
18.1 For a period of [redacted] following the date of last
sale of the affected Core Deliverable, excluding OEM
Equipment but including Radio Products, Nortel shall
make spare parts, or their functional equivalent,
available for purchase by Buyer, so that Buyer may meet
existing obligations relative to such Core Deliverable.
The prices charged for the spare parts following the
termination of this Agreement shall be Nortel's then
current published list price or its then current policy.
Nortel shall use its best endeavors to obtain similar
terms from OEM suppliers.
18.2 [redacted]
18.3 During the Warranty Period, Nortel shall provide Buyer
emergency replacement for Core Deliverables (new,
repaired, or functionally equivalent) within [redacted]
of a verbal request from the Buyer. This service is
available twenty-four (24) hours a day, including
holidays. After the Warranty Period, emergency service
shall be provided at Nortel's current rates for such
service.
18.4 During the Term, Nortel shall offer Buyer, as an option,
technical support services, whereby Nortel supplies
Teligent up to three (3) experts in each metropolitan
area for a period of up to six (6) months following
acceptance of a System, extended upon notice by Buyer.
The Parties agree that initially the experts required
will be one (1) switching expert, one (1) operations and
maintenance expert and one (1) radio systems expert, but
the precise set of skills will be determined on a
metropolitan area-by-metropolitan area basis as mutually
agreed to by the Parties. TCO pricing including such
technical support services shall be provided to Buyer as
set forth in Section 4.3.4.
[redacted]
20. SUBCONTRACTING
Nortel may subcontract any of its obligations under this
Agreement, but no such subcontract shall relieve Nortel of
primary responsibility for performance of its obligations and
for ensuring that any such subcontractors adhere to Nortel's
relevant obligations in the performance of their duties,
including, but not limited to, obligations with respect to
Confidential Information.
21. REGULATORY COMPLIANCE
In the event of any change in the Specifications or Nortel's
manufacturing or delivery processes for any Core Deliverables
as a result of the legally-proper imposition of new and
material requirements by any government body or agency of
competent jurisdiction, Nortel may upon notice to Buyer,
increase its prices, charges and fees to cover the added
costs and expenses directly incurred by Nortel as a result of
such change.
22. GENERAL
22.1 If any of the provisions of this Agreement shall be
invalid or unenforceable under applicable law and a
party deems such provisions to be material, that party
may terminate this Agreement upon notice to the other
party. Otherwise, such invalidity or unenforceability
shall not invalidate or render this Agreement
unenforceable, but this Agreement shall be construed as
if not containing the particular invalid or
unenforceable provision and the rights and obligations
of the Parties shall be construed and enforced
accordingly.
22.2 A party shall not release without the prior written
approval of the other party any advertising or other
publicity relating to this Agreement wherein such other
party may reasonably be identified. In addition each
party shall take reasonable precautions to keep the
existence and the contents of this Agreement
confidential so long as this Agreement remains in effect
and for a period of three (3) years thereafter, except
as may be reasonably required to enforce this Agreement
or by law.
22.3 The construction, interpretation and performance of this
Agreement shall be governed by the laws of the State of
New York, except for its rules with respect to the
conflict of laws.
22.4 Neither party may assign or transfer this Agreement or
any of its rights hereunder without the prior written
consent of the other party, such consent not to be
unreasonably withheld, except Buyer's consent shall not
be required for any assignment or transfer by Nortel (a)
to any Affiliate of all or any part of this Agreement or
of Nortel's rights hereunder, or (b) to any third party
of Nortel's right to receive any monies which may become
due to Nortel pursuant to this Agreement.
22.5 Notices and other communications shall be transmitted in
writing by certified United States Mail, postage
prepaid, return receipt requested, by guaranteed
overnight delivery, or by facsimile addressed to the
Parties as follows:
To Teligent: Teligent, Inc.
8065 Leesburg Pike
Suite 400
Vienna, Virginia 22182
Attention: Laurence E. Harris
Senior Vice President and General Counsel
Facsimile: (703) 762-5227
Telephone: (703) 762-5225
with a copy to:
Hamid Akhavan
Vice President Engineering
Facsimile: (703) 762-5101
Telephone: (703)762-5115
To Nortel: Northern Telecom Inc.
5555 Windward Parkway, Suite B
Alpharetta, Georgia 30201-3895
Attention: Vice President & G.M, Access
Networks
Facsimile: (770) 661-5272
Telephone: (770) 661-4000
with a copy to:
Attention: Peter Farranto, Esq.
General Counsel
Facsimile: (770) 661-5272
Telephone: (770) 661-4000
Any notice or communication sent under this Agreement
shall be deemed given upon receipt, as evidenced by the
United States Postal Service return receipt Mail if
given by certified United States Mail, on the following
business day if sent by guaranteed overnight delivery,
or on the transmission date if given by facsimile during
the receiving party's normal business hours, with a
confirming call to the stated individual, his/her named
assistant, and/or his/her voice mail box.
The address information listed for a party in this
Section may be changed from time to time by that party
by giving notice to the other as provided above.
22.6 Expiration or termination of the Agreement for any
reason will not release either party from any
obligations or liabilities set forth in this Agreement
which a) the Parties have expressly agree will survive
or which remain to be performed, or b) which by their
nature tended to be applicable following such expiration
or termination.
22.7 All headings used herein are for index and reference
purposes only, and shall not be given any substantive
effect. This Agreement has been created jointly by the
Parties, and no rule of construction requiring
interpretation against the drafter of this Agreement
shall apply in its interpretation.
22.8 Buyer shall not export any technical data received from
Nortel pursuant to this Agreement, or release any such
technical data with the knowledge or intent that such
technical data will be exported or transmitted to any
country or to foreign nationals of any country, except
in accordance with applicable U.S. law concerning the
exporting of such technical data. Buyer shall obtain all
authorizations from the U.S. government in accordance
with applicable law prior to exporting or transmitting
any such technical data as described above.
22.9 Any changes to this Agreement may only be effected if
agreed upon in writing by duly authorized
representatives of the Parties hereto. No agency,
partnership, joint venture, or other similar business
relationship shall be or is created by this Agreement.
22.10 Nortel will demonstrate that it has normal and customary
insurance coverage in reasonable levels to be agreed by
the Parties.
22.11 This Agreement, including the following Attachments A,
B, C, D, E, F, G, H, I, J, K, L and M, constitutes the
entire agreement of the Parties with respect to the
subject matter hereof.
NORTHERN TELECOM INC. TELIGENT, INC.
By: /s/ J. A. Craig By: /s/ K.G. Pickle
--------------------- ----------------------
(Signature) (Signature)
Name: J.A. Craig Name: K.G. Pickle
------------------- --------------------
(print) (print)
Title: President Title: President
------------------ -------------------
Date: 12/11/97 Date: 12/11/97
------------------ -------------------
ATTACHMENT A
------------
DEFINITIONS
-----------
As used in the Agreement (as defined below), the following
initially capitalized terms shall have the following meanings:
"Adjunct Deliverables" shall be as defined in Section 2.1.2.
"Affiliate" shall mean Nortel's parent corporation,
Northern Telecom Limited and any corporation controlled directly
or indirectly by Northern Telecom Limited through the ownership
or control of shares or other securities in such corporation.
"Attachments" shall mean Attachments A, B, C, D, E, F, G,
H, I, J, K, L and M attached hereto, and any additional
Attachments which Nortel and Buyer subsequently agree in writing
shall be incorporated into, and made a part of the Agreement by
reference.
"Agreement" shall mean the Agreement to which this
Attachment is attached.
"Buyer" shall mean Teligent and any Strategic Partner
purchasing Core Deliverables hereunder.
"Confidential Information" shall be defined as in the
Nondisclosure Agreement, set forth in Attachment M.
"Core Deliverables" shall be as defined in Section 2.1.1.
"Critical Event" shall mean [redacted]
"Deliverables" shall collectively mean Core Deliverables
and Adjunct Deliverables.
"Documentation" shall mean the documents which Nortel
generally makes available to its customers containing
descriptive, operating, installation, engineering and
maintenance information for Core Deliverables, including
Specifications, as such documents may be amended from time to
time.
"Equipment" shall mean the hardware listed or otherwise
identified in, or pursuant to, Attachment G.
"Extension" shall mean Core Deliverables which are
engineered by Nortel and installed and which are added to an
Initial System after the Turnover of the Initial System.
"Finance Agreement" shall mean the Agreement to be entered
into between Nortel and Teligent under which Nortel shall
provide financing for the Deliverables.
"First Commercial System" shall mean the System installed
in the first city or metropolitan that becomes ready for
commercial service and consists of the following equipment:
[redacted], as more clearly defined in Attachment G.
"First Soak Period" shall mean [redacted]
"Hazardous Materials" shall mean any pollutants or
dangerous, toxic or hazardous substances (including, without
limitation, asbestos) as defined in, or pursuant to, the OSHA
Hazard Communication Standard (29 CFR Part 1910, Subpart Z), the
Resource Conservation and Recovery Act of 1976 (42 USC Section
6901, et seq.), the Toxic Substances Control Act (15 USC Section
2601, et seq.), the Comprehensive Environmental Response
Compensation and Liability Act (42 USC Section 9601, et seq.),
and any other federal, state or local environmental law,
ordinance, rule or regulation.
"Merchandise" shall mean any Hardware or other parts or
components which are not ordered as part of a System and with
respect to which no engineering, installation or other Services
are provided by Nortel.
"Node" shall mean the Teligent Node Models identified in
Attachment G.
"OEM Equipment" shall mean any non-Nortel branded products,
but not including Radio Products.
"Order" shall mean a written purchase order issued by Buyer
to Nortel. Each Order shall specify on the face of the Order
the types and quantities of Core Deliverables and/or Services to
be furnished by Nortel pursuant to the Order, the applicable
prices, charges and/or fees with respect to such Core
Deliverables and/or Services, Buyer's facility to which the Core
Deliverables are to be delivered, the delivery and/or completion
schedule, and any other information which may be required to be
included in an Order in accordance with the provisions of this
Agreement.
"Parties" shall mean Teligent, Inc. and Nortel.
"Post Termination Purchases" shall mean those purchases
described in Section 4.2.1.
"Preferred Supplier Status" shall be as defined in Section
19.1.
"Punch List" shall be as defined in Section 9.1.7
"Radio Products" shall those products identified as radio
products in Attachment G and supplied by a Teligent-Approved
Radio Vendor.
"Services" shall mean all engineering, installation and
integration, training and testing and other services listed or
otherwise identified in, or pursuant to this Agreement which may
be purchased from or provided by Nortel and which are associated
with the Core Deliverables.
"Software" shall mean (a) programs in machine-readable code
or firmware which (i) are owned by, or licensed to, Nortel or
any of its Affiliates, (ii) reside in Equipment memories, tapes,
disks or other media, and (iii) provide basic logic operating
instructions and user-related application instructions, and (b)
Documentation associated with any such programs which may be
furnished by Nortel to Buyer from time to time.
"Specifications" shall mean, with respect to any Core
Deliverables, the specifications identified in Attachment L.
Nortel shall have the right at its sole discretion to modify,
change or amend such specifications at any time, provided that
the capacity and parameter warranties are not degraded, the
provisions of Section 9.4 are retained, and the ATPs are not
modified, without Teligent's prior approval.
"Strategic Partner" shall mean any company designated by
Teligent through a formal Strategic Partnership Arrangement as
set forth in Section 1.4.2.
"Strategic Partnership Arrangement" shall mean any of the
conditions set forth in Section 1.4.2.
"Subsequent System" shall mean the System installed in any
new city or market, as may be configured by Buyer for that city
or market, usually consisting of [redacted]. More than one (1)
Subsequent Initial System may be installed in a given city or
market.
"Subsequent System Soak Period" shall mean a period of
[redacted] consecutive operational days without a Critical Event
due to Core Deliverables (but not due to Teligent's or a third
party's error) must be demonstrated in a Subsequent System.
