<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1996
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PAGING NETWORK, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 4812 04-2740516
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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4965 PRESTON PARK BOULEVARD, SUITE 600
PLANO, TEXAS 75093
(972) 985-4100
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
GLENN W. MARSCHEL
PAGING NETWORK, INC.
4965 PRESTON PARK BOULEVARD, SUITE 600
PLANO, TEXAS 75093
(972) 985-4100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
ROGER D. FELDMAN, ESQ.
BINGHAM, DANA & GOULD LLP
150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-8414
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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=================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------
10% Senior Subordinated Notes due
October 15, 2008.................. $500,000,000 98.69% $493,450,000 $149,530.30
=================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f) of Regulation C under the Securities Act of 1933, as amended,
on the basis of the market value of the outstanding 10% Senior Subordinated
Notes due October 15, 2008 on October 29, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PAGING NETWORK, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ---------------------------------------------- ----------------------------------------------
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................... Cover Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page.
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Inside Front Cover Page; Outside Back Cover
Page.
3. Risk Factors, Ratio of Earnings to
Fixed Charges, and Other
Information.......................... Prospectus Summary; Risk Factors; Business;
Selected Financial and Operating Data.
4. Terms of the Transaction............. Prospectus Summary; The Exchange Offer,
Description of the Exchange Notes; United
States Federal Income Tax Consequences of the
Exchange Notes.
5. Pro Forma Financial Information...... Prospectus Summary; Selected Financial and
Operating Data.
6. Material Contracts With the Company
Being Acquired....................... Not Applicable.
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............ Not Applicable.
8. Interests of Named Experts and
Counsel................................ Legal Matters; Experts.
9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities.......................... Not Applicable.
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants.......................... Prospectus Summary; Risk Factors;
Capitalization; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Selected Financial and Operating
Data; Business; Description of the Exchange
Notes; Financial Statements.
11. Incorporation of Certain Information
by Reference......................... Incorporation of Certain Information by
Reference.
12. Information With Respect to S-2 or
S-3 Registrants...................... Not Applicable.
13. Incorporation of Certain Information
by Reference......................... Not Applicable.
14. Information With Respect to
Registrants Other Than S-2 or S-3
Registrants.......................... Not Applicable.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3
Companies............................ Not Applicable.
16. Information With Respect to S-2 or
S-3 Companies........................ Not Applicable.
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies...... Not Applicable.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Other Authorizations are to be
Solicited............................ Not Applicable.
19. Information if Proxies, Consents or
Other Authorizations are Not to be
Solicited, or in an Exchange Offer... Not Applicable.
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<PAGE> 3
[PAGENET LOGO]
OFFER TO EXCHANGE
10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
FOR
ALL OUTSTANDING 10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME ON
, 1996, UNLESS EXTENDED
------------------------
Paging Network, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" and, together with the Prospectus, the "Exchange
Offer"), to exchange up to an aggregate principal amount of $500,000,000 of its
registered 10% Senior Subordinated Notes due October 15, 2008 (the "Exchange
Notes") for up to an aggregate principal amount of $500,000,000 of its
outstanding unregistered 10% Senior Subordinated Notes due October 15, 2008 (the
"Outstanding Notes"). The terms of the Exchange Notes are identical in all
material respects to those of the Outstanding Notes, except for certain transfer
restrictions and registration rights relating to the Outstanding Notes and
except for certain interest provisions related to such registration rights. The
Exchange Notes will be issued pursuant to, and entitled to the benefits of, the
Indenture (as defined herein) governing the Outstanding Notes. The Exchange
Notes and the Outstanding Notes are sometimes referred to collectively as the
"Notes."
The Notes are unsecured obligations of the Company and are subordinate in
right of payment to all Senior Debt of the Company. As of October 28, 1996, the
aggregate amount of Senior Debt outstanding was $24.5 million, and approximately
$333.2 million was available for borrowing under the Company's Credit Agreement
(as defined herein).
The Company will accept for exchange any and all Outstanding Notes which
are properly tendered in the Exchange Offer prior to 5:00 p.m., New York time,
on , 1996, or such later date to which it is extended by the
Company in its sole discretion (the "Expiration Date"). The Exchange Offer will
not in any event be extended to a date beyond , 1997. Tenders of
Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York
time, on the Expiration Date. If the Company terminates the Exchange Offer and
does not accept for exchange any Outstanding Notes with respect to the Exchange
Offer, the Company will promptly return the Outstanding Notes to the holders
thereof. The Exchange Offer is not conditioned upon any minimum principal amount
of Outstanding Notes being tendered for exchange, but is otherwise subject to
certain customary conditions. The Outstanding Notes may be tendered only in
integral multiples of $1,000.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Prospectus is , 1996.
<PAGE> 4
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY. ANY SUCH REQUEST SHOULD BE DIRECTED TO MARY V. HAYNES, VICE
PRESIDENT -- INVESTOR AND PUBLIC RELATIONS, PAGING NETWORK, INC., 4965 PRESTON
PARK BLVD., SUITE 600, PLANO, TEXAS 75093, TELEPHONE NUMBER (972) 985-4100. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT
LEAST FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated October 16, 1996 (the "Registration Rights Agreement") by and
among the Company, Goldman, Sachs & Co., Salomon Brothers Inc and Bear, Stearns
& Co. Inc., as the initial purchasers (the "Initial Purchasers") with respect to
the initial sale of the Outstanding Notes. Based on positions taken by the staff
of the Securities and Exchange Commission (the "Commission") that have been
enunciated in no-action letters issued in Exxon Capital Holdings Corp. (May 13,
1988) and Morgan Stanley & Co. Inc. (June 5, 1991), among others, the Company
believes that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Outstanding Notes may be offered for resale, resold and otherwise
transferred by the respective holders thereof (other than any such holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), or (ii) a
broker-dealer who acquired Outstanding Notes for resale pursuant to an exemption
from the registration requirements of the Securities Act) without compliance
with the registration and prospectus delivery provisions under the Securities
Act, provided that (A) such Exchange Notes are acquired in the ordinary course
of such holders' business, (B) such holders are not engaged in, and do not
intend to engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes, and (C) as provided in
the next paragraph certain broker-dealers will be subject to a prospectus
delivery requirement with respect to resales of such Exchange Notes.
Each holder who is a broker-dealer and who receives Exchange Notes for its
own account in exchange for Outstanding Notes that were acquired by it as a
result of market making activities or other trading activities (a "Participating
Broker-Dealer") will be required to acknowledge that it will deliver a
prospectus in connection with any resale by it of such Exchange Notes. To date,
the staff of the Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as the exchange
pursuant to the Exchange Offer (other than a resale of an unsold allotment from
the sale of the Outstanding Notes to the Initial Purchasers thereof) with the
Prospectus contained in the registration statement (the "Exchange Offer
Registration Statement"), under the Securities Act, relating to the Exchange
Offer. Pursuant to the Registration Rights Agreement, the Company has agreed to
permit Participating Broker-Dealers and other persons, if any, subject to
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such Exchange Notes. The Company has agreed that, for a
period of 90 days after the Exchange Offer has been consummated, it will make
this Prospectus, and any amendment or supplement to this Prospectus, available
to any broker-dealer that requests such documents in the Letter of Transmittal.
Prior to the Exchange Offer, there has been no public market for the
Exchange Notes. There can be no assurance as to the liquidity of any markets
that may develop for the Exchange Notes, the ability of holders to sell the
Exchange Notes or the price at which holders would be able to sell the Exchange
Notes. The Company does not intend to list the Exchange Notes for trading on any
national securities exchange or over-the-counter market system. Future trading
prices of the Exchange Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's operating results and the
market for similar securities. Historically, the market for securities similar
to the Exchange Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the Exchange Notes, if
such market develops, will not be subject to similar disruptions.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay certain expenses incident to the Exchange Offer.
2
<PAGE> 5
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER, OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
3
<PAGE> 6
<TABLE>
TABLE OF CONTENTS
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PAGE
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Available Information................................................................. 4
Incorporation of Certain Information by Reference..................................... 4
Prospectus Summary.................................................................... 6
Risk Factors.......................................................................... 14
Use of Proceeds....................................................................... 17
Capitalization........................................................................ 18
The Exchange Offer.................................................................... 18
Selected Financial and Operating Data................................................. 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 28
Business.............................................................................. 34
Description of Senior Debt............................................................ 46
Description of the Exchange Notes..................................................... 47
United States Federal Income Tax Consequences of the Exchange of Notes................ 65
Plan of Distribution.................................................................. 66
Legal Matters......................................................................... 67
Experts............................................................................... 67
Index to Financial Statements......................................................... F-1
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Exchange Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The Company is subject to the periodic reporting
and other informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Periodic reports, proxy statements and other
information filed by the Company with the Commission may be inspected at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at its regional offices located at the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. The Commission also
maintains a Web site that contains reports, proxy and information statements,
and other information regarding the Company at http://www.sec.gov. Copies of
such material can be obtained from the Company upon request.
The Company has agreed to file with the Commission, to the extent
permitted, and distribute to holders of the Exchange Notes reports, information
and documents specified in Section 13 and 15(d) of the Exchange Act, so long as
the Exchange Notes are outstanding, whether or not the Company is subject to
such informational requirements of the Exchange Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by the Company with the Commission
are hereby incorporated herein by reference: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995; (ii) the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June
30, 1996; (iii) the Company's Current Report on Form 8-K/A dated April 3, 1995,
which includes audited financial statements of Comtech, Inc. -- Paging Division,
SNET Paging, Inc. and TNI Associates, Inc. and unaudited pro forma combined
condensed financial statements; (iv) the Company's Current Report on Form 8-K
dated October 31, 1995, which includes audited financial statements of Celpage,
Inc. (Atlanta Branch) and unaudited pro forma combined condensed financial
4
<PAGE> 7
statements; (v) the Company's Current Report on Form 8-K dated October 16, 1996;
and (vi) all other reports filed by the Registrant pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by the Annual
Report referred to in (i) above. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the consummation of the Exchange Offer shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
5
<PAGE> 8
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Holders of
the Outstanding Notes should carefully consider the factors set forth in "Risk
Factors."
THE COMPANY
Paging Network, Inc. (the "Company") is the largest provider of paging
services in the United States. As of June 30, 1996, the Company had
approximately 7.9 million pagers in service in the United States, more than the
combined number of pagers in service of the second and third largest U.S.
providers of paging services. The Company provides paging services in all 50
states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico,
including local paging service in virtually all of the largest 100 markets (in
population) in the United States. The Company believes that it is one of the
fastest growing major providers of paging and wireless messaging services in the
United States and that it has the lowest cost operating structure, which enables
it to compete aggressively on price while maintaining high quality service. See
"Business -- Strategy."
The Company's revenues from services, rent and maintenance, plus product
sales, less the cost of products sold ("Net Revenues"), and the number of pagers
in service with its subscribers have increased rapidly over the past five years.
The Company's Net Revenues have grown from $111.2 million in 1990 to $552.6
million in 1995, a compound annual rate of approximately 38%. From January 1,
1990 to December 31, 1995, the number of pagers in service with subscribers of
the Company (net of dispositions of paging operations) has grown at a compound
annual rate of approximately 49%. From 1990 to 1995, earnings before interest,
income taxes, depreciation and amortization ("EBITDA") have increased from $39.3
million to $201.1 million, representing a compound annual growth rate of
approximately 39%. (EBITDA is not a measure defined in generally accepted
accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.) See "Business -- General."
The Company's strategy is to strengthen its industry leadership by
continuing to provide superior paging and messaging services at prices generally
below those of the competition. The Company intends to significantly increase
its market share and the number of paging units in service in its direct and
indirect sales channels and its National Accounts Division by focusing on a
variety of new products and services. The Company also intends to enhance the
overall effectiveness of its nationwide digital transmission network for one-way
messaging services. Key components of the Company's strategy include:
LOW-COST STRUCTURE -- Management believes the key to its success in the
paging and wireless communications industry is its ability to provide low-cost,
high-quality service. The Company has achieved its status as a low-cost provider
because of two primary factors. First, because the Company is one of the largest
volume purchasers of pagers and paging infrastructure equipment, it is able to
obtain volume discounts not available to many of its competitors. Second, the
Company has made investments which improve the efficiency of its operations,
including investments in administrative and customer information systems and
high-quality, large-capacity transmission systems which allow the Company to
serve more customers on fewer frequencies and to operate with less manpower.