"System" shall mean the First Commercial System and any
Subsequent System.
"Teligent Approved Radio Vendor" [redacted]
"Turnover" shall mean [redacted]
"Third Party Software Vendor" shall mean any supplier of
programs contained in the Software which is not an Affiliate of
Nortel.
ATTACHMENT B
------------
SOFTWARE LICENSE
----------------
1. Buyer acknowledges that the Software may contain
programs which have been supplied by, and are
proprietary to, Third Party Software Vendors. In
addition to the terms and conditions herein, Buyer
shall abide by any additional terms and conditions
provided by Nortel to Buyer with respect to any
Software provided by any Third Party Software Vendor.
2. Upon Buyer's payment to Nortel of the applicable fees
with respect to any Software furnished to Buyer
pursuant to this Agreement, Buyer shall be granted a
personal, non-exclusive, paid-up license to use the
version of the Software furnished to Buyer only in
conjunction with Buyer's use of the Equipment with
respect to which such Software was furnished for the
life of that Equipment as it may be repaired or
modified. Buyer shall be granted no title or ownership
rights to the Software, which rights shall remain in
Nortel or its suppliers.
3. As a condition precedent to this license and to the
supply of Software by Nortel pursuant to the
Agreement, Nortel requires Buyer to give proper
assurances to Nortel for the protection of the
Software. Accordingly, all Software supplied by
Nortel under or in implementation of the Agreement
shall be treated by Buyer as the exclusive property,
and as proprietary and a TRADE SECRET, of Nortel
and/or its suppliers, as appropriate, and Buyer shall:
a) hold the Software, including, without limitation,
any methods or concepts utilized therein in confidence
for the benefit of Nortel and/or its suppliers, as
appropriate; b) not provide or make the Software
available to any person except to its employees on a
'need to know' basis; c) not reproduce, copy, or
modify the Software in whole or in part except as
authorized by Nortel; d) not attempt to decompile,
reverse engineer, disassemble, reverse translate, or
in any other manner decode the Software; e) issue
adequate instructions to all persons, and take all
actions reasonably necessary to satisfy Buyer's
obligations under this license; and f) forthwith
return to Nortel, or with Nortel's consent destroy,
any magnetic tape, disc, semiconductor device or other
memory device or system and/or Documentation or other
material, including, but not limited to all printed
material furnished by Nortel to Buyer which shall be
replaced, modified or updated. The foregoing
restrictions shall not apply to the maintenance of the
Software by Teligent when Nortel no longer offers
support for such Software or any update thereto.
4. The obligations of Buyer hereunder shall not extend to
any information or data relating to the Software which
is now available to the general public or becomes
available by reason of acts or failures to act not
attributable to Buyer.
5. Buyer shall not assign this license or sublicense any
rights herein granted to any other party without
Nortel's prior written consent.
6. Buyer shall indemnify and hold Nortel and its
suppliers, as appropriate, harmless from any loss or
damage resulting from a breach of this Attachment B.
The obligations of Buyer under this Attachment B shall
survive the termination of the Agreement and shall
continue if the Software is removed from service.
ATTACHMENT C
------------
FAULT CLASSIFICATIONS
---------------------
As different types of problems require different levels of
reaction, a Nortel Priority Classification system is set up to
establish a relationship between the reported problems and appropriate
level of reaction and resolution. The Priority System is based upon
problem's direct or potential effect upon subscriber service. Each
reported problem is assigned priority rating accordingly.
The Priority System has five levels:
E1 Emergency: Severe Degradation or Outage
E2 Emergency: Potential Degradation or Outage
S1 Non-Emergency: Service-Affecting Problem
S2 Non-Emergency: Intermittently Service Affecting
NS Non-Service Affecting Problem
The resolution objective for E1 or E2 Emergency classification is
immediate and continuous assistance until the service level is
restored to pre-incident operation. For assistance in such E1 or E2
Emergency, please call [redacted]. The resolution objective for
non-emergency condition is to provide a status response in [redacted]
and solution to the problem in [redacted] for S1 Classification
or [redacted] for S2. The resolution objective for non-service affecting
condition is to provide a status response in [redacted] and a fix, if
applicable, will be scheduled for future standard hardware, software or
Documentation update or revision.
In the event that Nortel believes that other actions may be more
economically or strategically beneficial to the Buyer, Nortel may
recommend actions different from those described. In such case, the
Buyer will not unreasonably withhold its consent to such alternative
actions.
The following is a detailed description of priority ratings:
E1 - Emergency: Severe Degradation or Outage
i) System ceased call processing
ii) [redacted] or more subscribers out of service;
iii) [redacted] or more trunk circuits out of service;
E2 - Emergency: Potential Degradation or Outage
i) [redacted]
ii) [redacted]
S1 - Service Affecting Problem
i) Problems directly and continuously affecting
subscriber service, not specified under E1 or E2;
ii) Problems that will seriously impair service after
in-service date;
S2 - Intermittently Service Affecting Problem
i) Software and hardware faults that only
intermittently affect service;
ii) Documentation errors that result service
impairments;
iii) Problems where operating company can show
significant impact upon plant and traffic operations
NS - Non-Service Affecting Problem
i) Service analysis, operational measurements, or
system-related Documentation inaccuracies that do
not affect call processing or revenue collection
capabilities;
ii) Non-service affecting software inconsistencies;
iii) Loss of test facilities for which manual procedures
or alternate test equipment can be readily
substituted.
ATTACHMENT D
------------
CORE DELIVERABLES SUPPORT
-------------------------
1. WARRANTY SUPPORT
Except for the items provided at no additional costs
specified in Section 19, the following terms apply to
Warranty Support:
1.1 Remote (off-site) Assistance
Technical support offered at no charge to Buyer during
the Warranty Period includes Remote (off-site)
assistance to Buyer's trained personnel in resolving
Core Deliverables operational and compatibility
problems.
Remote (off-site) assistance consists of one or more
of the following:
a) Over-the-phone consultations and guidance at
1-800-275-8726.
b) Interrogation and analysis of systems over
data lines from Nortel's service facility.
(**Please note: If system access over data
lines is not provided by the customer,
regardless of the problem cause, support
charges may apply.)
c) Other activity directly related to problem
resolution, where Nortel travel is not
involved.
If after investigation, Nortel determines that the
problem was caused by equipment, software, or
conditions not attributable to Nortel then such
technical assistance shall be billable to Buyer in
accordance with Nortel's current rates and procedures
as set forth in Section 3 of this Attachment.
Calls to Nortel's service facilities during Nortel's
off-hours shall be limited to Core Deliverable
failures directly affecting service that Buyer could
not resolve by following standard troubleshooting
procedures, covered by NTPs.
1.2 Local (on-site) Assistance
Local (on-site) assistance by Nortel field engineers
is also available as part of the warranty support. To
qualify for Local (on-site) assistance without charge,
the following efforts must have been exhausted prior
to the field trip:
a) Buyer has determined that the Core
Deliverable is the source of the problem; and
b) Buyer was unable to resolve the problem by
using standard troubleshooting procedures
covered by applicable NTP's; and
c) Nortel 's engineer could not resolve the
problem remotely with full cooperation of
Buyer's personnel.
Local on-site assistance, provided at Buyer's request,
that does not meet above requirements is billable in
accordance with Nortel's current rates and procedures
as set forth in Section 3 of this Attachment. If
after investigation, Nortel determines that the need
for Local (on-site) assistance was not caused by the
Equipment, Software nor conditions attributable to
Nortel then, such technical assistance and associated
travel and living expenses shall be billable to Buyer
at Nortel's current rates and procedures as set forth
in Section 3 of this Attachment.
The following types of assistance fall outside the
scope of warranty support and are billable;
a. Local (on-site) assistance with system
verification and pre-service testing, where
required by the Buyer.
b. Local (on-site) assistance for Software upgrades,
where required by the Buyer.
c. Analysis to determine origins of the fault and
resolution of technical problems associated with
equipment or software not furnished by Nortel.
d. Non-emergency calls for technical assistance
during Service Center off-hours.
e. Consultation in excess of [redacted] on matters
that are adequately covered by standard
Documentation and/or for which training programs
are available, including Software upgrades.
2. OUT-OF-WARRANTY SUPPORT
Technical assistance as set forth in Section 1 of this
Attachment is available for out-of-warranty Equipment and
is billable at the current rates and procedures as set
forth in Section 1 of this Attachment.
3. TECHNICAL SERVICE RATES
All billable technical services are billed at hourly rate
plus expenses as defined herein.
Billable expenses include coach air travel, economy car
rental and mutually-agreed per diem meals and lodging costs
for Nortel's service representatives, if the job site is
more than [redacted] from the representative's normal place
of employment, and long distance telephone and data link
charges and other costs which are directly related to the
service effort. These expenses shall be augmented by
[redacted] handling and administration charge.
For Local (on-site) assistance service, both work and
travel time to the site are included and charged as
applicable. Minimum charge for Local (on-site) assistance
service is [redacted] plus expenses.
Minimum charge for Remote assistance service shall be one
(1) hour, billable according to the rate structure listed
below.
The following standard rates are in effect for these
procedures:
i) REGULAR WORKING HOURS (STD)- [redacted]
ii) OVERTIME 1 RATE (OT1) [redacted]
iii) OVERTIME 2 RATE (OT2)- [redacted]
Overtime may only be worked with Teligent's express
approval. Work required during Overtime periods
necessitated due to Nortel's or its contractor's acts,
errors or omissions, shall be billed only at Standard
rates.
Buyer's Local Time 0000 0800 16:30 2400
Midnight 8:00 a.m. 4:30 p.m. Midnight
MON-FRI OT1 STD OT1
SAT OT1 OT1
SUN/HOLIDAYS OT2
NOTE: Nortel observed holidays are: New Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and the day after, and Christmas week.
The telephone number for the Broadband Technical Support
Group is as follows:
Non-Emergency Support: 1-800-ASK TRAN(1-800-275-8726)
Emergency Support: 1-800-ASK ETAS (1-800-275-3827)
ATTACHMENT E
ADJUNCT DELIVERABLES
Adjunct Deliverables - Section 2.1.2
AC and DC power systems, including rectifiers and batteries
Grounding Systems
Antennas and Coax Cabling Systems
TCO Cabling & Cable Termination Equipment
HVAC Equipment
Stand-By Generators
Fire Protection Systems
Alarm Reporting & Monitoring Systems
Network Management Systems
Provisioning Systems
Billing Systems
Customer Care Systems
Fraud Management Systems
Voice Mail Equipment
Signal Transfer Point (STP) Equipment
Service Control Point (SCP) Equipment
AIN Platform Equipment & Software
Synchronization Equipment
DACS Equipment
Digital cross-connect (DSX) Equipment
Fiber cross-connect Equipment
Multiplex Equipment
Channel Bank Equipment
IP Network Platform Equipment
WAN Network Equipment
Point-to-Point Microwave Equipment
ATTACHMENT F
Future Deliverables - Section 4.4
Preamble: A number of questions have been raised on the measurement
methodology of many of the points below, and Nortel compliance will depend
on the determination of specific test plans which need to be agreed upon.
[redacted] renamed Proximity B product with availability as follows:
24B1.0 Gate 1B -[redacted]
24B2.0 General Availability -[redacted]
24B3.0 General Availability -[redacted]
The failure of Nortel to deliver the features described below by the date
indicated will result in a discount being applied as described in Section
4.4:
Description of Future Deliverable Discount Date
1
2 [redacted]
3
4
5
6
7
8
ATTACHMENT G
PRICING
The following models are as revised by Nortel through December
11, 1997.
Merchandise pricing is as presented by Nortel through November
25, 1997.
TCO component pricing is to be supplied, reflecting net prices.