- --------------------------------------------------------------------------------
6
<PAGE> 9
CONTINUED GROWTH IN CORE PAGING BUSINESS -- The Company currently
provides local, regional and nationwide paging services utilizing primarily
numeric display and alphanumeric display pagers, with voice mail available as a
supplemental service. The Company is also the exclusive wireless provider of CNN
news, sports, and financial market headlines. In 1995, exclusive of
acquisitions, pagers in service with subscribers of the Company grew by
approximately 2 million units, or 45%. Through a combination of increased
penetration and market share gains, the Company believes its core paging
business will continue to provide significant future growth.
SUPERIOR GEOGRAPHIC COVERAGE AND NETWORK INFRASTRUCTURE -- The Company
believes that its geographic coverage and state-of-the-art paging network
combine to provide a superior paging service. The Company provides paging
services in virtually all of the largest 100 markets (in population) in the
United States and its paging system reaches more than 90% of the U.S.
population. The Company utilizes state-of-the-art network infrastructure
equipment which enables it to service a high number of pagers per frequency,
lowering the Company's infrastructure expenditure per subscriber.
SPECTRUM -- The Company believes that it has accumulated sufficient
spectrum to accommodate growth across the country for the foreseeable future and
considers its extensive spectrum holdings to be one of its most important
strategic assets. The Company has five nationwide frequencies for its paging
services, more than any other paging provider, and significant local frequencies
in the major U.S. markets. In addition, in 1994 the Company acquired three
nationwide narrowband personal communication services ("PCS") frequencies in a
Federal Communications Commission ("FCC") auction at a cost of $197 million. In
1996 the Company participated in the FCC auction of specialized mobile radio
("SMR") frequency licenses, and ultimately won two to four blocks of two-way
spectrum across the United States for a total of $45.6 million. The Company is
in the process of purchasing exclusive rights to certain of these SMR
frequencies from incumbent operators. Expenditures for such purchases are
estimated to total $200 million in 1996 and 1997. Total SMR frequency acquired
is expected to approximate three times the frequency acquired in the 1994 PCS
auctions.
The Company will utilize the PCS and SMR frequencies to offer products
requiring two-way service, such as VoiceNow(R) and low-cost, nationwide
alphanumeric service. To increase network capacity, a paging carrier can either
add additional transmitters to the system or utilize additional spectrum. The
Company believes utilizing SMR frequencies, rather than adding transmitters,
will provide a greater return on investment and allow for significantly greater
numbers of subscribers.
TWO-WAY WIRELESS SERVICES -- The Company is working with Motorola, Inc. and
Glenayre Technologies, Inc. to deploy a new nationwide two-way digital
transmission network using its PCS and SMR frequencies which it believes will be
the highest quality, most extensive and most cost-effective network of its kind
in the country. This network will represent the next generation of wireless
messaging technology, with greater speed and capacity than existing networks.
Management believes that this network and the Company's nationwide frequencies
will offer significant strategic opportunities. While paging will remain the
Company's core business, this network will be a strategic asset that allows
further penetration of the business market with new communications services and
new opportunities for growth in the consumer market.
- - VOICENOW(R) -- The new two-way network will initially be used primarily for
VoiceNow(R), the Company's new digitized voice messaging service, which the
Company is currently field testing. Because of its features, the Company
believes VoiceNow(R) will appeal to the consumer market not traditionally
reached by paging services as well as businesses. VoiceNow(R) subscribers will
carry a portable receiver, approximately the same size as an alphanumeric
pager, that is capable of receiving, storing and playing brief digitized voice
messages. The Company expects to price the VoiceNow(R) service at
approximately $9.95 per month for local service plus the lease of the
subscriber device. Once technological and marketing tests are complete, the
Company intends to begin commercial deployment throughout the country. The
Company expects to have several hundred units in service with selected
commercial customers by the end of 1996 and a major launch of the product in
the first quarter of 1997.
7
<PAGE> 10
- - OTHER NEW TWO-WAY WIRELESS SERVICES -- In addition to the traditional paging
services and VoiceNow(R), the Company expects to introduce other two-way
messaging products, such as a new, low-cost, nationwide alphanumeric paging
and data messaging services. The new alphanumeric service is expected to be
deployed over the Company's new nationwide two-way network in 1997. The new
two-way network uses less spectrum by determining the location of the
alphanumeric pager and sending the message via typically the closest
transmitter, rather than by all transmitters simultaneously. By utilizing the
closest transmitter to send the message the costs of providing nationwide
alphanumeric service approximates the cost of providing local alphanumeric
service today. The Company expects that this new low-cost system will enable
it to provide nationwide alphanumeric service to customers at lower prices and
that this will increase the demand for alphanumeric paging and will expand the
Company's market position.
DISTRIBUTION -- The Company believes its distribution channels provide the
broadest marketing reach in the industry. The Company uses three distribution
channels -- direct, indirect and its National Accounts Division. In the direct
channel, the Company leases or sells pagers to customers and charges a monthly
fee for paging service. In the indirect channel, the Company sells pagers to
third parties and provides paging service at reduced rates. The resellers, in
turn, lease or resell the pagers to their own subscribers and resell the
Company's paging service under marketing agreements. The reseller is responsible
for customer service, billing and other associated expenses. Through its
National Accounts Division, the Company partners with other companies that are
regional or national in scope with large client bases. These partners market the
Company's paging services to their customers or potential customers, with the
Company providing a variety of services, which can include pager leasing,
customer service, order fulfillment, and billing. Throughout 1995 and 1996 the
Company has been selected by a variety of companies to provide these services,
including Citizens Telecom, Comcast Cellular, Communications Expo, GTE Telephone
Operations ("GTE"), MCI Communications ("MCI"), Sprint TeleCommunications
Venture ("Sprint"), and TransNational Communications International. The Company
believes these marketing affiliates, which primarily reach the consumer market,
also offer an excellent means of selling, distributing and servicing its
VoiceNow(R) product.
INTERNATIONAL EXPANSION -- On April 1, 1996, the Company, with its Canadian
partner, Madison Venture Corp., commenced offering paging services in Canada. In
September 1996, the Company announced that it had purchased a 25% interest in a
Spanish paging company. The Company is considering other opportunities for
international expansion. Paging market penetration in many international markets
is relatively low, and many such markets have only a small number of existing
paging providers. The Company believes that in these areas its strategy of
low-cost, high quality service is likely to be successful. The Company's goal is
to create a portfolio of international operations. The Company expects to invest
up to $100 million in this endeavor through 1998, including approximately $32
million invested to date. Additional investments will depend on such factors as
growth rates, new market opportunities and execution of financing plans that
maximize value for the Company's stockholders.
RECENT DEVELOPMENTS
On October 24, 1996, the Company reported consolidated Net Revenues for the
third quarter of 1996 of $180.8 million and EBITDA of $65 million. EBITDA
margins for such period were 36%. The Company added 562,706 net new subscribers
in service during the quarter. These results include the impact from the
Company's international operations, which accounted for $2.5 million in EBITDA
losses and 12,358 net new subscribers in service. The Company's domestic EBITDA
margins were 37.5%.
On October 16, 1996 the Company completed an offering of $500 million of
the Outstanding Notes, the net proceeds of which were used to repay
approximately $417.2 million of revolving loans and accrued interest under its
Credit Agreement, with the balance to be used for frequency acquisitions,
capital expenditures and general corporate purposes.
8
<PAGE> 11
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER
THE EXCHANGE NOTES...... The form and terms of the Exchange Notes are identical
in all material respects to the terms of the
Outstanding Notes for which they may be exchanged
pursuant to the Exchange Offer, except for certain
transfer restrictions and registration rights relating
to the Outstanding Notes and except for certain
interest provisions relating to such registration
rights described below under "Description of the
Exchange Notes."
THE EXCHANGE OFFER...... The Company is offering to exchange up to $500,000,000
aggregate principal amount of its registered 10% Senior
Subordinated Notes due October 15, 2008 (the "Exchange
Notes") for up to $500,000,000 aggregate principal
amount of its outstanding unregistered 10% Senior
Subordinated Notes due October 15, 2008 (the
"Outstanding Notes"). Outstanding Notes may be
exchanged only in integral multiples of $1,000.
EXPIRATION DATE;
WITHDRAWAL OF TENDER.. The Exchange Offer will expire at 5:00 p.m., New York
time, on , 1996, or such later date to
which it is extended by the Company in its sole
discretion (the "Expiration Date"). The Exchange Offer
will not in any event be extended to a date beyond
, 1997. The tender of Outstanding Notes
pursuant to the Exchange Offer may be withdrawn at any
time prior to 5:00 p.m., New York time, on the
Expiration Date. Any Outstanding Notes not accepted for
exchange for any reason will be returned without
expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the
Exchange Offer.
CERTAIN CONDITIONS TO
THE EXCHANGE OFFER.... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Certain Conditions to the
Exchange Offer."
PROCEDURES FOR TENDERING
OUTSTANDING NOTES..... Each holder of Outstanding Notes wishing to accept the
Exchange Offer must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and
mail or otherwise deliver such Letter of Transmittal,
or such facsimile, together with such Outstanding Notes
(or a timely confirmation of book-entry transfer of
such Outstanding Notes, if such procedure is available)
and any other required documentation to the Exchange
Agent (as defined) at the address set forth herein. By
executing the Letter of Transmittal, each holder will
represent to the Company that, among other things, (i)
any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, (ii)
it is not engaging in, and does not intend to engage
in, a distribution of the Exchange Notes, (iii) it has
no arrangement with any person to participate in the
distribution of the Exchange Notes and (iv) it is not
an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company.
INTEREST ON THE EXCHANGE
NOTES................. The Exchange Notes will bear interest from October 16,
1996 at the rate of 10% per annum, payable on April 15
and October 15, commencing April 15, 1997, to holders
of record on the immediately preceding April 1 and
October 1, respectively. Holders of Outstanding Notes
whose Outstanding Notes are accepted for exchange will
be deemed to have waived
- --------------------------------------------------------------------------------
9
<PAGE> 12
- --------------------------------------------------------------------------------
the right to receive any payment in respect of interest
on the Outstanding Notes.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS..... Any beneficial owner whose Outstanding Notes are
registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to
tender such Outstanding Notes in the Exchange Offer
should contact such registered holder promptly and
instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Outstanding Notes,
either make appropriate arrangements to register
ownership of the Outstanding Notes in such owner's name
or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time and may not be able to be
completed prior to the Expiration Date.
GUARANTEED DELIVERY
PROCEDURES............ Holders of Notes who wish to tender their Outstanding
Notes and whose Outstanding Notes are not immediately
available or who cannot deliver their Outstanding
Notes, the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange
Agent prior to the Expiration Date, must tender their
Outstanding Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
REGISTRATION
REQUIREMENTS.......... The Company has agreed to use its best efforts to
consummate the Exchange Offer to offer holders of the
Outstanding Notes an opportunity to exchange their
Outstanding Notes for the Exchange Notes which will be
issued without legends restricting the transfer
thereof. However, if on or before the date of
consummation of the Exchange Offer the existing
Commission interpretations are changed such that the
Exchange Notes would not in general be freely
transferable on such date, the Company has agreed, in
lieu of effecting registration of the Exchange Notes,
to use its best efforts to cause a registration
statement under the Securities Act relating to a shelf
registration of the Outstanding Notes for resale by
holders (the "Resale Registration") to become effective
and to remain effective for a period of up to three
years after the time and date as of which the
Commission declares the Resale Registration effective.
See "The Exchange Offer -- Purpose and Effect of the
Exchange Offer."
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS.... For a discussion of certain federal income tax
considerations relating to the exchange of Notes, see
"United States Federal Income Tax Consequences of the
Exchange of Notes."
USE OF PROCEEDS......... There will be no cash proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
EXCHANGE AGENT.......... Fleet National Bank is the Exchange Agent. The address
and telephone number of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent."
- --------------------------------------------------------------------------------
10
<PAGE> 13
- --------------------------------------------------------------------------------
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
SECURITIES.............. $500,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due October 15, 2008.
MATURITY DATE........... October 15, 2008.
INTEREST PAYMENT DATES.. April 15 and October 15, commencing April 15, 1997.
OPTIONAL REDEMPTION..... The Exchange Notes will be redeemable, in whole or in
part, at the option of the Company at any time on or
after October 15, 2001 at the redemption prices set
forth herein plus accrued interest to the redemption
date.
REPURCHASE OBLIGATION... The Company will be required to offer to repurchase all
outstanding Exchange Notes at 101% of principal amount
plus accrued interest promptly after the occurrence of
a Change of Control (as defined). See "Description of
the Exchange Notes -- Covenants -- Change of Control."
MANDATORY SINKING
FUND.................. None.