Section 1: High Level Model Overview
-------------------------------------
[redacted]
In order to simplify ordering, Teligent equipment has been partitioned into
the following stock models for point to multi-point wireless networks. Each
model is described in detail in the following sections, pricing is at the
Teligent base level and does not include applicable volume discounts.
Additional models for point-point wireless networks are provided in
Appendix 1.
Services Matrix
- ---------------
Program Management I I I O
Engineering, Installation & Testing I I O O
Power plant (sufficient to Nortel equipment I I I N/A
On-line technical assistance I I I O
Delivery I N N N/A
I = Included, O = Optional, N = Not Included, N/A = Not Applicable
Items Excluded from All Models (except where otherwise stated)
- -------------------------------------------------------------
- Ancillary equipment including but not limited to HVAC, DACS/DSX,
cable racks
- Applicable taxes
Section 2: Teligent Central Office Models
-----------------------------------------
TCO Base Model: [redacted]
- --------------
A TCO start-up configuration to serve[redacted] voice lines assuming a
[redacted] concentration level. This model includes all necessary
DMS-500, AccessNode HDT and Power equipment:
- One (1) DMS-500 Switch
Including:
[redacted]
[redacted]
[redacted]
TCO Voice Expansion Model
- -------------------------
[redacted] (when ordered and installed at the same time as TCO base model)
[redacted](when ordered and installed after the TCO base model)
-
This increases the TCO capability by [redacted] voice lines
assuming a [redacted] concentration level. This model includes all
necessary DMS-500, AccessNode HDT Power equipment. Since Passport
equipment also serves data requirements it is provided in a separate
model.
DMS-500 Switch Equipment
Including:
[redacted]
TCO Trunk Expansion Model
- -------------------------
[redacted] when ordered and installed at the same time as TCO base
model)
[redacted] when ordered and installed after the TCO base model)
This increases the TCO capability by [redacted]. This model includes
the following:
[redacted]
TCO Passport Model (Phase 1): [redacted]
- ---------------------------
This model provides TCO Passport capability to serve voice and data lines by
[redacted] and includes the following:
[redacted]
Passport Spares Model (Phase 1): [redacted]
- ---------------------
Recommended spares kit (per TCO) contains the following:
[redacted]
TCO Passport Model (Phase 2): [redacted]
- ----------------------------
This model provides TCO passport capability to serve voice and data lines by
[redacted] using new development 2 port channelized DS3 card and includes
the following:
[redacted]
Passport Spares Model (Phase 2): [redacted]
- ------------------------------
spares kit (per TCO) contains the following:
[redacted]
TCO Passport Model (Phase 1): DS-3 to OC-3 Upgrade: [redacted]
- ---------------------------------------------------
[redacted]
Section 3: Teligent Node Models
- -------------------------------
TN's are modeled in increments of [redacted]. The table below shows the
number of components required for each size of TN in terms of DS-1 capacity.
All models contain an MDS50 Power system equipped with 1 HELIOS 15 Amp
rectifier and [redacted] battery reserve (for full configured system -
820 w).
The provisioning rules are slightly different between Release 1 of the radio
and Release 2 (refer to the technical proposal) - there is no difference in
pricing between the two releases until the base station reaches a capacity of
[redacted].
Release 1 model
- --------------
BRU per Sector
- --------------
BSS
BSU
BMU
BRU
RSM [redacted]
Cable
Mounting
Bay
Power
Battery
Doc
---------
TN Price
BW in OS-1
---------
Release 2 model
- --------------
BRU per Sector
- --------------
BSS
BSU
BMU
BRU
RSM [redacted]
Cable
Mounting
Bay
Power
Battery
Doc
---------
TN Price
BW in OS-1
---------
Based on the final design, engineering configuration and optimization, the
Parties may agree that fewer component quantities may be required in the
Release 2 Models, commensurate with mutually agreed-upon price
reductions.
TN Spares Kit: [redacted]
- ------------------------
spares kit contains the following:
[redacted]
TN Options
- ----------
The following items provide options to the basic package. All prices are
incremental to the basic package.
TN Cabinet: [redacted]
- ----------------------
- 5" [redacted] Cabinet Packaging
TN OC-3 Interface: [redacted]
- ----------------------------
[redacted]
Section 4: Teligent Access Site Models
- --------------------------------------
[redacted] TAS Model: [redacted]
- --------------------
Installation: [redacted]
A start-up TAS configuration wired to serve [redacted] with rectifiers and
batteries sufficient for [redacted]. This model includes all necessary
AccessNode Express, Proximity-B Radio and Power equipment including:
[redacted]
96-Line TAS Model: [redacted]
- ------------------
Installation: [redacted] *********************
A start-up TAS configuration wired to serve * supplemental *
[redacted] lines. This model includes * exhibit - Diagram*
all necessary AccessNode Express, * filed in paper *
Proximity-B Radio and Power equipment * format on Form SE*
including: * *
* *
[redacted] * *
*********************
TAS POTS Line Cards:
- --------------------
Each line card serves [redacted].
[redacted]
Upgrades
- --------
The following items provide upgrades to
the basic package. All prices are
incremental to the basic package and
assume purchase and installation with
the basic package.
[redacted]
Appendix 1: Supplementary Models for Point-to-Point
---------------------------------------------------
Wireless Applications
---------------------
The following stock models add point to point wireless capability
to the models included in the previous sections.
[redacted]
Schedule and shipments:
- ----------------------
First Shipments of Point to Point systems are scheduled to begin on
[redacted]. Nortel understands Teligent's desire to ship in January and
will make every effort in conjunction with Teligent to improve upon the
existing timeline.
TCO Base M13 Model: [redacted]
- ------------------
Installation/SLAT:[redacted] (when installed at the same time as TCO
base model)
Optional Installation/SLAT: [redacted] (when installed after TCO
base model)
A start-up package containing [redacted] to terminate point-
point TN traffic at the TCO.
[redacted]
TCO M13 Expansion Model: [redacted]
- -----------------------
Installation/SLAT: [redacted] installed at the same time as M13
base model)
Optional Installation/SLAT: [redacted] (when installed after the
M13 base model)[redacted] to terminate TN traffic at TCO.
[redacted]
TN Model (Pt-Pt) 8 DS1:[redacted] ( First availability [redacted])
- ----------------------
TN Spares Kit 8 DS1: [redacted] First availability [redacted])
- -------------------
Optional SLAT (excluding installation and civil works):
[redacted] TN equipped with 4 DIU
Optional RF Planning: [redacted]/ link
Network management return path: $TBD
[redacted]
The TN cabinet includes:
[redacted]
TN Spares Kit 8 DS1: [redacted]
-------------------
Recommended spares kit per TN contains the following:
[redacted]
Optional RF Planning: [redacted]
--------------------
RF planning include the following activities that may either be
performed by Nortel or by a subcontractor under Nortel supervision.
[redacted]
Point to Point TAS Models
-------------------------
[redacted]
[redacted] Cabinet Configuration (Preliminary)
[redacted]
[redacted]: [redacted]( First availability [redacted])
Optional Installation/SLAT (excluding civil works and
travel): [redacted]
A start-up TAS configuration for a point to point wireless
application wired to serve [redacted] with rectifiers and
batteries sufficient for [redacted] (excluding line cards).
This model includes all necessary AccessNode Express,
Innova Radio and Power equipment including:
[redacted]
[redacted]: (First availability [redacted])
- ----------
Optional Installation/SLAT (excluding civil works and travel): [redacted]
A start-up TAS configuration for a point to point wireless
application wired to serve [redacted] excluding line cards).
This model includes all necessary AccessNode Express, Innova
Radio and Power equipment including:
[redacted]
TAS Line Cards:
- --------------
Each line card serves one subscriber line.
- POTS Line Card: [redacted]
Supports loop start signaling and CLASS service.
- 2W Service Adaptive Station Line Card: [redacted]
supports special 2-wire office services such as ISDN, Meridian
Business Set (i.e. P-Phone) and CO/DOD PBX trunks.
- 2W Service Adaptive Office Line Card: [redacted]
supports special 2-wire office services such as DID PBX
Trunks and FXO lines.
Upgrades & Options
- ------------------
The following items provide upgrades to the basic package.
All prices are incremental to the basic package and assume
purchase and installation with the basic package.
- - Duplicated Common Equipment: [redacted]
reduces the impact of equipment failures to one line.
- Cable Package: [redacted] Includes Connectors)
500 feet coax cables reel Belden type 89913 Plennum,
to connect DIU to RFU.
- - LaMarche 100VA Power Inverter: [redacted]
Provides un-interuptable 120V ac for ancillary equipment.
Section 2 Merchandise and Components
to be completed
The component and merchandise pricing shown is from Nortel's
telefaxes of November 24 and 25, except that TCO component
pricing is to be revised to be net prices, not list prices.