RANKING................. The Exchange Notes will be general unsecured
obligations of the Company and will be subordinated to
all existing and future Senior Debt (as defined) of the
Company. The Indenture pursuant to which the Exchange
Notes are to be issued will provide that the Company
will not incur any debt that is subordinate in right of
payment to any Senior Debt of the Company and senior in
right of payment to the Exchange Notes. The Exchange
Notes will rank pari passu with the Company's 11.75%
Senior Subordinated Notes due May 15, 2002, the
Company's 8.875% Senior Subordinated Notes due February
1, 2006, and the Company's 10.125% Senior Subordinated
Notes due August 1, 2007. See "Description of the
Exchange Notes -- Covenants -- Limitation on Certain
Debt" and " -- Subordination."
CERTAIN COVENANTS....... The Indenture will contain certain covenants that,
among other things, limit the ability of the Company
and its subsidiaries to incur indebtedness, pay
dividends, engage in transactions with affiliates, sell
assets, and engage in mergers and consolidations and
other acquisitions. See "Description of the Exchange
Notes -- Covenants."
- --------------------------------------------------------------------------------
11
<PAGE> 14
- --------------------------------------------------------------------------------
SUMMARY FINANCIAL AND OPERATING DATA
<TABLE>
The summary financial data presented below are derived from the audited and
unaudited consolidated financial statements of the Company. The unaudited
financial statements include all adjustments, consisting of normal recurring
adjustments, which management considers necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the six months ended June 30, 1996, are not necessarily indicative
of the results that may be expected for the entire year ending December 31,
1996. The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus and
should be read in conjunction with such information and statements. Throughout
this section the Company makes reference to EBITDA, which is defined as earnings
before interest, income taxes, depreciation and amortization. EBITDA is a key
performance measure used in the paging industry and is one of the financial
measures by which the Company's covenants are calculated under the agreements
governing its debt obligations. EBITDA is not a measure defined in generally
accepted accounting principles and should not be considered in isolation or as a
substitute for measures of performance in accordance with generally accepted
accounting principles.
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Services, rent and maintenance
revenues........................... $145,793 $206,198 $294,979 $389,919 $532,079 $240,310 $325,811
Product sales........................ 20,575 51,600 78,915 99,765 113,943 54,756 59,741
-------- -------- -------- -------- -------- -------- --------
Total revenues....................... 166,368 257,798 373,894 489,684 646,022 295,066 385,552
Cost of product sold................. (13,126) (35,909) (62,495) (78,102) (93,414) (44,346) (50,476)
-------- -------- -------- -------- -------- -------- --------
153,242 221,889 311,399 411,582 552,608 250,720 335,076
Services, rent and maintenance
expenses........................... 25,093 37,437 57,343 74,453 109,484 48,727 69,561
Selling expenses..................... 21,491 34,135 44,836 60,555 67,561 31,938 39,081
General and administrative
expenses........................... 49,397 74,754 108,993 136,539 174,432 81,240 102,867
Depreciation and amortization........ 41,154 58,683 87,430 107,362 148,997 67,420 96,855
-------- -------- -------- -------- -------- -------- --------
Total operating expenses............. 137,135 205,009 298,602 378,909 500,474 229,325 308,364
-------- -------- -------- -------- -------- -------- --------
Operating income..................... 16,107 16,880 12,797 32,673 52,134 21,395 26,712
Interest expense..................... 25,365 23,638 32,808 53,717 102,846 44,385 59,888
Interest income...................... -- -- -- 3,079 6,511 -- 2,538
-------- -------- -------- -------- -------- -------- --------
Loss before extraordinary item....... (9,258) (6,758) (20,011) (17,965) (44,201) (22,990) (30,638)
Extraordinary item(1)................ -- (14,884) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net loss............................. $ (9,258) $(21,642) $(20,011) $(17,965) $(44,201) $(22,990) $(30,638)
======== ======== ======== ======== ======== ======== ========
Net loss per common share(2):
Before extraordinary item.......... $ (0.11) $ (0.06) $ (0.20) $ (0.18) $ (0.43) $ (0.23) $ (0.30)
Extraordinary item................. -- (0.15) -- -- -- -- --
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<CAPTION>
DECEMBER 31, JUNE 30, 1996
-------------------------------------------------------------- ---------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(3)
--------- --------- --------- --------- ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............... $190,645 $304,747 $371,556 $706,008 $1,228,338 $1,218,022 $1,443,772
Long-term obligations,
including current
maturities............... 146,029 267,000 342,500 504,000 1,150,000 1,195,516 1,421,266
Total stockholders' equity
(deficit)................ 16,578 (4,818) (23,366) (39,908) (80,784) (109,233) (109,233)
</TABLE>
12
<PAGE> 15
- --------------------------------------------------------------------------------
<TABLE>
OTHER DATA:
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagers in service (at end of period)... 1,281,643 2,077,954 3,068,569 4,408,842 6,737,907 5,415,269 7,881,764
Pagers in service per employee
(at end of period)................... 765 778 974 1,103 1,441 1,301 1,500
EBITDA (in thousands).................. $ 57,261 $ 75,563 $ 100,227 $ 140,035 $ 201,131 $ 88,815 $ 123,567
Capital expenditures (in thousands).... $ 71,875 $ 145,970 $ 145,625 $ 213,308 $ 312,289 $ 120,400 $ 191,340
EBITDA as a percentage of Net
Revenues(4).......................... 37.4% 34.1% 32.2% 34.0% 36.4% 35.4% 36.9%
Ratio of earnings to fixed
charges(5,6)......................... -- -- -- -- -- -- --
Ratio of EBITDA to interest expense.... 2.26x 3.20x 3.05x 2.61x 1.96x 2.00x 2.06x
Ratio of long-term obligations,
including current maturities, to
EBITDA(7)............................ 2.55x 3.53x 3.42x 3.60x 5.72x 4.88x 5.07x
Pro forma ratio of latest twelve
months' EBITDA to interest
expense(8)........................... -- -- -- -- -- -- 1.60x
Pro forma ratio of long-term
obligations to latest twelve months'
EBITDA(8)............................ -- -- -- -- -- -- 6.03x
<FN>
- ---------------
(1) Represents an extraordinary charge to terminate certain interest rate swaps
and to write-off loan origination fees associated with the Company's prior
credit agreement for its senior bank debt.
(2) Per share amounts have been restated to reflect stock splits in 1991, 1993
and 1995.
(3) As adjusted to give effect to the issuance of the Outstanding Notes and the
application of the net proceeds thereof. See "Use of Proceeds."
(4) Net Revenues represent revenues from services, rent and maintenance plus
product sales less cost of products sold.
(5) Earnings consist of loss before extraordinary item plus fixed charges. Fixed
charges consist of interest expense, amortization of debt financing costs,
and the portion of rental expense which management believes is
representative of the interest component of rental expense. For the years
ended December 31, 1991, 1992, 1993, 1994, and 1995, and for the six months
ended June 30, 1995 and 1996, earnings were insufficient to cover fixed
charges by $9.3 million, $6.8 million, $20.0 million, $18.0 million, $44.2
million, $23.0 million and $30.6 million, respectively.
(6) The pro forma deficiency of earnings available to cover fixed charges for
the year ended December 31, 1995 and the six months ended June 30, 1996 is
$47.4 million and $33.4 million, respectively, assuming a portion of the net
proceeds from the Outstanding Notes was used to repay borrowings under the
Credit Agreement as of January 1, 1995 and January 1, 1996, respectively.
(7) The ratios of long-term obligations to EBITDA for the six months ended June
30, 1995 and 1996 have been calculated as long-term obligations outstanding
as of June 30, 1995 and 1996 divided by EBITDA for the twelve months ended
June 30, 1995 and 1996, respectively.
(8) The pro forma ratio of the latest 12 months' EBITDA to interest expense and
the pro forma ratio of long-term obligations to the latest 12 months' EBITDA
assume the sale of the Outstanding Notes occurred on July 1, 1995 and that
the net proceeds were used to repay borrowings under the Credit Agreement.
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 16
RISK FACTORS
Prior to tendering Outstanding Notes in the Exchange Offer, holders of
Outstanding Notes should read this entire Prospectus carefully and should
consider, among other things, the risks and the speculative factors inherent in
and affecting the Company's business described below and throughout this
Prospectus.
SUBSTANTIAL CURRENT AND FUTURE INDEBTEDNESS
As a result of its rapid growth, the Company has incurred significant
amounts of indebtedness. As of October 28, 1996 the Company had $1.4 billion
(including the Outstanding Notes) in principal amount of senior subordinated
notes outstanding. The Company may make additional borrowings under the Credit
Agreement (as defined in "Description of Senior Debt"), although at October 28,
1996 no borrowings were outstanding under the Credit Agreement. In order to
continue its growth, the Company anticipates that the incurrence of additional
indebtedness will be required to continue to expand its paging business, develop
a new nationwide digital transmission network for digitized voice and two-way
data messaging services (including its new VoiceNow[Registered Trademark]
service), and pursue international opportunities. If the Company's cash flow
from operations were to decrease substantially and the Company continued to
pursue its growth strategy, the Company could experience difficulty in meeting
its debt service requirements without additional financing. However, if the
Company's cash flow from operations did decrease substantially, the Company
could modify its expansion strategy to reduce or eliminate the need for
additional financing. No assurance can be given that, in the event the Company
were to require additional financing, such additional financing, debt or
equity, would be available to the Company. The Company is not at the present
time experiencing difficulty meeting its debt service requirements and does not
anticipate that it will have any difficulty meeting its debt service
requirements after the issuance of the Exchange Notes contemplated by this
Prospectus. See "Description of Senior Debt," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
CURRENT AND FUTURE NET LOSSES
The Company has incurred a net loss in each year except the year ended
December 31, 1988, although since 1983 the Company has had EBITDA in each year.
(EBITDA is not a measure defined in generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.) A significant contributing factor to these net losses has been the
interest expense on borrowings by the Company to fund its growth and, in periods
prior to 1991, to make cash distributions to stockholders. For the years ended
December 31, 1991, 1992, 1993, 1994 and 1995, the Company had net losses of $9.3
million, $21.6 million, $20.0 million, $18.0 million and $44.2 million,
respectively. For the years ended December 31, 1991, 1992, 1993, 1994 and 1995,
the Company incurred interest expense of $25.4 million, $23.6 million, $32.8
million, $53.7 million and $102.8 million, respectively. At December 31, 1991
the stockholders' equity of the Company was $16.6 million and at December 31,
1992, 1993, 1994 and 1995, the stockholders' deficit of the Company was $4.8
million, $23.4 million, $39.9 million and $80.8 million, respectively. In
addition, due to the Company's strategy of continued growth and geographic
expansion, the Company's capital expenditures have exceeded its EBITDA in each
year since 1983. The Company expects that this trend will continue in 1996, and
possibly in future years, if the Company continues to pursue its growth
strategy. See "Selected Financial and Operating Data."
DEFICIENCY OF EARNINGS TO FIXED CHARGES
Fixed charges of the Company exceeded its earnings before extraordinary
item and fixed charges by $9.3 million, $6.8 million, $20.0 million, $18.0
million and $44.2 million for the years ended December 31, 1991, 1992, 1993,
1994 and 1995, respectively. There can be no assurance that the Company's
earnings before fixed charges will be sufficient to pay interest on the Notes.
14
<PAGE> 17
RISKS OF NEW NATIONWIDE NETWORK AND VOICENOW(R)
The Company will be required to make substantial capital expenditures in
order to develop its new nationwide digital transmission network. While the new
network may be used to provide a variety of digitized voice and two-way data
messaging services, the new network will initially be used primarily for
VoiceNow(R), the Company's new digitized voice messaging service. Once
technological and marketing tests are complete, the Company intends to begin
commercial deployment throughout the country. The Company expects to have
several hundred units in service with selected commercial customers by the end
of 1996 and a major launch of the product in the first quarter of 1997. The
Company currently estimates that the capital expenditures to build the two-way
network, exclusive of the costs of acquiring other frequencies and of
VoiceNow(R) subscriber devices, may total approximately $200 million over 1996
and 1997. However, these capital expenditures could be significantly higher
based on several factors, including the cost of equipment and the design and
configuration of the network. Because VoiceNow(R) is a new service, it has no
existing market, and there can be no assurance that a market for VoiceNow(R)
will develop. In addition, the network requires the use of new technology, and
there can be no assurance that such technology can be successfully applied to
the new network.
COMPETITION AND TECHNOLOGICAL CHANGE
The Company faces direct competition in all the locations in which it
operates. VoiceNow(R) will compete with other existing and future messaging
services and broadband PCS operators. Some of the Company's competitors, which
include certain Regional Bell Operating Companies, possess greater financial and
other resources than the Company. In addition, future technological advances in
the telecommunications industry could create new services or products
competitive with the paging services currently provided by the Company.
Moreover, as the Company introduces new product lines, some of its existing
customers may upgrade from its other products. There can be no assurance that
the Company would not be adversely affected in the event of such competition or
as a result of technological change. See "Business -- Competition."
GOVERNMENT REGULATION/COST OF ADDITIONAL FREQUENCIES
The paging industry is subject to regulation by the FCC and various state
regulatory agencies. There can be no assurance that those agencies will not
adopt regulations or take other actions that would adversely affect the business
of the Company. See "Business -- Regulation." The FCC requires many of those
seeking new frequencies, including the Company and its competitors, to purchase
them through an auction process where more than one person seeks the same
frequency or there are otherwise conflicting applications. In addition, the
Company may purchase additional frequencies from third parties. The Company
cannot predict the cost of acquiring additional frequencies in the future.
SUBORDINATION OF DEBT SECURITIES
The Outstanding Notes are, and the Exchange Notes will be, subordinated
obligations of the Company. By reason of such subordination, in the event of
insolvency, creditors of the Company who are not holders of the Notes may
recover more, ratably, than the holders of the Notes. See "Description of the
Exchange Notes -- Subordination." Claims of creditors of the Company's
subsidiaries will generally have priority with respect to the assets of such
subsidiaries over the claims of the Company and the holders of the Company's
indebtedness, including the Exchange Notes.
INTERNATIONAL OPERATIONS
The Company's international operations are subject to certain political,
economic and other uncertainties, including, among others, risks of war,
expropriation, nationalization, renegotiation or nullification of existing
licenses or treaties, taxation and resource development policies, foreign
exchange and currency restrictions, changing political conditions and other
risks relating to foreign governmental sovereignty.
15
<PAGE> 18
HOLDING COMPANY STRUCTURE
The Company is a holding company which derives all of its operating income
and cash flow from its subsidiaries. The Company must rely entirely upon
distributions from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Notes. The
ability of the Company's subsidiaries to make such payments will be subject to,
among other things, applicable state laws. Claims of creditors of the Company's
subsidiaries will generally have priority with respect to the assets of such
subsidiaries over the claims of the Company and the holders of the Company's
indebtedness. The capital stock of the Company's domestic subsidiaries (as well
as the assets of the Company and its domestic subsidiaries) is pledged to the
Company's bank lenders to secure the Company's obligations under the Credit
Agreement. The Indenture will, among other things, limit the amount of debt that
may be incurred by the Company and its subsidiaries. However, these limitations
are subject to a number of important qualifications. See "Description of the
Exchange Notes -- Covenants."
LIMITED MARKET FOR THE NOTES
Prior to the Exchange Offer, there has been no public market for the
Outstanding Notes. There can be no assurance as to the liquidity of any markets
that may develop for the Exchange Notes, the ability of holders to sell the
Exchange Notes, or the price at which holders would be able to sell the Exchange
Notes. The Company does not intend to list the Exchange Notes for trading on any
national securities exchange or over-the-counter market system. Future trading
prices of the Exchange Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's operating results, and the
market for similar securities. Historically, the market for securities similar
to the Exchange Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities.
The Outstanding Notes are currently eligible for quotation through the
Private Offerings, Resales and Trading Through Automated Linkages System
("PORTAL") of the National Association of Securities Dealers, Inc. Prior to the
date hereof, there has been only a limited private trading market for the
Outstanding Notes. To the extent Outstanding Notes are tendered and accepted in
the exchange, the principal amount of remaining Outstanding Notes will decrease.
Following the consummation of the Exchange Offer, holders of the Outstanding
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Outstanding Notes could be
adversely affected.
FORWARD LOOKING STATEMENTS
Certain statements contained in this Prospectus, such as those concerning
future financial performance and growth, are not historical facts. Such
forward-looking statements are subject to risks and uncertainties and actual
results could differ materially from those set forth in the forward-looking
statements. Among the factors that could cause actual future results to differ
materially from those indicated by the forward-looking statements are
competitive pressures, timing and techniques used in marketing by third-party
distributors and acceptance of the Company's services in the marketplace.
16
<PAGE> 19
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive, in exchange,
Outstanding Notes in like principal amount. The form and terms of the Exchange
Notes are identical in all material respects to the form and terms of the
Outstanding Notes, except as otherwise described herein under "The Exchange
Offer -- Terms of the Exchange Offer." The Outstanding Notes surrendered in
exchange for the Exchange Notes will be retired and cancelled and cannot be
reissued. Accordingly, issuance of the Exchange Notes will not result in any
increase in the outstanding debt of the Company.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996, and as adjusted to give effect to the issuance
of the Outstanding Notes on October 16, 1996 and the application of $417.2
million of the net proceeds thereof to repay borrowings outstanding and accrued
interest under the Credit Agreement. The issuance of the Exchange Notes will not
result in any increase in the outstanding debt of the Company. See "Use of
Proceeds." This information should be read in conjunction with the Company's
Consolidated Financial Statements and related notes appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term obligations(1):
Borrowings under the Credit Agreement(2)...................... $ 403,250 $ --
11.75% Senior Subordinated Notes due May 15, 2002(3).......... 200,000 200,000
8.875% Senior Subordinated Notes due February 1, 2006......... 300,000 300,000
10.125% Senior Subordinated Notes due August 1, 2007.......... 400,000 400,000
10% Senior Subordinated Notes due October 15, 2008............ -- 500,000
Other......................................................... 25,697 25,697
---------- ----------
Total long-term obligations.............................. 1,328,947 1,425,697
Stockholders' deficit(4):
Common stock, $.01 par value (250,000,000 shares authorized;
102,534,887 shares outstanding)............................ 1,026 1,026
Paid-in capital............................................... 124,084 124,084
Accumulated deficit........................................... (256,139) (256,139)
---------- ----------
Total stockholders' deficit.............................. (131,029) (131,029)
---------- ----------
Total capitalization............................................ $1,197,918 $ 1,294,668
========== ==========
</TABLE>
- ---------------
(1) See Note 4 of Notes to Consolidated Financial Statements for the years ended
December 31, 1995 and 1994.
(2) At October 28, 1996, the Company had no revolving indebtedness outstanding
under the Credit Agreement.
(3) The Company anticipates that it will redeem the 11.75% Senior Subordinated
Notes due May 15, 2002 on May 15, 1997, the first date on which such Notes
may be redeemed at the option of the Company.
(4) The Company has authorized 25,000,000 shares of preferred stock, $0.01 par
value per share. At September 30, 1996 there were no preferred shares
issued or outstanding.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Outstanding Notes on October 16, 1996,
the Company and the Initial Purchasers entered into an Exchange and Registration
Rights Agreement ("Registration Rights Agreement"), pursuant to which the
Company agreed (i) to file with the Commission, within 30 days following the
closing of the issue of the Outstanding Notes to the Initial Purchasers (the
"Closing"), an Exchange Offer Registration Statement relating to the Exchange
Offer, pursuant to which securities substantially identical to the Outstanding
Notes (except that such securities will not contain terms with respect to the
special interest payments described below or transfer restrictions) would be
offered in exchange for Outstanding Notes tendered at the option of the holders
thereof and (ii) to use its best efforts to cause the Exchange Offer
Registration Statement to become effective as soon as practicable, but no later
than 75 days following the Closing.
18
<PAGE> 21
If on or before the date of consummation of the Exchange Offer the existing
Commission interpretations are changed such that the Exchange Notes would not in
general be freely transferable on such date, the Company has agreed, in lieu of
effecting registration of the Exchange Notes, to use its best efforts to cause a
registration statement under the Securities Act relating to a shelf registration
of the Outstanding Notes for resale by holders (the "Resale Registration") to
become effective and to remain effective for a period of up to three years after
the time and date as of which the Commission declares the Resale Registration
effective. The Company would, in the event of the Resale Registration, provide
to the holders of the Outstanding Notes copies of the prospectus that is a part
of the registration statement filed in connection with the Resale Registration,
notify such holders when the Resale Registration for the Outstanding Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Outstanding Notes.
The interest rate on the Outstanding Notes is subject to increase under
certain circumstances if the Company is not in compliance with its obligations
under the Registration Rights Agreement. See "Description of the Exchange Notes
- -- Registration Rights; Exchange Offer." Unless the context requires otherwise,
the term "holder" with respect to the Exchange Offer means the registered holder
of the Outstanding Notes or any other person who has obtained a properly
completed bond power from the registered holder.
Each holder of the Outstanding Notes who wishes to exchange such
Outstanding Notes for Exchange Notes in the Exchange Offer will be required to
make certain representations, including representations that (i) any Exchange
Notes to be received by it or any person or entity designated by such holder to
receive Exchange Notes ("designated holder") will be acquired in the ordinary
course of its (or any designated holder's) business, (ii) it (or any designated
holder) is not engaging in, and does not intend to engage in, a distribution of
the Exchange Notes, (iii) it (or any designated holder) has no arrangement with
any person to participate in the distribution of the Exchange Notes and (iv) it
(or any designated holder) is not an "affiliate," as defined in Rule 405 under
the Securities Act, of the Company, or, if it (or any designated holder) is an
affiliate, will comply with the registration and prospectus delivery
requirements of the Securities Act.
RESALE OF EXCHANGE NOTES
Based on positions taken by the staff of the Commission that have been
enunciated in no-action letters issued to third parties, the Company believes
that, except as described below, Exchange Notes issued pursuant to the Exchange
Offer in exchange for Outstanding Notes may be offered for resale, resold and
otherwise transferred by the holders thereof (other than any holder which is (i)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, or (ii) a broker-dealer who acquired Outstanding Notes for
resale pursuant to an exemption from the registration requirements of the
Securities Act) without compliance with the registration and prospectus delivery
requirements under the Securities Act, provided that (A) such Exchange Notes are
acquired in the ordinary course of such holders' business, (B) such holders are
not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such Exchange
Notes, and (C) as provided in the next paragraph certain broker-dealers will be
subject to a prospectus delivery requirement with respect to resales of such
Exchange Notes. Holders who tender Outstanding Notes in the Exchange Offer with
the intention or for the purpose of participating in a distribution of the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale of the
Exchange Notes (unless an exemption from such requirements is otherwise
available).
Each holder who is a broker-dealer and who receives Exchange Notes for its
own account in exchange for Outstanding Notes that were acquired by it as a
result of market making activities or other trading activities (a "Participating
Broker-Dealer") will be required to acknowledge that it will deliver a
prospectus in connection with any resale by it of such Exchange Notes. To date,
the staff of the Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as the exchange
19
<PAGE> 22
pursuant to the Exchange Offer (other than a resale of an unsold allotment from
the sale of the Outstanding Notes to the Initial Purchasers thereof) with the
Prospectus contained in the Exchange Offer Registration Statement. Pursuant to
the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Company has agreed that, for a period of 90
days after the Exchange Offer has been consummated, it will make this
Prospectus, and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
This Prospectus may be used for an offer to resell, resale or other
retransfer of Exchange Notes only as specifically set forth herein. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Outstanding Notes properly tendered and not withdrawn prior to 5:00 p.m.,
New York time, on the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
Outstanding Notes surrendered pursuant to the Exchange Offer. Outstanding Notes
may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and will not have the benefit of any registration rights
agreements or special interest provisions relating thereto. The Exchange Notes
will evidence the same debt as the Outstanding Notes. The Exchange Notes will be
issued under and entitled to the benefits of the Indenture dated as of July 15,
1995 between the Company, and Shawmut Bank, N.A. and Second Supplemental
Indenture dated as of October 15, 1996, between the Company and Fleet National
Bank, as successor to Shawmut Bank, N.A. (the "Trustee") (the Indenture and
Second Supplemental Indenture being referred to herein as the "Indenture"),
which also authorized the issuance of the Outstanding Notes, such that both
series will be treated as a single class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. Holders of Outstanding
Notes do not have any appraisal or dissenters' rights in connection with the
Exchange Offer.
As of the date of this Prospectus, $500,000,000 aggregate principal amount
of the Outstanding Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Outstanding
Notes. There will be no fixed record date for determining registered holders of
Outstanding Notes entitled to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Outstanding Notes which are not tendered for exchange in the Exchange Offer will
remain outstanding and continue to accrue interest and will be entitled to the
rights and benefits such holders have under the Indenture and the Registration
Rights Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Outstanding Notes when, as and if the Company gives oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the Exchange Notes from the
Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Outstanding Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
specified below under "-- Certain Conditions to the Exchange Offer."
20
<PAGE> 23
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York time on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean 5:00 p.m.,
New York time, on the latest date to which the Exchange Offer is extended. The
Exchange Offer will not in any event be extended beyond , 1997.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m.,
New York time, on the next business day after the previously scheduled
Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "-- Certain
Conditions to the Exchange Offer" shall not have been satisfied, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent
or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered holders of
Outstanding Notes. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders, and the Company may extend the Exchange Offer if the
Company determines that an extension is appropriate, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from October 16, 1996 at a rate of
10% per annum, payable on April 15 and October 15, commencing April 15, 1997.