CUSTOMER: Teligent
PROJECT: Merchandise Price List
CONFIGURATION: AccessNode Express
* Prices do not include additional [redacted] contract discount which will be
added at invoicing
PRODUCT PEC CPC UNIT
ITEM DESCRIPTION CODE CODE PRICE
---------------------------------------------------------------------------
#1.0 HOST DIGITAL TERMINAL
HDT EQUIPMENT
7' ABM Bay , No CDS pre-wiring NT4K03BB A0647794 [redacted]
Bottom Plate (Optional) NT4K13AA B0231568 [redacted]
ABM Bay Installation Kit NT4K0120 A0398539 [redacted]
ABM Bay Top Support /
Grounding Material TBD TBD [redacted]
Termination Plug NT7E5072 A0363083 [redacted]
Wrist Strap NPS50332-01L3 A0336175 [redacted]
Control Network Cable (1M) NT7E44JB A0365242 [redacted]
Control Network Cable (5M) NT7E44JC A0365243 [redacted]
Control Network Cable (10M) NT7E44JK A0394840 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#2.0 COMMON EQUIPMENT SHELVES
Access Bandwidth Manager Shelf NT4K10AA B0231565 [redacted]
ABM Label Kit, English NT4K1022 A0397896 [redacted]
ABM Shelf Cover NT4K1033 A0394065 [redacted]
Breaker Interface Panel NT4K14AB B0239825 [redacted]
BIP Label Kit, English NT4K1422 A0397898 [redacted]
Breaker Interface Panel Cover NT4K1490 A0395045 [redacted]
Local Craft Access Panel NT4K16AA B0232290 [redacted]
Cooling Module NT4K17BA A0644781 [redacted]
Cooling Unit Shelf NT4K18BA A0644780 [redacted]
BIP -to- ABM Power Cable NT4K84BA A0375509 [redacted]
Cooling Unit Power Cable NT4K84CB A0398133 [redacted]
Cooling Unit Interface Cable NT4K85JA A0375511 [redacted]
BIP Control Cable NT4K85KA A0375512 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#3.0 OPERATIONS CONTROLLER & S/W
OPC Module with Tape Drive NT7E24BC A0399043 [redacted]
Software Rel. AN14 NT4K90JA A0684788 [redacted]
Fiberworld Blank DAT Tape NT7E24TA A0379851 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#4.0 SOFTWARE CERTIFICATES
AN14 Software Certificate NTG370AH A0679472 [redacted]
SuperNode Integration
AN10/11/12/14 NTG375AD A0627718 [redacted]
Data Direct (TR-303 CSC/DMS-100)
(AN12.31 mini NTG634AA A0663614 [redacted]
X.25 Interface NTG350AA A0405636 [redacted]
TL1 Generic Surveillance OS I/F NTG352AC A0627727 [redacted]
DS1 Protection Switching
(Reqd for HDT) NTG353AA A0405639 [redacted]
DS1 Performance Monitoring NTG620AA A0609080 [redacted]
Multi-Hosting NTG357AB A0410326 [redacted]
Standby OPC NTG372AA A0402363 [redacted]
High Speed Performance Monitor NTG373AB A0608836 [redacted]
Meridian Business Set Feature
Package NTG376AB A0409696 [redacted]
ISDN-U Integration AN10 NTG377AB A0608842 [redacted]
Enhanced Administration AN10 NTG378AD A0627719 [redacted]
Enhanced Maintenance AN10 NTG379AB A0608843 [redacted]
Network View Inventory NTG624AA A0609084 [redacted]
TR-08 Interface NTG625AA A0609085 [redacted]
TL1 Generic Provisioning OS I/F NTG626AC A0627725 [redacted]
CDS S/W RTU NTG368AC A0634208 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#5.0 HDT COMMON EQUIPMENT
Processor Card NT4K52FA A0628692 [redacted]
Maintenance Interface Card NT4K53AC A0619177 [redacted]
Test Access Card NT4K54AA A0370303 [redacted]
Loopback Access Interface Car NT4K55CA A0661614 [redacted]
Transport Interface Card NT4K56AC A0409344 [redacted]
Face Plate 1 Assy, Passive
(Slots 30-45) NT4K5830 A0396781 [redacted]
Face Plate 2 Assy, Passive
(Slots 46-53) NT4K5840 A0396782 [redacted]
Alarm Relay Card NT4K64AA A0389031 [redacted]
TXC Card NT4K75AA A0617179 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#6.0 HDT DS1 INTERFACE
DS1 Protection Bridge NT4K31AA A0389517 [redacted]
DS1 Input NT4K32AA A0389518 [redacted]
DS1 Output NT4K33AA A0389519 [redacted]
DS1 Enhanced VT Mapper NT7E04EA A0652867 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#7.0 HDT TESTING
Integrated Test Bypass Pair Card NTN516AA A0666004 [redacted]
Auxiliary Shelf NTN556AA A0666007 [redacted]
Aux Mounting Bracket NTN55650 A0669059 [redacted]
ITBP HDT Cable NTN558CD A0679757 [redacted]
Power Cable NTN559NA A0689038 [redacted]
Single Shielded Twisted Pair
Cable R0113753 R0113753 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#8.0 HDT EXTERNAL CABLING
Main Power Cable, UL/CSA (35') NT4K84UA A0399780 [redacted]
ABM DS1 Cable (50') NT4K85HH A0401069 [redacted]
9/25-Pin User Interface
Cable (5M) NT7E44EA A0365239 [redacted]
Parallel Telemetry Cable (30M) NT4K85GA A0375504 [redacted]
OPC Cable (Port B) 5M NT7E44RA A0394185 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#9.0 ANX REMOTE WALL/ FLOOR/ BAY MOUNT TERM
Mounting
--------
25" ANX Enclosure NTN473BA A0675628 [redacted]
ANX Enclosure Top Cover NTN47390 A0673315 [redacted]
Universal L-Frame NTN474AA A0651712 [redacted]
Shell Shelf with Installation
Kit NTN550AA A0666006 [redacted]
Aux Mounting Bracket NTN55650 A0669059 [redacted]
7'0" Bay Assembly NT7E70AA A0364959 [redacted]
ABM Bay Top Support / Grounding
Material TBD TBD [redacted]
Air Deflectors - VM NTN55040 A0665980 [redacted]
Air Deflectors - DM NTN55044 A0680159 [redacted]
Air Deflector, Full Width NTN55045 A0680161 [redacted]
Auxiliary Shelf
---------------
Auxiliary Shelf NTN556AA A0666007 [redacted]
Mini-250/48V Power Supply NTN559JA A0680567 [redacted]
Mini-500/48V Power Supply NTN559HA A0680566 [redacted]
Mini-500 48V Rectifier Module NT5C15AA A0638309 [redacted]
Remote Power Cable, 10 ft NTN55645 A0679756 [redacted]
Integrated Test Bypass Pair
(ITBP) Card NTN516AA A0666004 [redacted]
ITBP Intershelf Cable, 6 ft NTN558CA A0673312 [redacted]
ITBP Intershelf Cable, 50 ft NTN558CB A0678054 [redacted]
ITBP Intershelf Cable, 150 ft NTN558CC A0678055 [redacted]
ITBP Intershelf Cable,
18 inches NTN558CF A0687426 [redacted]
Single Shielded Twisted
Pair Cable R0113753 R0113753 [redacted]
Miscellaneous
-------------
PC GUI Software NTN591AA A0684432 [redacted]
ANX Software RTU NTN590AA A0684431 [redacted]
DS1 Cable, 6 pr 26 awg, 50 ft NTN558AA A0673310 [redacted]
DS1 Cable, 6 pr 26 awg, 6 ft NTN558AB A0675633 [redacted]
50-pair VF Cable (10') NTN558DA A0679776 [redacted]
50-pair VF Cable (50') NTN558DB A0679778 [redacted]
50-pair VF Cable (150') NTN558DC A0679779 [redacted]
100-pair VF Cable (10') NTN558EA A0679780 [redacted]
100-pair VF Cable (50') NTN558EB A0679781 [redacted]
100-pair VF Cable (150') NTN558EC A0679782 [redacted]
6' Extension VF Cable NTN558HA A0684697 [redacted]
25-pair VF Cable (50') NTN558HB A0684698 [redacted]
25-pair VF Cable (100') NTN558HC A0684699 [redacted]
Spares
------
Mini-500 48V DC Distribution NT6C34DB A0643608 [redacted]
Mini-500 48V Controller Assy NT6C34CA A0643606 [redacted]
I/O Module for 48L VM NTN555AA A0664182 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#10.0 BATTERY BACKUP OPTION
---------------------
18" ANX Enclosure NTN473AA A0651539 [redacted]
ANX Enclosure Top Cover NTN47390 A0673315 [redacted]
Battery Kit (Cables,
Tray and Bracket) NTN559KA A0680568 [redacted]
Johnson-Controls TEL12-45
Battery A0672263 A0672263 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#11.0 TRANSPORT OPTIONS
-----------------
18" ANX Enclosure NTN473AA A0651539 [redacted]
ANX Enclosure Top Cover NTN47390 A0673315 [redacted]
Westcom T-1 Repeater Shelf
Model 3192 A0368502 A0368502 [redacted]
OC-1 Fiber Shelf [redacted]
Kit, 28 DS1 Test Panel NTN559AA A0675991 [redacted]
Kit, 28 DS1 Test + DSX Field NTN559BA A0675992 [redacted]
Kit, DSX3 Chassis Module
and cable NTN559CA A0678690 [redacted]
Kit, 28 DS1 Wire Wrap Field NTN559DA A0678691 [redacted]
Fiber Splice Tray NTN559EA A0678692 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#12.0 DATA MODULE EQUIPMENT
Common Equipment
----------------
Kit, DM + Common Equipment NTN601AA A0681135 [redacted]
NTN601AA Includes equipment with *
*Data Module Chassis NTN605AA A0675651 [redacted]
Data Module Pwr Supply NTN610AA A0675653 [redacted]
*Data Chassis Power Cable NTN606AA A0675684 [redacted]
Data Module Power Cable (4FT) NTN606BA A0682687 [redacted]
Data Module Power Cable (5FT) NTN606CA A0682688 [redacted]
Interface Card
--------------
*8 T1/E1 IF, 128k NVRAM NTN620AA A0675655 [redacted]
CPU Cards & Firmware
--------------------
*CPU Card XCON (5.x) NTN621AA A0675656 [redacted]
*Firmware, CPU Host Ver.5.0 NTN62141 A0681136 [redacted]
Firmware, CPU Host Ver.5.1 NTN62142 A0684429 [redacted]
TCP/IP/SNMP Telnet/SNMP (s/w) NTN62131 A0682593 [redacted]
WAN Interface Cards and Personality Modules
-------------------------------------------
WAN Card, 1 x T1/E1 NTN622AA A0675657 [redacted]
WAN Card, 2 x T1/E1 NTN622BA A0675659 [redacted]
HDSL Card, 2 x T1/E1 HDSL NTN622CA A0675660 [redacted]
WAN Card Module - DSX/CEPT
Line Interfac NTN624AA A0675661 [redacted]
WAN Card Module - CSU Line
Interface NTN624BA A0675662 [redacted]
WAN Card Module - HDSL Line
Interface NTN624CA A0675663 [redacted]
User Interface Cards
--------------------
E&M/TO Card 2-wire, 8 ports NTN630AA A0675664 [redacted]
E&M/TO Card 4-wire - Extended
Range, 4 p NTN630BA A0675665 [redacted]
HSU Card 2 - port w/ RS-530
(DB25) NTN631AA A0675666 [redacted]
HSU Card 2 - port w/ V.35
(DB25) NTN631BA A0675667 [redacted]
HSU Card 2 - port w/ RS-530/V.35
& RS366 NTN631CA A0675668 [redacted]
HSU Card 4 - port w/ RS-530/V.35
(DB26) NTN631DA A0675669 [redacted]
SRU Card, 10-port NTN632AA A0675670 [redacted]
FRAD Card, 10-port, RS-232,
HDLC and Syn NTN633AA A0675671 [redacted]
OCU-DP Card 10-Port NTN634AA A0675672 [redacted]
DSO-DP Card, 4-ports NTN635AA A0675675 [redacted]
BRI "S/T" Card 8-port, 4-wire NTN636CA A0675678 [redacted]
Single Port Kit v.25 NTU
(20/Pack) NTN654AA A0682591 [redacted]
Installation Kit FOR SERIES
2560 NTU NTN654BA A0683656 [redacted]
Server Cards
------------
ISDN PRI Server, 2 PRI Channels ?
wasn't incl on P NTN640AA A0675679 [redacted]
ACS Card, Frame Relay NTN641AA A0675680 [redacted]
ACS Card, MCC NTN641BA A0675681 [redacted]
ACS Card, ATM DS3 NTN641CA A0675682 [redacted]
ATM Concentrator V1.1 (f/w) NTN64161 A0682597 [redacted]
Frame Relay Server V1.5 (f/w) NTN64141 A0682594 [redacted]
MCC Firmware Ver 1.0 NTN64151 A0682596 [redacted]
MCC Firmware Ver 1.1 NTN64152 A0684430 [redacted]
Other Cards
-----------
Steel Filler Panel NTN611AA A0675652 [redacted]
External Alarms, 4-port,
4 inputs & 4 outputs NTN612AA A0675654 [redacted]
BRI NTU [redacted]
HDSL NTU [redacted]
Cables
------
1 Amp (M) to bare end, 6 ft NTN650AA A0675685 [redacted]
2 Amp (M) to bare end, 25 ft NTN650BA A0675686 [redacted]
RJ-48(M) to DB25(M) VT-100
cable, 15 ft. NTN650CA A0675687 [redacted]
Gndr chgr: DB25/DB25 NTN650DA A0675688 [redacted]
RJ-48 to open end, 10 ft NTN650EA A0675689 [redacted]
DB26(M) to M34(F) Straight-thru,
6-ft NTN651AA A0675690 [redacted]
DB26(M) to M34(M) Straight-thru,
6-ft NTN651BA A0675691 [redacted]
DB26(M) to DB26(F) V.35 ext'n,
25 ft NTN651CA A0675693 [redacted]
DB25(M) to M34(F) Straight-thru
V.35 cab NTN651DA A0675694 [redacted]
DB25(M) to M34(M) Straight-thru
V.35 cab NTN651EA A0675695 [redacted]
DB15(M) to DB25(F) RS366 s
traight-thru, NTN651FA A0675696 [redacted]
RJ48(M) to DB25(F) Straight-thru,
6-ft, NTN652AA A0675697 [redacted]
RJ48(M) to DB25(F) Straight-thru,
6-ft NTN652BA A0675699 [redacted]
RJ48(M) to DB25(M) Straight-thru,
6-ft NTN652CA A0675701 [redacted]
RS530 to V.35 Converter NTN653AA A0675702 [redacted]
RS530 to RS232 Converter NTN653BA A0675703 [redacted]
DB25(M)-to-DB25(M), RS530
Gender Chgr NTN655AA A0721086 [redacted]
HSU-Trunk, DTE NTN656AA A0721087 [redacted]
HSU-Trunk, DCE NTN656BA A0721088 [redacted]
Personality Module 1252 Cable NTN656CA A0721089 [redacted]
---------------------------------------------------------------------------
--------------------------------------------------------------------------
#13.0 VOICE MODULE EQUIPMENT
48 Line Voice Module (VM) NTN551AA A0673309 [redacted]
Common Equipment
----------------
Controller (Processor) NTN510AA A0664179 [redacted]
PSURA (Power Supply/Ring Amp) NTN501AA A0664181 [redacted]
TBF (Talk Battery Filter for 96L) NTN515AA A0666002 [redacted]
ITU (Internal Test Unit) NTN511AA A0664180 [redacted]
Line Cards
----------
Omega 2W Station Line Card NT4K67AC A0407068 [redacted]
Omega 2W Office Line Card NT4K68AA A0367099 [redacted]
Omega 4W Line Card NT4K69AA A0367100 [redacted]
2-Wire Manual Ringdown Line NT4K78AA A0397226 [redacted]
UVG Station Line Card NT4K79AB A0618283 [redacted]
Epsilon II (POTS Only) NTN502AA A0665474 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#14.0 ANX REMOTE TERMINAL, OSP
ANX ModCab
----------
ANX standard OSP (Evergood OSP) NTN570AA A0675994 [redacted]
Johnson-Controls TEL12-45 Battery A0672263 A0672263 [redacted]
Mini-500/48V Power Supply NTN559HA A0680566 [redacted]
Mini-500 48V Rectifier Module NT5C15AA A0638309 [redacted]
Auxiliary Shelf NTN556BA A0678056 [redacted]
Cabinet Mounting
----------------
Anchor Plate Assy Kit NTN57016 A0679771 [redacted]
Shim Kit A0667167 A0667167 [redacted]
Pole Mount Kit A0688549 A0688549 [redacted]
Power Pedestal/Load Box Options
-------------------------------
Power Ped, 100Amp, UL, Hubbell,
Sgl Ph A0659135 A0659135 [redacted]
Power Ped, 100A, UL, Crouse Hds,
Sgl Ph A0659138 A0659138 [redacted]
Power Ped, 100A, CSA, Crouse Hds,
Sgl Ph A0659253 A0659253 [redacted]
Disc Module (Load Box), 100A A0659143 A0659143 [redacted]
Power Ped, 100A, UL, Hubbell,
Sgl Ph w A A0672175 A0672175 [redacted]
Internal ATS Disconnect Upgrade
Kit A0672177 A0672177 [redacted]
Protector Blocks/Modules
------------------------
100-pair HF Prot Block 3M MS2 NT3W30CA B0247186 [redacted]
100-pair HF Prot Block AT&T 710 NT3W30DA B0247187 [redacted]
100-pair VF Prot Block 3M MS2 NT3W30QA B0247511 [redacted]
100-pair VF Prot Block AT&T 710 NT3W30RA B0247512 [redacted]
100-pair VF Prot Block -to-
Reliant BP NT3W30LA B0247507 [redacted]
Binding Post Mounting Bracket P0843862 P0843862 [redacted]
Binding Post Test Probe A0663883 A0663883 [redacted]
Blue Label Binding Post Kit R0117879 R0117879 [redacted]
Green label Binding Post Kit R0117881 R0117881 [redacted]
50-pair Binding Post -to- 3M MS2,
Long NT3W31AA B0247194 [redacted]
50-pair Binding Post -to- 3M MS2,
Short NT3W31NA B0247421 [redacted]
50-pair Binding Post -to- AT&T 710,
Long NT3W31BA B0247201 [redacted]
50-pair Binding Post -to- AT&T 710,
Short NT3W31PA B0247422 [redacted]
Binding Post Test Kit NT3W50AG B0248379 [redacted]
100-pair Prot Block -to- Nortel BIX NT3W30NA B0247509 [redacted]
Nortel BIX Mounting Bracket P0843861 P0843861 [redacted]
Blue Label Nortel BIX Kit P0859944 P0859944 [redacted]
25-pair Nortel BIX Block -to- 3M
MS2 NT3W31GA B0247195 [redacted]
25-pair Nortel BIX Block -to-
AT&T 710 NT3W31HA B0247203 [redacted]
400V 7A Fail Short Gas, Black,
Tin Pins 303-0750 A0312598 [redacted]
300V SS Prot, Black, Gold Pins 303M-11A1G0 A0341959 [redacted]
300V SS Prot, Black, Tin Pins 303M-11A1TO A0341961 [redacted]
300V SS w/Heat Coils Prot, Black,
Tin Pins 303M-12A1TA A0353718 [redacted]
240V SS Prot, Black, Tin Pins 303M-11A1KO A0342431 [redacted]
400V 9A Fail Short Gas, Red,
Tin Pins 303-0970 A0298238 [redacted]
300V SS Prot, Red, Gold Pins 303M-11A3G0 A0341960 [redacted]
300V SS Prot, Red, Tin Pins 303M-11A3TO A0341962 [redacted]
300V SS w/Heat Coils Prot, Red,
Tin Pins 303M-12A3TA A0353719 [redacted]
240V SS Prot, Red, Tin Pins 303M-11A3KO A0342434 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#15.0 ANX-MODCAB TRANSPORT OPTIONS
T1/HDSL Repeaters
-----------------
Westcom Repeater Kit w/ Cables NTN575BA A0679784 [redacted]
Fuse & Alarm Repeater Module 3192-9F A0368064 [redacted]
Power Office Repeater Module NPS5097702L1 A0368063 [redacted]
Cut-Thru Repeater Module 3192-9C A0368065 [redacted]
Bridge Office Repeater Module 3192-9B A0368066 [redacted]
Remote Testing Adapters
-----------------------
ITBP Adapter Kit NTN576AA A0679790 [redacted]
4Tel RMU Wiring harness kit NTN576BA A0679791 [redacted]
---------------------------------------------------------------------------
---------------------------------------------------------------------------
#16.0 DOCUMENTATION
AN14 NTP'S on Paper NT4K00GB A0688333 [redacted]
AN14 NTP's on CD-ROM NT4K00GP A0685487 [redacted]
AN14 Quick Reference Guide NT4K00JG A0688808 [redacted]
AN14 Planning Guide NTR410GA A0681055 [redacted]
ANX Data Module Users Guide NTN680AA A0684433 [redacted]
ABM Bay Installation Guide P0833108 P0833108 [redacted]
ANX Maintenance Guide P0873660 P0873660 [redacted]
ANX Ordering Guide P0873662 P0873662 [redacted]
PC-GUI Users Guide P0873663 P0873663 [redacted]
ANX-ModCab Installation Guide P0871629 P0871629 [redacted]
ANX VM Quick Ref Guide P0876010 P0876010 [redacted]
ANX Wall Mt Quick Ref Guide P0876011 P0876011 [redacted]
ANX Data Module Quick Ref Guide P0875696 P0875696 [redacted]
---------------------------------------------------------------------------
NORTEL MAGELLAN
---------------
North American ($US) Prices
- --------------------------------------------------------------
HARDWARE North American
Unit Price ($US)
- --------------------------------------------------------------
Packages (Model 160):
- --------------------------------------------------------------
- --------------------------------------------------------------
AC Seismic Cabinet Package QMY733B [redacted]
DC Seismic Cabinet Package QMY734B [redacted]
Seismic Cabinet NTFN23XX [redacted]
Anchoring Kit QMY709X [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Passport Shelf - AC Power (16 slot) NTBP05XX [redacted]
Passport Shelf - DC Power (16 slot) NTBP64XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Packages (Model 50):
- -------------------
AC Rack Mount Package QMY725X [redacted]
AC Stand-alone Package QMY726X [redacted]
AC Stand-alone Package with Covers QMY727X [redacted]
DC Rack Mount Package QMY728X [redacted]
DC Standalone Package QMY729X [redacted]
DC Standalone Package with Covers QMY730X [redacted]
Model 50 Shelf Assembly NTEP39XX [redacted]
Left Bus Terminator Assembly NTEP05XX [redacted]
Shelf Assembly with Cooling Unit Only NTEP06XX [redacted]
Right Bus Terminator NTBP10XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Packages (Model 50 with CFP1 Base Package Types):
- ------------------------------------------------
AC Rack Mount Package (with CFP1) QMY731X [redacted]
DC Rack Mount Package (with CFP1) QMY732X [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Packages (Model 30 with CFP1 Base Package Types):
- ------------------------------------------------
Passport Model 30 Base Package
(with CFP1) QMY435X [redacted]
Passport Model 30 N. American Voice Package
(with CFP1) QMY436X [redacted]
Passport Model 30 European Voice Package
(with CFP1) QMY437X [redacted]
Model 30 Shelf Assembly NTHQ01X [redacted]
Desk Top Kit NTHQ05XX [redacted]
Vertical Mount Kit NTHQ08XX [redacted]
Rack Mount Kit NTHQ04XX [redacted]
Rear Fanout Mount Kit NTHQ09XX [redacted]
Cable Management Unit NTHQ10XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
FPs and Interfaces (Model 160, Model 50 and Model 30)
- -----------------------------------------------------
Control Processor (Model 160 and
Model 50) NTBP12XX [redacted]
Control Function Processor (CFP1,
for Model 50 and Model 30) NTFP61XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Eight-port V.35 FP,16M NTFN46XX [redacted]
Eight-port V.35 FP,32M NTFN73XX [redacted]
Eight-port V.11 FP,16M NTFN45XX [redacted]
Eight-port V.11 FP,32M NTFN49XX [redacted]
Four-port DS1 FP, 16M NTFN47XX [redacted]
Four-port E1 FP, 16M NTFN48XX [redacted]
Four-port Channelized DS1 FP 16M NTFN52XX [redacted]
Four-port Channelized DS1 FP 32M NTFL04XX [redacted]
Four-port Channelized E1 FP 16M NTFN57XX [redacted]
Four-port Channelized E1 FP 32M NTFK01XX [redacted]
Eight-port DS1 Unch. FP, 16M NTFN56XX [redacted]
One-port DS3 FP16M NTFN71XX [redacted]
One-port DS3 FP32M NTFN50XX [redacted]
One-port E3 FP,16M NTFN51XX [redacted]
One-port HSSI FP,16M NTFN58AA [redacted]
One-port DS3 Channelized, 32M FP NTFP67XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Three-port DS1 ATM FP NTFP30XX [redacted]
Three-port E1 ATM FP NTFP32XX [redacted]
Four-port DS1 AAL1 CES FP NTFP80XX [redacted]
Four-port E1 AAL1 CES FP NTFP82XX [redacted]
Eight-port DS1 ATM UNI/IMA FP NTFN14XX [redacted]
Eight-port E1 ATM UNI/IMA FP NTFN16XX [redacted]
Three-port E3 ATM FP NTFP17XX [redacted]
Three-port DS3 ATM FP NTFP18XX [redacted]
Three-port OC3/STM-1 ATM Multimode FP NTFP16X [redacted]
Three-port OC3/STM-1 ATM Singlemode FP NTFP38XX [redacted]
Two-port 6 Mbps ATM FP NTFP58XX [redacted]
Four-port AAL1 FP NTFP80XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Four-port Token Ring FP,16M NTFN42XX [redacted]
Six-port Ethernet FP,16M NTFN59XX [redacted]
ILS Forwarder FP NTFN18XX [redacted]
One-port FDDI Multimode FP,16M NTFN61XX [redacted]
One-port FDDI Singlemode FP,16M NTFN60XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
One-port TTC2M Voice FP NTBP96XX [redacted]
One-port DS1 Voice FP NTFP41XX [redacted]
One-port E1 Voice FP NTFP43XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Blank Function Processor Face Plate
(PP160 and PP50) NTBP23XX [redacted]
Blank Power Converter Face Plate
(PP160) NTBP51XX [redacted]
Blank Power Converter Face Plate (PP50)NTEP41XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Power Supply
- ------------
AC Power Converter (Model 160) NTBP09XX [redacted]
DC Power Converter (Model 160) NTBP52XX [redacted]
AC Power Converter (Model 50) NTEP26XX [redacted]
DC Power Converter (Model 50) NTEP27XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Power Cords (Model 160 & 50)
- ---------------------------
AC Power Cord - N.A., Thailand, Korea,
aiwan and CALA (excl. Argentina) NTFP83XX [redacted]
AC Power Cord - Japan NTFP84XX [redacted]
AC Power Cord - U.K., Ireland, and
Hong Kong NTFP85XX [redacted]
AC Power Cord - Continental Europe and
Indonesia NTFP86XX [redacted]
AC Power Cord - Australia, New Zealand,
China, and Argentina NTFP87XX [redacted]