Holders of Outstanding Notes whose Outstanding Notes are accepted for exchange
will be deemed to have waived the right to receive any payment in respect of
interest on the Outstanding Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any Exchange Notes for, any
Outstanding Notes, and may terminate the Exchange Offer as provided herein
before the acceptance of any Outstanding Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's reasonable judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offer; or
(c) any governmental approval has not been obtained, which approval
the Company shall reasonably deem necessary for the consummation of the
Exchange Offer as contemplated hereby.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable judgment. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part.
21
<PAGE> 24
PROCEDURES FOR TENDERING
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the Exchange
Agent prior to 5:00 p.m., New York time, on the Expiration Date. In addition,
either (i) Outstanding Notes must be received by the Exchange Agent along with
the Letter of Transmittal, or (ii) a timely confirmation of book-entry transfer
(a "Book-Entry Confirmation") of such Outstanding Notes, if such procedure is
available, into the Exchange Agent's account at the Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New
York time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder of Outstanding Notes to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on its own behalf, such owner
must, prior to completing and executing the Letter of Transmittal and delivering
its Outstanding Notes, either make appropriate arrangements to register
ownership of the Outstanding Notes in such owner's name or obtain a properly
completed bond power from the registered holder of Outstanding Notes. The
transfer of registered ownership may take considerable time and may not be able
to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case may be, must be guaranteed by an Eligible Institution (as
defined below) unless the Outstanding Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. If signatures on a Letter of Transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantor must be a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of a recognized signature guarantee program (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by a properly completed bond power, in
each case signed by such registered holder as such registered holder's name
appears on such Outstanding Notes with the signature thereon guaranteed by an
Eligible Institution.
If the Letter of Transmittal (or any Outstanding Notes) or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a
22
<PAGE> 25
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Outstanding Notes not properly tendered or any
Outstanding Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular
Outstanding Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Outstanding Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of
Outstanding Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Outstanding Notes or a timely Book-Entry
Confirmation of such Outstanding Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted tendered Outstanding Notes
when, as and if the Company has given written and oral notice thereof to the
Exchange Agent. If any tendered Outstanding Notes are not exchanged pursuant to
the the Exchange Offer for any reason or if Outstanding Notes are submitted for
a greater principal amount than the holder desires to exchange, such
unacceptable or non-exchanged Outstanding Notes will be returned without expense
to the tendering holder thereof (or, in the case of Outstanding Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non-exchanged Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
23
<PAGE> 26
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, or (ii) who cannot deliver
their Outstanding Notes, the Letter of Transmittal or any other required
documents to the Exchange Agent on or prior to the Expiration Date, or (iii) who
are unable to complete the procedure for book-entry transfer on a timely basis,
may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Outstanding Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the Outstanding Notes or a Book-Entry Confirmation, as the case may
be, and any other documents required by the Letter of Transmittal will be
deposited with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Outstanding Notes in proper
form for transfer or a Book-Entry Confirmation, as the case may be, and all
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Outstanding Notes to be withdrawn, identify the Outstanding Notes
to be withdrawn (including the principal amount of such Outstanding Notes), and
(where certificates for Outstanding Notes have been transmitted) specify the
name in which such Outstanding Notes were registered, if different from that of
the withdrawing holder. If certificates for Outstanding Notes have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates, the withdrawing holder must also submit the serial
numbers of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Outstanding Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Outstanding Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Outstanding Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any
Outstanding Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Outstanding Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Outstanding
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility for the Outstanding Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
under "-- Procedures for Tendering" above at any time on or prior to the
Expiration Date.
24
<PAGE> 27
<TABLE>
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for the Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<S> <C> <C>
By Mail/Overnight Courier: By Hand: By Facsimile:
Fleet National Bank Fleet National Bank (860) 986-7908
Corporate Trust Operations c/o First Chicago Trust Co. (For Eligible Institutions Only)
777 Main Street, MSN 224 14 Wall Street, 8th Floor Confirm by Telephone:
Hartford, CT 06115 Window No. 2 (860) 986-1271
Attn: Patricia Williams New York, NY 10005
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitations
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees, printing costs and
related fees and expenses.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Outstanding Notes pursuant to the Exchange Offer. If, however, Exchange Notes
or Outstanding Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of Outstanding Notes tendered, or if
tendered Outstanding Notes are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of Outstanding Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer applicable to such Outstanding Notes, as set forth
in the legend thereon, as a consequence of the issuance of the Outstanding Notes
pursuant to the exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the Outstanding Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the
Outstanding Notes under the Securities Act.
25
<PAGE> 28
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial data for the five years ended December 31,
1995 are derived from the audited Consolidated Financial Statements of the
Company. The financial data for the six-month periods ended June 30, 1995 and
1996, are derived from unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring adjustments,
which management considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the six months ended June 30, 1996, are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1996. The
data presented below should be read in conjunction with the Company's
Consolidated Financial Statements, related notes and other financial information
included or incorporated herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Throughout this section the
Company makes reference to EBITDA, which is defined as earnings before interest,
income taxes, depreciation and amortization. EBITDA is a key performance measure
used in the paging industry and is one of the financial measures by which the
Company's covenants are calculated under the agreements governing its debt
obligations. EBITDA is not a measure defined in generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance in accordance with generally accepted accounting
principles.
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Services, rent and maintenance
revenues........................... $145,793 $206,198 $294,979 $389,919 $532,079 $240,310 $325,811
Product sales........................ 20,575 51,600 78,915 99,765 113,943 54,756 59,741
-------- -------- -------- -------- -------- -------- --------
Total revenues....................... 166,368 257,798 373,894 489,684 646,022 295,066 385,552
Cost of product sold................. (13,126) (35,909) (62,495) (78,102) (93,414) (44,346) (50,476)
-------- -------- -------- -------- -------- -------- --------
153,242 221,889 311,399 411,582 552,608 250,720 335,076
Services, rent and maintenance
expenses........................... 25,093 37,437 57,343 74,453 109,484 48,727 69,561
Selling expenses..................... 21,491 34,135 44,836 60,555 67,561 31,938 39,081
General and administrative
expenses........................... 49,397 74,754 108,993 136,539 174,432 81,240 102,867
Depreciation and amortization........ 41,154 58,683 87,430 107,362 148,997 67,420 96,855
-------- -------- -------- -------- -------- -------- --------
Total operating expenses............. 137,135 205,009 298,602 378,909 500,474 229,325 308,364
-------- -------- -------- -------- -------- -------- --------
Operating income..................... 16,107 16,880 12,797 32,673 52,134 21,395 26,712
Interest expense..................... 25,365 23,638 32,808 53,717 102,846 44,385 59,888
Interest income...................... -- -- -- 3,079 6,511 -- 2,538
-------- -------- -------- -------- -------- -------- --------
Loss before extraordinary item....... (9,258) (6,758) (20,011) (17,965) (44,201) (22,990) (30,638)
Extraordinary item(1)................ -- (14,884) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net loss............................. $ (9,258) $(21,642) $(20,011) $(17,965) $(44,201) $(22,990) $(30,638)
======== ======== ======== ======== ======== ======== ========
Net loss per common share(2):
Before extraordinary item.......... $ (0.11) $ (0.06) $ (0.20) $ (0.18) $ (0.43) $ (0.23) $ (0.30)
Extraordinary item................. -- (0.15) -- -- -- -- --
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<CAPTION>
DECEMBER 31, JUNE 30, 1996
-------------------------------------------------------------- ---------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(3)
--------- --------- --------- --------- ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............... $190,645 $304,747 $371,556 $706,008 $1,228,338 $1,218,022 $1,443,772
Long-term obligations,
including current
maturities............... 146,029 267,000 342,500 504,000 1,150,000 1,195,516 1,421,266
Total stockholders' equity
(deficit)................ 16,578 (4,818) (23,366) (39,908) (80,784) (109,233) (109,233)
</TABLE>
26
<PAGE> 29
<TABLE>
OTHER DATA:
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagers in service (at end of period)... 1,281,643 2,077,954 3,068,569 4,408,842 6,737,907 5,415,269 7,881,764
Pagers in service per employee (at end
of period)........................... 765 778 974 1,103 1,441 1,301 1,500
EBITDA (in thousands).................. $ 57,261 $ 75,563 $ 100,227 $ 140,035 $ 201,131 $ 88,815 $ 123,567
Capital expenditures (in thousands).... $ 71,875 $ 145,970 $ 145,625 $ 213,308 $ 312,289 $ 120,400 $ 191,340
EBITDA as a percentage of Net
Revenues(4).......................... 37.4% 34.1% 32.2% 34.0% 36.4% 35.4% 36.9%
Ratio of earnings to fixed
charges(5, 6)........................ -- -- -- -- -- -- --
Ratio of EBITDA to interest expense.... 2.26x 3.20x 3.05x 2.61x 1.96x 2.00x 2.06x
Ratio of long-term obligations,
including current maturities, to
EBITDA(7)............................ 2.55x 3.53x 3.42x 3.60x 5.72x 4.88x 5.07x
Pro forma ratio of latest twelve
months' EBITDA to interest
expense(8)........................... -- -- -- -- -- -- 1.60x
Pro forma ratio of long-term
obligations to latest twelve months'
EBITDA(8)............................ -- -- -- -- -- -- 6.03x
<FN>
- ---------------
(1) Represents an extraordinary charge to terminate certain interest rate swaps
and to write-off loan origination fees associated with the Company's prior
credit agreement for its senior bank debt.
(2) Per share amounts have been restated to reflect stock splits in 1991, 1993
and 1995.
(3) As adjusted to give effect to the issuance of the Outstanding Notes and the
application of the net proceeds thereof. See "Use of Proceeds."
(4) Net Revenues represent revenues from services, rent and maintenance plus
product sales less cost of products sold.
(5) Earnings consist of loss before extraordinary item plus fixed charges. Fixed
charges consist of interest expense, amortization of debt financing costs,
and the portion of rental expense which management believes is
representative of the interest component of rental expense. For the years
ended December 31, 1991, 1992, 1993, 1994, and 1995, and for the six months
ended June 30, 1995 and 1996, earnings were insufficient to cover fixed
charges by $9.3 million, $6.8 million, $20.0 million, $18.0 million, $44.2
million, $23.0 million and $30.6 million, respectively.
(6) The pro forma deficiency of earnings available to cover fixed charges for
the year ended December 31, 1995 and the six months ended June 30, 1996 is
$47.4 million and $33.4 million, respectively, assuming a portion of the net
proceeds from the Outstanding Notes was used to repay borrowings under the
Credit Agreement as of January 1, 1995 and January 1, 1996, respectively.
(7) The ratios of long-term obligations to EBITDA for the six months ended June
30, 1995 and 1996 have been calculated as long-term obligations outstanding
as of June 30, 1995 and 1996 divided by EBITDA for the twelve months ended
June 30, 1995 and 1996, respectively.
(8) The pro forma ratio of the latest 12 months' EBITDA to interest expense and
the pro forma ratio of long-term obligations to the latest 12 months' EBITDA
assume the sale of the Outstanding Notes occurred on July 1, 1995 and that
the net proceeds were used to repay borrowings under the Credit Agreement.
</TABLE>
27
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three years ended December 31, 1995
and the six months ended June 30, 1995 and 1996. It should be read in
conjunction with the Consolidated Financial Statements of the Company and the
related notes included elsewhere in this Prospectus. Throughout this section the
Company makes reference to EBITDA, which is defined as earnings before interest,
income taxes, depreciation and amortization. EBITDA is a key performance measure
used in the paging industry and is one of the financial measures by which the
Company's covenants are calculated under the agreements governing its debt
obligations. EBITDA is not a measure defined in generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance in accordance with generally accepted accounting
principles.
RESULTS OF OPERATIONS
The following table presents certain items in the Consolidated Statements
of Operations as a percentage of revenues from services, rent and maintenance
plus product sales less the cost of products sold ("Net Revenues") for the years
ended December 31, 1993, 1994 and 1995 and the six months ended June 30, 1995
and 1996.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Revenues.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Services, rent and maintenance................ 18.4 18.1 19.8 19.4 20.7
Selling....................................... 14.4 14.7 12.2 12.8 11.7
General and administrative.................... 35.0 33.2 31.6 32.4 30.7
Depreciation and amortization................. 28.1 26.1 27.0 26.9 28.9
----- ----- ----- ----- -----
Operating income................................ 4.1 7.9 9.4 8.5 8.0
Net loss........................................ (6.4) (4.4) (8.0) (9.2) (9.1)
EBITDA.......................................... 32.2 34.0 36.4 35.4 36.9
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Net Revenues for the six months ended June 30, 1996 increased 33.6% over
the same period ended June 30, 1995. Revenues from service, rent and
maintenance, which the Company considers its primary business, increased 35.6%
to $325.8 million for the six months ended June 30, 1996 compared to $240.3
million for the six months ended June 30, 1995. The increase was primarily due
to continued growth in the number of pagers in service with subscribers of the
Company. The number of pagers in service with subscribers at June 30, 1996 was
7,881,764, compared to 5,415,269 pagers in service with subscribers at June 30,
1995, an increase of 45.5%. Contributing to the growth in the number of pagers
in service with subscribers is the Company's expanding local and national
third-party reseller customer base, which includes the impact of the Company's
National Accounts Division. The Company's National Accounts Division represents
a new distribution strategy which gives the Company an opportunity to reach into
broader markets, including consumers, by partnering with large companies that
are regional or national in scope and have large client bases. In addition, the
Company's National Accounts Division includes customer relationships with
national resellers, where it sells pagers to major third parties and provides
paging service at reduced rates. The resellers, in turn, lease or resell the
pagers to their own subscribers and resell the Company's paging service under
marketing agreements. As the Company increases reliance on distribution of
pagers and paging services through resellers and marketing affiliates, the
Company may experience increased variability in quarterly results relating to
the net addition of pagers.
28
<PAGE> 31
Product sales, less cost of products sold, remained relatively flat for the
six month periods ended June 30, 1996 and 1995 ($9.3 million and $10.4 million,
respectively).
Services, rent and maintenance expenses increased 42.8% to $69.6 million
(20.7% of Net Revenues) for the six months ended June 30, 1996, compared to
$48.7 million (19.4% of Net Revenues) for the six months ended June 30, 1995.
This increase in services, rent and maintenance expenses and the increase as a
percentage of Net Revenues were a result of growth in the number of pagers in
service with subscribers of the Company, expenses associated with an increase in
transmitter sites in order to ensure reliable transmission of enhanced messaging
services, and expansion of the nationwide transmission networks.
For the six months ended June 30, 1996, selling expenses increased 22.4% to
$39.1 million (11.7% of Net Revenues) from $31.9 million (12.8% of Net Revenues)
for the six months ended June 30, 1995. This increase resulted from the addition
of sales personnel to support continued growth in both Net Revenues and the
number of pagers in service with subscribers. The decline in selling expenses as
a percentage of Net Revenues is primarily attributable to the expansion of local
and national third-party resellers, for which the Company incurred less selling
costs on units placed in service through this channel than through the direct
channel. In addition, since sales commissions are paid at the time a new unit is
placed in service and not in subsequent months when the unit continues to
generate revenue, the Company's continued growth in the number of pagers in
service results in the decline in selling expenses as a percentage of the Net
Revenues.
General and administrative expenses increased 26.6% to $102.9 million
(30.7% of Net Revenues) for the six months ended June 30, 1996, compared to
$81.2 million (32.4% of Net Revenues) for six months ended June 30, 1995. The
increase in general and administrative expenses occurred to support the growth
in the number of pagers in service with subscribers of the Company. The decline
in general and administrative expenses as a percentage of Net Revenues is
primarily attributable to the improved revenue performance of operations opened
in 1992 through 1994. Historically, domestic start-up operations have typically
required three to four years to achieve results similar to the Company's more
mature operations.
Depreciation and amortization expenses increased 43.7% to $96.9 million
(28.9% of Net Revenues) for the first six months of 1996 compared to $67.4
million (26.9% of Net Revenues) for the first six months of 1995. The increases
in depreciation and amortization expenses were primarily attributable to the
increase in the number of pagers owned by the Company and leased to subscribers;
the increase in other paging equipment, primarily in the number of transmitters,
to support the increase in the number of units in service with subscribers; and
the acquisitions discussed in Note 7 to the consolidated financial statements.
Operating income increased from $21.4 million for the six months ended June
30, 1995 to $26.7 million for the six months ended June 30, 1996.
As a result of the above factors, for the six months ended June 30, 1996,
EBITDA increased 39.1% to $123.6 million (36.9% of Net Revenues) compared to
$88.8 million (35.4% of Net Revenues) for the corresponding period in 1995.
EBITDA and the percent of Net Revenues were negatively impacted by the start-up
operations in the Company's international operations. For the six months ended
June 30, 1996, domestic EBITDA increased 41.8% to $125.9 million (37.6% of Net
Revenues).
Interest expense increased $15.5 million for the six month period ended
June 30, 1996, as compared to the corresponding period in 1995, due to a higher
average level of indebtedness outstanding in 1996. The average level of
indebtedness outstanding during the six months ended June 30, 1996 was
approximately $1.2 billion compared to approximately $721.5 million outstanding
during the six months ended June 30, 1995.
Interest income for the six months ended June 30, 1996 was $2.5 million.
The interest income was a result of investing the net proceeds of the 10.125%
Senior Subordinated Notes issued in July 1995.
29
<PAGE> 32
YEARS ENDED DECEMBER 31, 1995, DECEMBER 31, 1994 AND DECEMBER 31, 1993
Net Revenues for the year ended December 31, 1995 were $552.6 million, an
increase of 34.3% over $411.6 million for the year ended December 31, 1994. Net
Revenues for the year ended December 31, 1994 increased 32.2% from $311.4
million for the year ended December 31, 1993. Revenues from services, rent and
maintenance, which the Company considers its primary business, increased 36.5%
to $532.1 million for the year ended December 31, 1995, compared to $389.9
million for the year ended December 31, 1994. Services, rent and maintenance
revenues for the year ended December 31, 1994 increased 32.2% from $295.0
million for the year ended December 31, 1993. These increases were primarily due
to continued growth in the number of pagers in service with subscribers of the
Company. The number of pagers in service with subscribers at December 31, 1995,
1994 and 1993 was 6,737,907, 4,408,842, and 3,068,569, respectively. The
increase in the pagers in service with subscribers from December 31, 1994 to
December 31, 1995 and from December 31, 1993 to December 31, 1994 was 52.8% and
43.7%, respectively. The net gains in pagers in service in 1995 was 2,329,065,
which includes the impact of the Company's National Accounts Division and
approximately 343,000 pagers from the acquisition of certain paging assets of
Comtech, Inc. -- Paging Division ("Comtech"); SNET Paging, Inc. and its wholly
owned subsidiary, TNI Associates, Inc. ("SNET Paging"); PageAmerica of
California; PageAmerica of Florida; Page Florida; International Paging Corp.;
and Celpage, Inc. -- Atlanta Branch ("Celpage"). The Company's National Accounts
Division represents a new distribution strategy which gives the Company an
opportunity to reach into a broader market, including consumers, by partnering
with large companies that are regional or national in scope and have large
client bases. In addition, the Company's National Accounts Division includes
customer relationships with national resellers, where it sells pagers to major
third parties and provides paging service at reduced rates. The resellers, in
turn, lease or resell the pagers to their own subscribers and resell the
Company's paging service under marketing agreements.
Product sales, less cost of products sold, was relatively flat for the year
ended December 31, 1995 compared to the year ended December 31, 1994.
Product sales, less cost of products sold, were $20.5 million (3.7% of Net
Revenues) for 1995 compared to $21.7 million (5.3% of Net Revenues) for 1994.
Product sales, less cost of products sold, were $16.4 million (5.3% of Net
Revenues) for the year ended December 31, 1993. The increase in product sales,
less cost of products sold, from 1993 to 1994 was primarily attributable to the
Company's continued expansion through indirect sales channels, which accounted
for 1,994,867 and 1,204,850 pagers in service with subscribers at December 31,
1994 and 1993, respectively, an increase of 65.6%. The decline in product sales,
less cost of products sold, as a percentage of Net Revenues in 1995 is primarily
attributable to a lower product sales margin being derived in 1995 than in 1994
as a result of more competitive pricing for product sales. Management expects
this competitive pricing trend to continue in 1996.
Services, rent and maintenance expenses for the year ended December 31,
1995 increased 47.1% to $109.5 million (19.8% of Net Revenues) compared to $74.5
million (18.1% of Net Revenues) for the year ended December 31, 1994. Services,
rent and maintenance expenses for the year ended December 31, 1994 increased by
29.8% from $57.3 million (18.4% of Net Revenues) for the year ended December 31,
1993. These increases in services, rent and maintenance expenses and the
increase as a percentage of Net Revenues from 1994 to 1995 were a result of
growth in the number of pagers in service with subscribers of the Company
(including pagers added through acquisitions), expenses associated with an
increase in transmitter sites in order to ensure reliable transmission of
enhanced messaging services, and expansion of nationwide transmission networks.
For the year ended December 31, 1995, selling expenses increased 11.6% to
$67.6 million (12.2% of Net Revenues) from $60.6 million (14.7% of Net Revenues)
for the year ended December 31, 1994. Selling expenses for the year ended
December 31, 1994 increased by 35.1% from $44.8 million (14.4% of Net Revenues)
for the year ended December 31, 1993. These increases resulted from the addition
of sales personnel to support continued growth in both Net Revenues and the
number of pagers in service with subscribers. The increase in selling expenses
as a percentage of Net Revenues from 1993 to 1994 was also attributable in part
to additional expenditures for advertising. Advertising expenditures
30
<PAGE> 33
increased from approximately $2.0 million (0.7% of Net Revenues) in 1993 to $7.8
million (1.9% of Net Revenues) in 1994. The decline in selling expenses as a
percentage of Net Revenues for 1995 as compared to the prior year was
attributable primarily to the expansion of local and national third-party
resellers, for which the Company incurred less selling costs on units placed in
service through this channel than through the direct channel. In addition, since
sales commissions are paid at the time a new unit is placed in service and not
in subsequent months when the unit continues to generate revenue, the Company's
continued growth in the number of pagers in service results in the decline in
selling expenses as a percentage of the Net Revenues.
General and administrative expenses increased 27.8% to $174.4 million
(31.6% of Net Revenues) for the year ended December 31, 1995, compared to $136.5
million (33.2% of Net Revenues) for the year ended December 31, 1994. General
and administrative expenses for the year ended December 31, 1994 increased by
25.3% from $109.0 million (35.0% of Net Revenues) for the year ended December
31, 1993. The increase in general and administrative expenses occurred to
support the growth in the number of pagers in service with subscribers of the
Company including pagers added through acquisitions. The decline in general and
administrative expenses as a percentage of Net Revenues is primarily
attributable to the improved revenue performance of operations opened in 1992
through 1994. Domestic start-up operations typically require three to four years
to achieve results similar to the Company's more mature businesses.
Depreciation and amortization expenses increased for the year ended
December 31, 1995, as compared to the prior year by 38.8% from $107.4 million to
$149.0 million. Depreciation and amortization expenses for the year ended
December 31, 1994 increased by 22.8% from $87.4 million for the year ended
December 31, 1993. These increases in depreciation and amortization expenses
were primarily attributable to the increase in the number of pagers owned by the
Company and leased to subscribers; the increase in other paging equipment,
primarily in the number of transmitters, to support the increase in the number
of units in service with subscribers; and the aforementioned acquisitions.
Operating income increased 59.6% from $32.7 million for the year ended
December 31, 1994 to $52.1 million for the year ended December 31, 1995.
Operating income for the year ended December 31, 1994 increased 155.3% from
$12.8 million for the year ended December 31, 1993.
As a result of the above factors, for the year ended December 31, 1995,
EBITDA increased 43.6% to $201.1 million (36.4% of Net Revenues) compared to
$140.0 million (34.0% of Net Revenues) for 1994. EBITDA for the year ended
December 31, 1994 increased by 39.7% from $100.2 million (32.2% of Net Revenues)
for the year ended December 31, 1993. The increase in EBITDA margins from 1994
to 1995 and from 1993 to 1994 was primarily attributable to the improved revenue
performance of operations opened in 1992 through 1994.
Interest expense for the years ended December 31, 1995, 1994 and 1993 was
$102.8 million, $53.7 million and $32.8 million, respectively. These increases
in interest expense were primarily due to the average level of indebtedness
outstanding during these years. The average level of indebtedness outstanding
during 1995, 1994 and 1993 was approximately $916.6 million, $490.2 million and
$302.0 million, respectively. Included in interest expense for 1995 was the
write-off of approximately $6.6 million of debt issuance costs related to the
amended and restated $450.0 million credit agreement.
Interest income for the year ended December 31, 1995 was $6.5 million,
compared to $3.1 million for 1994. The interest income in 1995 was the result of
investing the remaining net proceeds of the 10.125% Senior Subordinated Notes.