AC Power Cord - Switzerland NTFP88XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Seismic Cabinet Components
- --------------------------
Configured Seismic Cabinet Assembly
(AC Power) NTFN26XX [redacted]
Configured Seismic Cabinet Assembly
(DC Power) NTFN32XX [redacted]
Seismic Cabinet NTFN23XX [redacted]
Seismic Cabinet Mounting Rail Kit NTFN36XX [redacted]
Seismic Cabinet Anchoring Kit NTFN37XX [redacted]
Seismic Shelf Mounting Collar Kit NTFN38XX [redacted]
Door Alarm Cable NTBP42XX [redacted]
External Alarm Board NTBP69XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cabinet Components (Model 50)
- -----------------------------
Front/Rear Cover Kit NTEP19XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cooling Unit Assembly (Model 160)
- ---------------------------------
Cooling Unit NTBP07XX [redacted]
Air FilterNTBP0702[redacted]
Cooling Unit Drawer NTBP0701 [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cooling Components (Model 50)
- -----------------------------
Air Filter Replacement Pad A0626924 [redacted]
Cooling Unit Door Assembly NTEP13XX [redacted]
Cooling Unit Assembly NTEP14XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Termination Panels (Model 160 and Model 50)
- --------------------------------------------
V.35 Termination Panel (2 units high) NTBP53XX [redacted]
DS3/E3 Termination Panel (1 unit high) NTBP99AA [redacted]
V.35 Termination Panel (1 units high) NTFP08AA [redacted]
V.11 Termination Panel (1 units high) NTFP09AA [redacted]
DS1/E1 Balanced Termination Panel
(1 units high) NTFP10AA [redacted]
E1 Unbalanced Termination Panel
(1 units high) NTFP11AA [redacted]
Ethernet Fanout Panel (Passport 160) NTFP23XX [redacted]
DS3/E3 ATM Termination Panel
(Passport 160) NTFP99AA [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Termination Panels (Model 50 only)
- ----------------------------------
Integrated V.35 Termination Panel NTEP21XX [redacted]
Integrated V.11 Termination Panel NTEP22XX [redacted]
Integrated DS1/E1 Balanced Termination
Panel NTEP23XX [redacted]
Integrated E1 Unbalanced Termination
Panel NTEP24XX [redacted]
Integrated DS3/E3 Balanced Termination
Panel NTEP37XX [redacted]
Integrated Ethernet Fanout Panel NTEP42XX [redacted]
Integrated FDDI Fanout Panel NTEP46XX [redacted]
DS3/E3 ATM Termination Panel
(Passport 50) NTEP53AA [redacted]
CFP1 V.35 Termination Panel NTFN06XX [redacted]
CFP1 V.11 Termination Panel NTFN05XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cable Management Unit (Model 160) NTBP08XX [redacted]
Cable Management Unit (Model 30) NTBP10XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cables (Models 160, 50 and 30)
- -----------------------------
Passport to DPN Interconnect Cable
(5M) NTFP21AA [redacted]
Passport to DPN Interconnect Cable
(10M) NTFP21AB [redacted]
DCE V.24 Operator Cable NTBP25XX [redacted]
DS1 Termination Panel Cable (3M) NTBP27AA [redacted]
DS1 Termination Panel Cable (15M) NTBP27AB [redacted]
E1 Termination Panel Cable (3M) NTBP28AA [redacted]
E1 Termination Panel Cable (15M) NTBP28AB [redacted]
V.35/V.11 Termination Panel Cable (3M) NTBP29CA [redacted]
V.35/V.11 Termination Panel Cable
(10M) NTBP29CB [redacted]
V.35/V.11 Termination Panel Cable
(15M) NTBP29CC [redacted]
Grounding Cable NTBP63XX [redacted]
Shelf Alarm Interconnect Cable NTBP73XX [redacted]
Ethernet Cable (3M) (Passport
160 only) NTFN03XX [redacted]
Ethernet Cable (15M) (Passport
160 only) NTFN04XX [redacted]
DS3/E3 Termination Panel Cable (3 M) NTFP19AA [redacted]
DS3/E3 Termination Panel Cable (15 M) NTFP19AB [redacted]
DS3/E3 Termination Panel Cable w/Ferrite
(3 M) NTFP19AD [redacted]
DS3/E3 Termination Panel Cable w/Ferrite
(15 M) NTFP19AE [redacted]
DS3/E3 Interface Cable (3 M) NTFP20AA [redacted]
DS3/E3 Interface Cable (15 M) NTFP20AB [redacted]
DS3/E3 ATM Termination Panel Control
Cable (1M) NTFP52AA [redacted]
DS3/E3 ATM Termination Panel Control
Cable (3M) NTFP52AB [redacted]
DS3/E3 ATM Termination Panel Control
Cable (15M) NTFP52AC [redacted]
DS1 Termination Cable (3M)
(8 port DS1 FP) NTFP69AA [redacted]
DS1 Termination Cable (15M)
(8 port DS1 FP) NTFP69AB [redacted]
HSSI null modem cable (3M) NTFP94AA [redacted]
HSSI null modem cable (50') NTFP95AA [redacted]
HSSI 1:1 cable assembly (3M) NTFP96AA [redacted]
HSSI 1:1 cable assembly (50') NTFP97AA [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cables (Model 50 only)
- ---------------------
DS1 Integrated Termination Panel
Cable (32") NTEP01XX [redacted]
E1 Integrated Termination Panel
Cable (32) NTEP02AA [redacted]
E1/E1V/DS1/DS1V Integrated Termination
Panel Cable (1M) NTEP02BA [redacted]
V.35/V.11 Integrated Termination Panel
Cable (1M) NTEP03CA [redacted]
V.35/V.11 Integrated Termination Panel
Cable (1M) - also used for CFP1 NTEP03DA [redacted]
FDDI Fiber Optic Cable NTFN01XX [redacted]
Ethernet Cable (1M) NTFN02XX [redacted]
DS3/E3 Termination Panel Cable (1 M) NTFP19AC [redacted]
DS3/E3 Termination Panel Cable
w/Ferrite (1M) NTFP19AF [redacted]
DS3/E3 Interface Cable (0.8 M) NTFP20AC [redacted]
DS1 Termination Cable (30)
- Passport 50 NTFP70AA [redacted]
DS1 Termination Cable (36")
- Passport 50 NTFP70AB [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Cables (Model 30 only)
- ---------------------
Ferrite Bead Cable (for CFP1
LAN ports) NTHQ11XX [redacted]
V.35/V.11 Integrated Termination
Panel (1M) - also used for CFP1 NTEP03DA [redacted]
E1/E1V/DS1/DS1V Integrated Termination
Panel Cable (1M) NTEP02BA [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Mounting Kits
- -------------
Rack Mounting Kit NTEP17XX [redacted]
Standalone Mounting Kit NTEP40XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Miscellaneous Items
- -------------------
Air Filter Pad (Model 160) A0383866 [redacted]
Model 160 Anchoring Kit QMY709 X [redacted]
Antistatic Wriststrap (Model 160
and 50) A0378999 [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Base Software
- -------------
Passport 160 Base Software NTJ200XX [redacted]
Passport 50 Base Software NTJ212XX [redacted]
Passport 30 Base Software NTJ230XX [redacted]
CFP1 Software NTJ226AE [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Routing Software
- ----------------
Path Oriented Routing Software NTJ206XX [redacted]
Connectionless Routing Software NTJ203XX [redacted]
Application Software
- --------------------
DPN Gateway Software NTJ201XX [redacted]
Passport- Network Trunk Software NTJ202XX [redacted]
Frame Relay UNI Software NTJ204XX [redacted]
Frame Relay NNI Software NTJ205XX [redacted]
Frame Relay UNI SVC Software NTJ222XX [redacted]
Frame Relay / ATM PVC Service
Interworking NTJ227XX [redacted]
Frame Relay Trace Software NTJ228AE [redacted]
ATM Software NTJ214XX [redacted]
Networking Protocols (ECMA & QSIG) NTJ225XX [redacted]
Voice Transport Service Software NTJ207XX [redacted]
Voice Compression Software NTJ208XX [redacted]
Voice Networking Software NTJ224XX [redacted]
Lan Protocols NTJ216XX [redacted]
Link Protocols NTJ218XX [redacted]
Filtering Software NTJ219XX [redacted]
Virtual Networking Software NTJ223XX [redacted]
Speech Activity Detection Software NTJ209XX [redacted]
HDLC Transparent Data Software NTJ210XX [redacted]
Bit Transparent Data Software NTJ211XX [redacted]
Echo Cancellation Software NTJ213XX [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Complete Voice Software, includes : QMYJ201AC [redacted]
Complete Lan Software, includes : QMYJ202AA [redacted]
- --------------------------------------------------------------
NA Price ($US)
NMS
S/W Licenses (per copy) (Site License)
- --------------------------------------------------------------
Magellan NMS Optional Package (R10 CDROM)
- ----------------------------------------
NMS Base NTJ100AG [redacted]
Advisor NTJ101AG [redacted]
DPN Provisioning NTJ103AJ [redacted]
DPN Backup and Restore NTJ103AM [redacted]
Passport Provisioning NTJ103AK [redacted]
Passport Backup and Restore NTJ103AN [redacted]
Configuration Server NTJ103AL [redacted]
Passport Global Data Manager NTJ115AC [redacted]
Passport Module Manager NTJ500AC [redacted]
SNMP Integrator NTJ112AC [redacted]
Network Activation Tool NTJ118AC [redacted]
Magellan View NTJ126AA [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Magellan Data Provider (per copy) NTJ113AC [redacted]
Magellan Data Provider (network
license) NTJ113AC [redacted]
- --------------------------------------------------------------
NA Price ($US)
(per copy)
- --------------------------------------------------------------
X-AMINER Options:
- ----------------
Basic Data Reporter (BDR) NTJ303AA [redacted]
Enhanced Statistics Reporter (ESR) NTJ303AB [redacted]
Magellan Accounting Reporter (MAR) NTJ303AE [redacted]
Passport Data Reporter (PDR) NTJ303AF [redacted]
X.11 Multi-Access Software for
X-AMINER (up to five users) NTJ303AD [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
X-PLORER Options:
- ----------------
Configurator NTJ302AA [redacted]
Tariff Coster NTJ302AB [redacted]
Traffic Modeling NTJ302AC [redacted]
Model Link NTJ302AE [redacted]
Architect Link NTJ302AJ [redacted]
Passport Modeling NTJ302AG [redacted]
End-to-End Delay NTJ302AH [redacted]
User Re-Homing NTJ302AF [redacted]
ATM Modeling NTJ302AL [redacted]
X.11 Multi-Access Software for X-PLORER
(up to five users) NTJ302AK [redacted]
Traffic Link NTJ302AM [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Service Management Reporter
- ---------------------------
SMR Core System NTJ304AA [redacted]
Data Populator - Magellan BDF
Accounting NTJ305AA [redacted]
Data Populator - Magellan Statistics NTJ306AA [redacted]
Data Populator - SNMP Statistics NTJ307AA [redacted]
Reports - Frame Relay
Usage/Availability NTJ308AA [redacted]
Reports - Backbone Statistics NTJ309AA [redacted]
Reports - Standard Access Usage NTJ310AA [redacted]
Reports - Standard Access Daily Calls NTJ311AA [redacted]
Reports - LAN Interconnect Reports NTJ312AA [redacted]
Reports - X.25 Statistics NTJ321AA [redacted]
Reports - ATM Accounting Reports NTJ319AA [redacted]
Reports - ATM Trunk Statistics/Usage NTJ318AA [redacted]
Reports - ATM Trunk
Statistics/Exception NTJ320AA [redacted]
Multi-Client License - 3 additional
clients license NTJ314AA [redacted]
Multi-Client License - 10 additional
clients license NTJ315AA [redacted]
SMR Installation (Travel and Living
not included) NTJ316AA [redacted]
Training (Travel and Living not
included) NTJ317AA [redacted]
- --------------------------------------------------------------
- --------------------------------------------------------------
Service Monitor Pricing Unit Price ($US)
- -----------------------
Base Packages
- -------------
Service Monitor Base (20 VPNs)
- Electronic NTJ114AP [redacted]
Service Monitor Base (50 VPNs)
- Electronic NTJ114AH [redacted]
License for Additional 50 VPNs
- Electronic NTJ114AJ [redacted]
Service Monitor Base (20 VPNs) - CDROM NTJ114AN [redacted]
Service Monitor Base (50 VPNs) - CDROM NTJ114AC [redacted]
License for Additional 50 VPNs - CDROM NTJ114AD [redacted]
Service Monitor Applications
- ----------------------------
Performance Data Viewer - Electronic NTJ114AK [redacted]
Command Application - Electronic NTJ114AM [redacted]
HP Open View for Windows Integration
- Electronic NTJ114AL [redacted]
Performance Data Viewer - CDROM NTJ114AE [redacted]
Command Application - CDROM NTJ114AG [redacted]
HP Open View for Windows Integration
- CDROM NTJ114AF [redacted]
Service Report Distribution - CDROM NTJ114AQ [redacted]
Connection Manager - CDROM NTJ114AR [redacted]
Local Grouping Tool - CDROM NTJ114AS [redacted]
Third Party Resource Integration
- CDROM NTJ114AT [redacted]
- -----------------------------------------------------------------
ATTACHMENT H
STATEMENT OF WORK
DRAFTED Revision required
Due by:
Draft due from: Teligent
The draft Statement of Work appearing as Appendix D of the
Parties' Letter of Intent is to be revised as necessary to be
made consistent with the Parties' intent as expressed in this
Agreement. Teligent will propose a draft Responsibility Matrix
and other language as necessary to define the Parties'
responsibilities under the Statement of Work, and the Parties
will mutually develop through good faith negotiation the final
Statement of Work.