The interest income in 1994 was a result of investing the remaining net proceeds
of the 8.875% Senior Subordinated Notes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations and expansion into new markets and product lines
require substantial capital investment for the development and installation of
wireless communications systems and for the procurement of pagers and paging
equipment. Capital expenditures (excluding payments for PCS and
31
<PAGE> 34
SMR licenses and acquisitions) were $191.3 million and $120.4 million for the
six months ended June 30, 1996 and 1995, respectively, and $312.3 million,
$213.3 million and $145.6 million for the years ended December 31, 1995, 1994
and 1993, respectively. These investments have been funded by net cash provided
by operating activities and borrowings. The Company's net cash provided by
operating activities was $15.5 million and $34.9 million for the six months
ended June 30, 1996 and 1995, respectively, and $160.6 million, $107.7 million
and $81.7 million for the years ended December 31, 1995, 1994 and 1993,
respectively. The increase in net cash provided by operating activities from
1994 to 1995 was $52.9 million, of which $32.3 million was due to an increase in
accounts payable, arising from a significant amount of paging and other
equipment purchased in the fourth quarter of 1995. Inventories increased from
$14.1 million at December 31, 1995 to $32.3 million at June 30, 1996, largely
due to purchases to support the Company's expanding third-party reseller and
marketing affiliate distribution channels.
In 1994 the Company acquired three nationwide narrowband PCS frequencies in
an FCC auction at a cost of $197 million. In 1996 the Company participated in
the FCC auction of SMR frequency licenses, and ultimately won two to four blocks
of two-way spectrum across the United States for a total of $45.6 million. The
Company is in the process of purchasing exclusive rights to certain of these SMR
frequencies from incumbent operators. Expenditures for such purchases are
estimated to total $200 million in 1996 and 1997.
The Company intends to employ these PCS and SMR frequencies to build a
two-way network over which it can deploy new products such as its new voice
messaging service, VoiceNow(R). The Company currently estimates that the capital
expenditures to build the two-way network, exclusive of the costs of acquiring
SMR frequencies and of VoiceNow(R) subscriber devices, may total approximately
$200 million over 1996 and 1997.
During 1995, the Company acquired certain paging assets of Comtech, SNET
Paging, two subsidiaries of PageAmerica, Page Florida, International Paging
Corp., and Celpage, including various frequencies and approximately 343,000
pagers in service. The payments for these purchases aggregated approximately
$117.6 million, subject to increase or decrease based on post-closing events of
certain acquisitions.
The Credit Agreement provides for a $1.0 billion revolving loan. Under the
Credit Agreement, the Company is able to borrow, provided it meets certain
financial covenants, the lesser of $1.0 billion or an amount based upon a
calculation which is reduced by total outstanding indebtedness for borrowed
monies (as defined) and outstanding letters of credit. The amount available for
borrowing is equal to a specified multiple of EBITDA for the most recently ended
fiscal quarter multiplied by four. As of September 30, 1996, the Company had
$405.5 million of borrowings outstanding including accrued interest under its
Credit Agreement and had $431.6 million available for additional borrowings. The
Credit Agreement expires on December 31, 2004. The maximum borrowings which may
be outstanding under the Credit Agreement begin reducing on June 30, 2001.
On July 24, 1995 the Company completed an offering of $400 million of
10.125% Notes, the net proceeds of which were used to repay $68.9 million of
revolving loans under a prior credit agreement and an aggregate of approximately
$47.1 million was paid to complete certain acquisitions, with the balance used
for frequency acquisitions, capital expenditures and general corporate purposes.
The Company initially expects to invest approximately $100 million in its
international operations through 1998, including approximately $32 million
invested to date. Additional investments will depend on such factors as growth
rates, new market opportunities and execution of financing plans that maximize
value for the Company's stockholders.
It is anticipated that 1996 net cash from operating activities will be
insufficient to completely fund 1996 capital expenditures (including the costs
to build the two-way network, but excluding frequency purchases and
international opportunities), which are expected to exceed $470 million. A
portion of these expenditures will be funded with existing cash and cash
equivalents and additional borrowings.
32
<PAGE> 35
The Company currently estimates 1996 net additional borrowings may aggregate in
excess of $250 million.
It is anticipated that 1997 net cash from operating activities will be
insufficient to completely fund 1997 capital expenditures (including the costs
to build the two-way network, but excluding frequency purchases and
international opportunities), which are expected to exceed $500 million.
Inflation is not a material factor affecting the Company's business. Paging
system equipment and transmission costs have not increased and pager costs have
actually declined significantly over time; these lower costs have been reflected
in lower prices charged to the Company's subscribers. General operating expenses
such as salaries, employee benefits and occupancy costs are, however, subject to
normal inflationary pressures.
RECENT DEVELOPMENTS
On October 24, 1996, the Company reported consolidated Net Revenues for the
third quarter of 1996 of $180.8 million and EBITDA of $65 million. EBITDA
margins for such period were 36%. The Company added 562,706 net new subscribers
in service during the quarter. These results include the impact from the
Company's international operations, which accounted for $2.5 million in EBITDA
losses and 12,358 net new subscribers in service. The Company's domestic EBITDA
margins were 37.5%.
On October 16, 1996 the Company completed an offering of $500 million of
the Outstanding Notes, the net proceeds of which were used to repay
approximately $417.2 million of revolving loans and accrued interest under its
Credit Agreement, with the balance to be used for frequency acquisitions,
capital expenditures and general corporate purposes.
33
<PAGE> 36
BUSINESS
HISTORY
The Company commenced paging operations in June 1982 through the
acquisition of established paging operations. Within two years of commencing
operations, the Company had acquired six paging and related communications
services enterprises, having an aggregate of approximately 41,000 pagers in
service with subscribers as of their respective dates of acquisition by the
Company. In 1983, the Company began to build new paging systems in geographic
markets not previously served by the Company and since then has established 49
new independent paging operations in major metropolitan markets and regional
clusters. As a result of its expansion, the Company had approximately 7.9
million pagers in service with its paging subscribers as of June 30, 1996.
GENERAL
The Company is the largest provider of paging services in the United
States. As of June 30, 1996 the Company had approximately 7.9 million pagers in
service in the United States, more than the combined number of pagers in service
of the second and third largest U.S. providers of paging services. The Company
provides paging services in all 50 states, the District of Columbia, the U.S.
Virgin Islands and Puerto Rico, including local paging service in virtually all
of the largest 100 markets (in population) in the United States. The Company
believes that it is one of the fastest growing major providers of paging
services in the United States and that it has the lowest cost operating
structure, which enables it to compete aggressively on price while maintaining
high quality service. See "-- Strategy," below.
The Company provides local, wide area metropolitan, multi-state regional
and nationwide paging service. Its digital transmission system reaches a
geographic area containing more than 90% of the United States population. The
Company currently provides numeric display and alphanumeric display as its basic
types of paging service. All paging services can be used with the Company's
PageMail(R) or PageMail Box(SM) voice messaging and personalized/automated
answering services. In developing its paging systems, the Company seeks to
achieve optimal building penetration and wide area coverage. As part of its
paging operations, the Company sells, leases and repairs pagers. The Company is
licensed by the FCC to provide service in the geographic markets in which it
conducts paging operations. See "-- Regulation," below. In 1994 the Company
acquired three nationwide narrowband PCS frequencies in an FCC auction at a cost
of $197 million. In 1996 the Company participated in the FCC auction of SMR
frequency licenses, and ultimately won two to four blocks of two-way spectrum
across the United States for a total of $45.6 million. The Company is in the
process of purchasing exclusive rights to certain of these SMR frequencies from
incumbent operators. Expenditures for such purchases are estimated to total $200
million in 1996 and 1997. The Company intends to employ these PCS and SMR
frequencies to build a two-way network over which it can deploy new products
such as its new voice messaging service, VoiceNow(R).
The Company's Net Revenues and the number of pagers in service with its
subscribers have increased rapidly over the past five years. The Company's Net
Revenues have grown from $111.2 million in 1990 to $552.6 million in 1995, a
compound annual rate of approximately 38%, and EBITDA has increased from $39.3
million in 1990 to $201.1 million in 1995, a compound annual rate of
approximately 39%. (EBITDA is not a measure defined in generally accepted
accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.) From January 1, 1990 to December 31, 1995, the
number of pagers in service with subscribers of the Company (net of dispositions
of paging operations) has grown at a compound annual rate of approximately 49%.
The Company has incurred a net loss in each year except the year ended December
31, 1988. A significant contributing factor to these net losses has been the
interest expense on borrowings by the Company to fund its growth and, in periods
prior to 1991, to make cash distributions to stockholders. For the years ended
December 31, 1991, 1992, 1993, 1994 and 1995, the Company had net losses of $9.3
million, $21.6 million, $20.0 million, $18.0 million and $44.2 million,
respectively. For the years ended December 31, 1991, 1992, 1993, 1994 and 1995,
the Company
34
<PAGE> 37
incurred interest expense of $25.4 million, $23.6 million, $32.8 million, $53.7
million and $102.8 million, respectively. At December 31, 1991 the total
stockholders' equity of the Company was $16.6 million and at December 31, 1992,
1993, 1994 and 1995, the stockholders' deficit of the Company was $4.8 million,
$23.4 million, $39.9 million and $80.8 million, respectively.
APPROXIMATE NUMBER OF PAGERS IN SERVICE WITH SUBSCRIBERS OF THE COMPANY
<TABLE>
<CAPTION>
INCREASE
(DECREASE) INCREASE
PAGERS IN IN PAGERS IN PAGERS PAGERS IN
FOR THE SERVICE AT THROUGH THROUGH SERVICE
YEARS ENDED BEGINNING ACQUISITIONS INTERNAL AT END
DECEMBER 31, OF PERIOD (DISPOSITIONS) GROWTH OF PERIOD
- ------------ ---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
1982....................................... -0- 36,120 -0- 36,120
1983....................................... 36,120 5,150 18,451 59,721
1984....................................... 59,721 -0- 30,474 90,195
1985....................................... 90,195 -0- 28,555 118,750
1986....................................... 118,750 -0- 46,566 165,316
1987....................................... 165,316 (4,910) 100,197 260,603
1988....................................... 260,603 (20,656) 153,817 393,764
1989....................................... 393,764 -0- 230,411 624,175
1990....................................... 624,175 (31,323) 299,537 892,389
1991....................................... 892,389 -0- 389,254 1,281,643
1992....................................... 1,281,643 -0- 796,311 2,077,954
1993....................................... 2,077,954 -0- 990,615 3,068,569
1994....................................... 3,068,569 -0- 1,340,273 4,408,842
1995....................................... 4,408,842 343,412 1,985,653 6,737,907
1996 (through June 30)..................... 6,737,907 -0- 1,143,857 7,881,764
</TABLE>
The Company is organized under the laws of the State of Delaware and
conducts its domestic business through its wholly owned subsidiaries. The term
"Company" as used herein refers to both the Company and its subsidiaries unless
the context otherwise requires. The Company's executive offices are located at
4965 Preston Park Boulevard, Suite 600, Plano, Texas 75093. The telephone number
of the Company's executive offices is (972) 985-4100.
PAGING INDUSTRY BACKGROUND
The paging industry has been in existence since 1949 when the FCC allocated
a group of radio frequencies for use in providing one-way and two-way types of
mobile communications services. The industry grew slowly at first as the quality
and reliability of equipment was developed and the market began to perceive the
benefits of mobile communications. Many of the paging industry pioneers started
in the business as an adjunct to their existing telephone answering service or
mobile radio sales and service businesses.
Equipment reliability improved dramatically in the 1970s, and potential
customers gained a better understanding of the time savings and efficiencies
that paging services could provide. In addition, the energy crisis of the early
1970s stimulated industry growth as people sought ways to conserve gasoline and
increase motion efficiency.
The 1980s saw the most significant developments in the industry. First came
the introduction of the numeric display pager which supplanted tone and voice
pagers as the most popular paging product; then the FCC allocated a block of
additional frequencies which expanded the capacity of the industry and allowed
new market entrants in markets where additional frequencies were previously
unavailable; and finally, the industry began consolidating as certain Regional
Bell Operating Companies made significant acquisitions of paging operations.
35
<PAGE> 38
Historically, the industry has been fragmented, with a large number of
small local operators. Despite the acquisitions made by certain Regional Bell
Operating Companies and the consolidation of the industry in the 1980s, at
present there are still more than 600 licensed paging companies in the United
States. However, management believes that approximately 50% of the pagers in
service in the United States now are served by the six companies in the industry
having the largest subscriber bases, of which the Company has the largest
subscriber base.