ATTACHMENT I
ACCEPTANCE TEST PROCEDURE
1. ATP for Components: This will be Nortel NTPs, available now
with the exception of the Radio components.
2. ATPs for:
a) TCOs due: from:
b) Nodes due: from:
c) TASs due: from:
3. System ATP due: from:
ATTACHMENT J
NETWORK MONITORING
This Attachment shall specify the intent of Section 19.1.5.
Due by: 11/18/97
Due from: Gary Palmer
ATTACHMENT K
CORPORATE AND REGIONAL SUPPORT TEAM
This Attachment shall specify the intent of Section 19.1.7.
Due by: 11/18/97
Due from: Mike Lambert
ATTACHMENT L
SPECIFICATIONS
This Attachment shall capture the capacity and performance
specifications contained in Teligent's RFP and Nortel's response
to such RFP.
Due by: 11/18/97
From: Ian Viney
ATTACHMENT M
NONDISCLOSURE AGREEMENT
insert June 6, 1997 letter here.
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated as of March 6, 1998, by
and between Teligent, Inc., a Delaware corporation (the "Company"),
and Microwave Services, Inc., a Delaware corporation ("MSI").
MSI owns of record 17,206,210 shares of the Company's
Common Stock, par value $.01 per share, designated as Class B-Series 1
(such 17,206,210 shares being referred to as the "Series B-1 Shares"),
which Series B-1 Shares are convertible on a share-for-share basis
into shares of the Company's Common Stock, par value $.01 per share,
designated as Class A (the "Class A Common Stock").
MSI has requested that the Company grant to MSI, and the
Company has agreed to grant to MSI, the registration rights provided
for herein.
In consideration of the foregoing, and the agreements set
forth herein, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Registration Rights. The Company agrees that MSI will have the
-------------------
registration rights set forth in this Section 1 with respect to shares
of Class A Common Stock into which the Series B-1 Shares have been
converted or are convertible ("Registrable Securities").
(a) "Piggyback" Registration Rights. (i) If the
-------------------------------
Company at any time proposes to register under the Securities Act of
1933, as amended (the "Securities Act") (other than a registration on
Form S-4 or S-8 or any successor or similar forms thereto and other
than a registration pursuant to paragraph 1(b) below), whether or not
for sale for its own account (including, without limitation, pursuant
to the exercise by any other person or entity of any registration
rights granted by the Company), on a form and in a manner that would
permit registration of Registrable Securities for sale to the public
under the Securities Act, it will give written notice to MSI of its
intention to do so, describing such securities and specifying the form
and manner and the other relevant facts involved in such proposed
registration (including, without limitation, (x) whether or not such
registration will be in connection with an underwritten offering of
equity securities and, if so, the identity of the managing underwriter
and whether such offering will be pursuant to a "best efforts" or
"firm commitment" underwriting and (y) the anticipated price range at
which such equity securities are reasonably expected to be sold to the
public). Upon the written request of MSI delivered to the Company
within 15 calendar days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be
disposed of by MSI and the intended method of disposition thereof),
the Company will use reasonable best efforts to effect the registra-
tion under the Securities Act of the Registrable Securities that the
Company has been so requested to register, subject to the further
provisions of this agreement;
(ii) If a registration pursuant to this Section 1
involves an underwritten offering and the managing underwriter advises
the Company that, in its opinion, the number of Registrable Securities
proposed to be included in such registration should be limited due to
market conditions, then the Company may exclude Registrable Securities
requested to be included pursuant to Section 1(a) pro rata, based on
the respective numbers of Registrable Securities as to which registra-
tion has been so requested by each holder of Registrable Securities.
(iii) In connection with any underwritten offering
with respect to which holders of Registrable Securities shall have
requested registration pursuant to this Section 1, the Company shall
have the right to select the managing underwriter with respect to the
offering.
(b) Demand Registration Rights. (i) In addition to the
--------------------------
registration rights afforded by Section 1(a) above, at any time
commencing six months after November 26, 1997 (the "Demand Date"), MSI
shall be entitled to demand in writing that the Company effect a
registration under the Securities Act and under such state securities
laws as MSI may reasonably request (provided that the Company shall
not be required to consent to general service of process in any
jurisdiction where it is not then so subject) in respect of all or
part of the Registrable Securities held by MSI, provided that (A) such
-------- ----
demand registration right shall apply only if the amount of
Registrable Securities to be registered (1) constitutes at least 20%
of the amount of Registrable Securities owned by MSI or (2) has an
anticipated aggregate offering price (before underwriters' fees, com-
missions and discounts) of at least $20,000,000, (B) the Company shall
not be obligated to use its reasonable best efforts to cause to become
effective a registration statement pursuant to this Section 1(b) until
a period shall have elapsed from the effective date of the most recent
previous registration statement under the Securities Act with respect
to a public offering of equity securities of the Company (a "Prior
Public Offering") equal to the greater of (1) 120 days and (2) the
shortest period of any lockup of shareholders of the Company required
by the lead managing underwriter of such Prior Public Offering (the
"Holdback Period") and (C) if, while a registration request is pending
pursuant to this Section 1(b), the Board of Directors of the Company
makes a good faith determination that the filing or effectiveness of a
registration statement would require the public disclosure of material
information, the disclosure of which would adversely affect the
Company, the Company shall not be required to effect a registration
pursuant to this Section 1(b) until such material information is dis-
closed to the public or ceases to be material; provided, further, however,
-------- ------- -------
that the foregoing delay shall in no event exceed 120 days.
Notwithstanding the foregoing provisions of Section 1(b), the Company
shall not be obligated to effect more than three registrations
pursuant to this Section 1(b)(i).
(ii) At any time after the Demand Date, MSI shall be
entitled to demand in writing that the Company effect a registration
under the Securities Act of all or part of its Registrable Securities
on Form S-3 or any similar short-form ("Short-Form") registration
statement ("Short-Form Registrations"), if available, specifying in
the request the number of Registrable Securities to be registered by
MSI and the intended method of distribution thereof (such notice is
hereinafter referred to as an "S-3 Holder Request"); provided, that
--------
the Company shall be obligated to effect a registration of Registrable
Securities pursuant to this Section 1(b)(ii) only if the anticipated
aggregated offering price for such Registrable Securities is in excess
of $10,000,000, provided, further, that the Company shall not be
-------- -------
obligated to file and use its reasonable best efforts to cause to
become effective a registration statement pursuant to this Section
1(b) until a period equal to the Holdback Period shall have elapsed
from the effective date of the Prior Public Offering. The holders of
Registrable Securities will be entitled to request an unlimited number
of Short-Form Registrations. After the Company has become subject to
the reporting requirements of the Securities Exchange Act of 1934, the
Company will use its reasonable best efforts to make Short-Form
Registrations on Form S-3 available for the sale of Registrable
Securities.
(iii) If, in connection with any underwritten offering
pursuant to this Section 1(b), the managing underwriter thereof
advises the Company in writing that in its opinion the number of
securities (including, for purposes of this Section 1(b), securities
of the Company which the Company has proposed to include in such
offering) proposed to be included in such offering should be limited
due to market conditions, the Company will promptly so advise all
holders seeking to participate in such offering, and securities shall
be excluded from such offering in the following order until such
limitation has been met: (A) securities requested to be included in
such offering by holders other than MSI, if any, shall be excluded
until all such other securities shall be so excluded, (B) securities
that the Company has elected to include in such offering, if any,
shall be excluded until all such securities have been excluded, and,
(C) thereafter, any Registrable Securities requested to be included in
such offering shall be excluded pro rata, based on the respective
number of Registrable Securities as to which registration has been so
requested by each holder thereof.
(iv) If a requested registration pursuant to this
Section 1(b) involves an underwritten offering, the holders of a
majority of Registrable Securities included in such registration shall
have the right, with the approval of the Company (which approval shall
not be unreasonably withheld), to select the managing underwriter for
such offering.
(c) [Intentionally Omitted]
(d) Registration Procedures.
-----------------------
(i) If and whenever the Company is required to use its
reasonable best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in Section
1(a) or 1(b), the Company will, as expeditiously as possible:
(A) Prepare and promptly file with the Securities
and Exchange Commission (the "Commission") a registration statement
with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become and remain
effective;
(B) Prepare and file with the Commission such
amendments (including post-effective amendments) and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period as may be requested by holders desiring to
register their Registrable Securities for sale not exceeding 90 days
and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the Holder or Holders thereof set
forth in such registration statement.
(C) Furnish to each holder of Registrable
Securities covered by the registration statement and to each underwriter,
if any, of such Registrable Securities, such number of copies of a
prospectus and preliminary prospectus for delivery in conformity with
the requirements of the Securities Act, and such other documents, as
such Person may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Securities.
(D) Use its reasonable best efforts to register
or qualify such Registrable Securities covered by such registration
Statement under such other securities or blue sky laws of such
jurisdictions as each holder thereof shall reasonably request, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such holder to consummate the disposition of the
Registrable Securities owned by such holder in such jurisdictions,
except that the Company shall not for any such purpose be required (A)
to qualify to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 1(d)(i)(D)), it is not
then so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is not then so subject.
(E) Use its reasonable best efforts to cause such
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the holder or holders
thereof to consummate the disposition of such Registrable Securities.
(F) Immediately notify each holder of Registrable
Securities covered by such registration statement, at any time when a
prospectus thereto is required to be delivered under the Securities
Act within the appropriate period mentioned in Section 1(d)(i)(B), if
the Company becomes aware that the prospectus included in such
registration statement, as ten in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and, at
the request of any such holder, deliver reasonable number of copies of
an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(G) Otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission and
make generally available to its securityholders, in each case as soon
as practicable, but not later than 45 calendar days after the close of
the period covered thereby (90 calendar days in case the period
covered corresponds to a fiscal year of the Company), an earnings
statement of the Company which will satisfy the provisions of Section
11(a) of the Securities Act.
(H) Use its reasonable best efforts in connection
with the underwriters of list such Registrable Securities on each
securities exchange as they may reasonably designate.
(I) In the event the offering is an underwritten
offering, use its reasonable best efforts to obtain a "cold comfort"
letter from the independent public accountants for the Company in
customary form and covering such matters of the type customarily
covered by such letters.
(J) Execute and deliver all instruments and
documents (including in an underwritten offering an underwriting
agreement in customary form) and taken such other actions and obtain
such certificates and opinions as are customary in an underwritten
public offering.
(ii) Each holder of Registrable Securities will, upon
receipt of any notice from the Company of the happening of any event
of the kind described in Section 1(d)(i)(F), forthwith discontinue
disposition of the Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 1(d)(i)(F).
(iii) If a registration pursuant hereto involves an
underwritten offering, the Company agrees, if so required by the
managing underwriter of such offering, not to effect any public sale
or distribution of any of its equity securities or securities
convertible into or exchangeable or exercisable for any of such equity
securities during a period of up to 180 calendar days after the effec-
tive date of such registration, except for securities sold in such
underwritten offering or except in connection with an option plan,
purchase plan, savings or similar plan, or an acquisition, merger or
exchange offer.
(iv) If a registration pursuant hereto involves an
underwritten offering, each holder of Registrable Securities, whether
or not such holder's Registrable Securities are included in such
registration, will, if and to the extent request by the managing
underwriter in such offering, enter into an agreement not to effect
any public sale or distribution, including any sale pursuant to Rule
144 under the Securities Act (but excluding those Registrable Securi-
ties sold n such offering), of any of the Company's excluding those
Registrable Securities sold in such offering), of any of the Company's
equity securities owned by such holder or securities, without the
consent of such managing underwriter, during a period commencing on
the effective date of such registration and ending a number of
calendar days thereafter not exceeding 180 days as such managing
underwriter shall reasonably determine is required to effect a
successful offering; provided such agreement is substantially
identical in form and substance to other "lock-up" agreements of the
Company's other stockholders who execute such agreements in connection
with such offering.
(e) Indemnification.
---------------
(i) In the event of any registration of any securities
of the Company under the Securities Act pursuant hereto, the Company
will, and it hereby agreed to, indemnify and hold harmless, to the
extent permitted by law, each holder of any Registrable Securities
covered by such registration statement, its directors and officers or
general and limited partners, each other Person who participates as an
underwriter in the offering or sale of such securities and each other
person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, as follows:
(A) against any and all loss, liability, claim,
damage and expense whatsoever arising out of or based upon an untrue
statement or alleged untrue statement of a material fact contained in
any registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising o ut of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein not misleading;
(B) against any and all loss, liability, claim,
damage and expense whatsoever to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(C) against any and all expense reasonably
incurred by them in connection with investigating, preparing or
defending against any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (A) or (B)
above;
provided, however, that this indemnity does not apply to any
-------- -------
loss, liability, claim, damage or expense to the extent arising out of
an untrue statement or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of such holder, underwriter or control
person expressly for use in the preparation of any registration
statement (or any amendment or supplement thereto) and provided,
further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or to any other Person, if any , who controls such under-
writer with the meaning of the Securities or to any other Person, if
any, who controls such underwriter with the meaning of the Securities
Act, in any such case to the extent that such loss, liability, claim,
damage or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented
or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in the final
prospectus.
(ii) The Company may require, as a condition to
including any Registrable Securities in any registration statement
filed in accordance herewith that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller
of such Registrable Securities to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 1(e)(i) the
Company, each director of the Company, each officer of the Company and
each other Person, if any, who controls the Company within the meaning
of the Securities Act with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such statement or alleged
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by
or on behalf of such holder specifically stating that it is for use in
the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made
by or on behalf of the Company or such director, officer or con-
trolling Person and shall survive the transfer of such securities by
such holder. In that event, the obligations of the Company and such
holders pursuant to this Section 1(e) are to be several and not joint;
provided, however, that with respect to each claim pursuant to this
- -------- -------
Section 1(e)(ii), each such holder's liability under this Section
1(e)(ii) shall be limited to an amount equal to the net proceeds
(after deducting the underwriting discount and expenses) received by
such holder from the sale of such Registrable Securities by such
holder.
(iii) Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in this Section 1(e), such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to such indemnifying
party of the commencement of such action; provided, however, that
-------- -------
the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations
under this Section 1(e), except to the extent (not including any such
notice of an underwriter) that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim (in which case the indemnifying party shall not be liable for
the fees and expenses of more than one firm of counsel for a majority
of the sellers of Registrable Securities or more than one firm of
counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will
be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably satisfactory to such
indemnified 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 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof. No
indemnified party shall consent to the entry of any judgment or enter
into any settlement of any such action, the defense of which has been
assumed by an indemnifying party and for which an indemnifying party
may have indemnification liability hereunder with the consent of such
indemnifying party.
(iv) The Company and each seller of Registrable
Securities shall provid e for the foregoing indemnity (with appropriate
modifications) in any underwriting agreement with respect to any
required registration or other qualification of securities under any
federal or state law or regulation of any governmental authority.
(f) Contribution. In order to provide for just and
------------
equitable contribution in circumstances under which the indemnity
contemplated by Section 1(e) is for any reason not available, the
parties required to indemnify by the terms thereof shall contribute to
the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by such indemnity agreement incurred by the Compa-
ny, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amounts
which the respective parties shall contribute, there shall be
considered the relative benefits received by each party from the
offering of the Registrable Securities (taking into account the
portion of the proceeds of the offering realized by each), the parties
relative knowledge and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to
correct and prevent any statement of omission and any other equitable
considerations appropriate under the circumstances. The Company and
each Seller of Registrable Securities agree with each other that no
seller of Registrable Securities shall be required to contribute any
amount in excess of the amount such seller would have been required to
pay to an indemnified party if the indemnity under Section 1(e)(ii)
were available. The Company and each such seller agree with each
other and the underwriters of the Registrable Securities, if requested
by such underwriters, that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation
(even if the underwriters were treated as one entity for such purpose)
or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the initial public
offering price of the Registrable Securities. For purposes of this
Section 1(f), each Person, if any, who controls an underwriter within
the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as such underwriter, and each director and
officer of the Company who signed the registration statement, and each
Person, if any, who controls the Company or a seller of Registrable
Securities within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company or a seller
of Registrable Securities, as the case may be.
(g) Expenses. The Company shall bear all registration
--------
expenses (exclusive of underwriting fees, discounts and commissions)
in connection with the registrations effected by it pursuant to
Section 1(b) and such registration expenses incurred in connection
with up to three fully completed registrations of Registrable
Securities pursuant to Section 1(a).
(h) Transfer of Registration Rights. MSI may assign its
-------------------------------
rights under this Section 1 to any person or entity to whom or which
MSI sells, transfers or assigns not less than 20% of the Registrable
Securities; provided that such person or entity agrees in writing with
the Company to be bound by this Agreement to the same extent as MSI
was bound at the time of such sale, transfer or assignment.
(i) Cessation of Registrable Security Status. As to any
----------------------------------------
particular Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement with respect
to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of under
such registration statement, (ii) such securities shall have been
transferred pursuant to Rule 144 under the Securities Act, (iii) such
securities shall have been otherwise transferred or disposed of, and
new certificates therefor not bearing a legend restricting further
transfer shall have been delivered by the Company, and subsequent
transfer or disposition of such securities shall not require their
registration or qualification under the Securities Act or any similar
state law then in force, or (iv) such securities shall have ceased to
be outstanding.
2. Miscellaneous.
-------------
(a) Effectiveness. This Agreement shall be effective
-------------
immediately upon the execution and delivery hereof.
(b) Definition of "Person". As used herein, the term
----------------------
"Person" means any individual, corporation, association, partnership
(general or limited), joint venture, trust, joint-stock company,
estate, limited liability company, unincorporated organization or
other legal entity or organization.
(c) Successors and Assigns. Except as otherwise
----------------------
provided herein, all of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be
enforceable by and against the respective successors and assigns of
the parties hereto.
(d) Amendment, Waiver. This Agreement may be amended
-----------------
only by a written instrument duly executed by the parties hereto. Any
failure of any of the parties to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
(e) Notices. Any notice, request, claim, demand,
-------
document or other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in writing
and delivered personally or sent by telex or telecopy (with such telex
or telecopy confirmed promptly in writing sent by first class mail),
or by reputable overnight courier or other similar means of
communication, as follows:
i) If to the Company, addressed to the Company at
8065 Leesburg Pike, Vienna, VA 22182, to the attention
of the Company's General Counsel (Facsimile No.
703-762-5227);
ii) If to MSI, addressed to it at 3 Bala Plaza
East, Suite 300, Bala Cynwyd, PA 19004, to the
attention of MSI's General Counsel;
or, in each case, to such other address or telex or
telecopy number as such party may designate in writing to
the other by written notice given in the manner specified
in this Section 2(e).
(f) Entire Agreement. This Agreement contains the
----------------
entire agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior oral and written
agreements and memoranda and undertakings between the parties hereto
with regard to such subject matter.
(g) Governing Law. This Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of New York,
without giving effect to its conflicts of laws principles.
(h) Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties as of the day and year first written above.
TELIGENT, INC.
By:/s/ Alex J. Mandl
--------------------------
Name: Alex J. Mandl
Title: Chairman and Chief
Executive Officer
MICROWAVE SERVICES, INC.
By:/s/ David J. Berkman
---------------------------
Name: David J. Berkman
Title: Executive Vice President
State of Formation
Teligent Licensing Company I, L.L.C. Delaware
Teligent Licensing Company II, L.L.C. Delaware
FirstMark Communications, Inc. Delaware
AUCO, Inc. Delaware
We consent to the incorporation by reference, in the Registration
Statement (Form S-8 No. 333-45005), of our report dated February 27,
1998 with respect to the financial statements of Teligent, Inc.,
included in this Annual Report (Form 10-K) for the year ended December
31, 1997.
ERNST & YOUNG LLP
Vienna, Virginia
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1997 AND CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 424,900,715
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 462,360,945
<PP&E> 14,171,382
<DEPRECIATION> 5,985,483
<TOTAL-ASSETS> 596,380,268
<CURRENT-LIABILITIES> 21,044,750
<BONDS> 300,000,000
0
0
<COMMON> 525,827
<OTHER-SE> 284,620,395
<TOTAL-LIABILITY-AND-EQUITY> 596,380,268
<SALES> 0
<TOTAL-REVENUES> 3,310,999
<CGS> 4,785,589
<TOTAL-COSTS> 138,747,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,859,457
<INCOME-PRETAX> (138,054,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> (138,054,155)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,054,155)
<EPS-PRIMARY> (2.94)
<EPS-DILUTED> (2.94)
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