Although the growth rate of the paging industry is difficult to determine
precisely, industry sources estimate that the number of pagers in service
increased at a compound annual growth rate of approximately 28% during the five
year period ended December 31, 1995. The Company believes there will be
continued rapid growth in the number of subscribers for paging and other one-way
wireless communications services like VoiceNow(@). Industry sources estimate
there were approximately 34 million pagers in service in the United States as of
December 31, 1995.
PAGING OPERATIONS
In general, paging provides a communications link to a paging service
subscriber throughout the paging service area. Each paging subscriber is
assigned a distinct telephone number which the caller dials to activate the
subscriber's pager. When a telephone call for a subscriber is received at one of
the Company's computerized paging terminals, the Company transmits a radio
signal to the subscriber's pager (a pocket-sized radio receiver carried by the
subscriber), which causes the pager to emit a beep or vibrate and, in most
cases, to provide the subscriber with additional information from the caller.
Depending on the type of pager in use, the subscriber may respond based on
information displayed by the pager, or by calling his or her home or office to
receive the message. A pager has an advantage over a landline telephone in that
the pager's reception is not restricted to a single location and, compared to a
cellular portable telephone, a pager is smaller, has a longer battery life,
better building penetration and, most importantly, is substantially less
expensive to use.
The Company currently provides primarily two types of paging service:
numeric display and alphanumeric display. A numeric display pager permits a
caller to transmit to the subscriber a numeric message that may consist of a
telephone number, an account number or coded information, and has the memory
capability to store several such numeric messages that can be recalled by the
subscriber when desired. Alphanumeric display paging service allows subscribers
to receive and store messages consisting of both numbers and letters. The
Company provides numeric display, tone-only and alphanumeric display service in
all its markets.
Numeric display paging service, which was introduced by the paging industry
around 1980, represented approximately 93% of the Company's pagers in service at
December 31, 1995. Alphanumeric display service, which was introduced in the
mid-1980s, but which the Company has only recently begun to market aggressively,
represented 6% of the Company's pagers in service at December 31, 1995.
The effective operating radius of a paging transmitter is approximately 20
to 30 miles from the point of transmission and varies depending upon the terrain
of the coverage area and the characteristics of the transmitter site. The
Company's paging operations link paging transmitters in order to form networks.
The Company's local paging service is offered in almost all United States
population centers of 400,000 or more, which include virtually all of the
largest 100 markets (in population) in the United States. Local paging provides
service in a broad geographic area surrounding the population center and often
includes smaller towns nearby. The Company's regional paging service options
include multi-state areas. The Company's nationwide paging service, which is
marketed under the name PageNet Nationwide(R) Paging, provides paging
transmission service covering a geographic area containing more than 90% of the
United States population in all 50 states, the District of Columbia, the U.S.
Virgin Islands and Puerto Rico. The Company believes that it offers subscribers
a superior nationwide paging service at competitive prices. In addition to the
nationwide narrowband PCS frequencies acquired in the FCC auction, the Company
has acquired three frequencies for its nationwide paging services.
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<PAGE> 39
Primarily in conjunction with its numeric display and alphanumeric display
paging services, the Company also provides voice messaging and
personalized/automated answering services, marketed under the names
PageMail(@)or PageMail BoxSM, enabling a caller to leave a recorded message that
is stored in the Company's computerized message retrieval center. When a message
is left, the subscriber is automatically alerted through a page and can retrieve
the stored voice message by calling the Company's paging terminal. PageMail(@)
or PageMail BoxSM are in use in conjunction with approximately 11.7% of the
pagers in service with subscribers of the Company on June 30, 1996.
The Company is working with Motorola, Inc. and Glenayre Technologies, Inc.
to develop a new nationwide digital transmission network for advanced messaging
services ("InFLEXion"). The first product to be introduced on the new network
will be VoiceNow(@), which the Company commenced field testing in 1996. Unlike
PageMail(R) and PageMail BoxSM, which require that a subscriber call the
Company's paging terminal to retrieve messages, VoiceNow(R) subscribers will
carry a portable receiver, approximately the same size as an alphanumeric pager,
that is capable of receiving, storing and playing brief voice messages.
The Company has three distribution channels -- direct, indirect and its
National Accounts Division. In the direct channel, the Company leases or sells
pagers to customers and charges a monthly service fee for paging service. In the
indirect channel, the Company sells pagers to third parties and provides paging
service at reduced rates. The resellers, in turn, lease or resell the pagers to
their own subscribers and resell the Company's paging service under marketing
agreements. Through its National Accounts Division, the Company partners with
other companies that are regional or national in scope with large client bases.
These partners market the Company's paging services to their customers or
potential customers, with the Company providing a variety of services, which can
include pager leasing, customer service, order fulfillment, and billing. The
following table sets forth the respective numbers and percentages of pagers that
are (i) serviced directly by the Company, including certain of the units placed
in service through its National Accounts Division, (ii) serviced directly by the
Company and owned by the subscribers and (iii) serviced by the Company through
resellers and which may be owned by the third party resellers or by their
subscribers.
OWNERSHIP OF PAGERS IN SERVICE WITH SUBSCRIBERS OF THE COMPANY
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
------------------ ------------------ ------------------ ------------------ -------------------
NUMBER % NUMBER % NUMBER % NUMBER % NUMBER %
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company
owned... 994,149 77.6% 1,365,278 65.7% 1,741,934 56.8% 2,234,460 50.7% 3,355,449 49.8%
Subscriber
owned... 96,813 7.5 162,382 7.8 206,086 6.7 232,896 5.3 339,237 5.0
Third
party
reseller... 190,681 14.9 550,294 26.5 1,120,549 36.5 1,941,486 44.0 3,043,221 45.2
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
TOTAL... 1,281,643 100.0% 2,077,954 100.0% 3,068,569 100.0% 4,408,842 100.0% 6,737,907 100.0%
========= ===== ========= ===== ========= ===== ========= ===== ========= =====
</TABLE>
The increase in the Company's subscriber base serviced and owned by the
Company in 1995 was primarily due to an increase in the Company's units placed
in service by the direct sales force and by the creation of its National
Accounts Division, which began to produce significant subscriber additions in
mid-1995.
The increase in the Company's subscriber base placed in service through
resellers was largely due to the successful expansion of a program begun in 1990
that targeted the use of resellers to sell to market segments that the Company's
direct sales force had been unsuccessful in reaching.
Subscribers who buy pagers pay a monthly paging service fee if they
contract with the Company for paging services, and they may contract
additionally to receive repair service from the Company. For leasing
subscribers, repair is included in the monthly rental charge, which is generally
combined with the paging service charge for an "all-in-one" monthly fee.
Generally there is no separate usage charge in either case. Leasing rates and
purchase prices for pagers vary widely by market region, service type and the
volume of pagers purchased or leased by the subscriber. The Company does not
manufacture any
37
<PAGE> 40
pagers. Instead, it purchases the pagers that it sells and leases, primarily
from a single manufacturer. See "-- System Equipment and Pagers" below.
STRATEGY
The Company's strategy is to strengthen its industry leadership by
continuing to provide superior paging and messaging services at prices generally
below those of the competition. The Company intends to significantly increase
its market share and the number of paging units in service in its direct and
indirect sales channels and its National Accounts Division, by focusing on a
variety of new products and services. The Company also intends to enhance the
overall effectiveness of its nationwide digital transmission network for one-way
messaging services. Key components of the Company's strategy include:
LOW-COST STRUCTURE -- Management believes the key to its success in the
paging and wireless communications industry is its ability to provide low-cost,
high-quality service. The Company has achieved its status as a low-cost provider
because of two primary factors. First, because the Company is one of the largest
volume purchasers of pagers and paging infrastructure equipment, it is able to
obtain volume discounts not available to many of its competitors. Second, the
Company has made investments which improve the efficiency of its operations,
including investments in administrative and customer information systems and
high-quality, large-capacity transmission systems which allow the Company to
serve more customers on fewer frequencies and to operate with less manpower.
CONTINUED GROWTH IN CORE PAGING BUSINESS -- The Company currently provides
local, regional and nationwide paging services utilizing primarily numeric
display and alphanumeric display pagers, with voice mail available as a
supplemental service. The Company is also the exclusive wireless provider of CNN
news, sports, and financial market headlines. In 1995, exclusive of
acquisitions, pagers in service with subscribers of the Company grew by
approximately 2 million units, or 45%. Through a combination of increased
penetration and market share gains, the Company believes its core paging
business will continue to provide significant future growth.
SUPERIOR GEOGRAPHIC COVERAGE AND NETWORK INFRASTRUCTURE -- The Company
believes that its geographic coverage and state-of-the-art paging network
combine to provide a superior paging service. The Company provides paging
services in virtually all of the largest 100 markets (in population) in the
United States and its paging system reaches more than 90 percent of the U.S.
population. The Company utilizes state-of-the-art network infrastructure
equipment which enables it to service a high number of pagers per frequency,
lowering the Company's infrastructure expenditure per subscriber.
SPECTRUM -- The Company believes that it has accumulated sufficient
spectrum to accommodate growth across the country for the foreseeable future and
considers its extensive spectrum holdings to be one of its most important
strategic assets. The Company has five nationwide frequencies for its paging
services, more than any other paging provider, and significant local frequencies
in the major U.S. markets. In addition, in 1994 the Company acquired three
nationwide narrowband PCS frequencies in an FCC auction at a cost of $197
million. In 1996 the Company participated in the FCC auction of SMR frequency
licenses, and ultimately won two to four blocks of two-way spectrum across the
United States for a total of $45.6 million. The Company is in the process of
purchasing exclusive rights to certain of these SMR frequencies from incumbent
operators. Expenditures for such purchases are estimated to total $200 million
in 1996 and 1997. Total SMR frequency acquired is expected to approximate three
times the frequency acquired in the 1994 PCS auctions.
The Company will utilize the PCS and SMR frequencies to offer products
requiring two-way service, such as VoiceNow(R) and low-cost, nationwide
alphanumeric service. To increase network capacity, a paging carrier can either
add additional transmitters to the system or utilize additional spectrum. The
Company believes utilizing SMR frequencies, rather than adding transmitters,
will provide a greater return on investment and allow for significantly greater
numbers of subscribers.
TWO WAY WIRELESS SERVICES -- The Company is working with Motorola, Inc. and
Glenayre Technologies, Inc. to deploy a new nationwide two-way digital
transmission network using its PCS and
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<PAGE> 41
SMR frequencies which it believes will be the highest quality, most extensive
and most cost-effective network of its kind in the country. This network will
represent the next generation of wireless messaging technology, with greater
speed and capacity than existing networks. Management believes that this network
and the Company's nationwide frequencies will offer significant strategic
opportunities. While paging will remain the Company's core business, this
network will be a strategic asset that allows further penetration of the
business market with new communications services and new opportunities for
growth in the consumer market.
- - VOICENOW(R) -- The new two-way network will initially be used primarily for
VoiceNow(R), the Company's new digitized voice messaging service, which the
Company is currently field testing. Because of its features, the Company
believes VoiceNow(R) will appeal to the consumer market not traditionally
reached by paging services as well as businesses. VoiceNow(R) subscribers will
carry a portable receiver, approximately the same size as an alphanumeric
pager, that is capable of receiving, storing and playing brief digitized voice
messages. The Company expects to price the VoiceNow(R) service at
approximately $9.95 per month for local service plus the lease of the
subscriber device. Each subscriber will be assigned a distinct telephone
number which the caller dials to leave a voice message. When the voice message
for a subscriber is received at one of the Company's computer terminals, the
terminal directs the network to broadcast a short radio signal to the
VoiceNow(R) device. The device will send a reply signal which will allow the
network to identify the subscriber's location. The voice message will then be
sent to the device typically via the transmitter closest to the subscriber.
The device will emit a tone or vibrate to alert the subscriber that a voice
message has been received and stored in the device. The subscriber can then
listen to the message at any time. The device will have a volume control so
that the subscriber can listen to the voice message in confidence or can allow
other people to listen to it as well. The VoiceNow(R) network will be capable
of confirming receipt of the message and resending it if it is not received
without subscriber intervention. The Company anticipates that the initial
devices will hold four minutes of messages (with any additional messages being
stored on the Company's network for later delivery) and will have rewind, fast
forward, cueing, pause and delete capabilities and a long (approximately six
weeks) battery life. Once technological and marketing tests are complete, the
Company intends to begin commercial deployment throughout the country. The
Company expects to have several hundred units in service with selected
commercial customers by the end of 1996 and a major launch of the product in
the first quarter of 1997.
- - OTHER NEW TWO-WAY WIRELESS SERVICES -- In addition to the traditional paging
services and VoiceNow(R), the Company expects to introduce other two-way
messaging products, such as a new, low-cost, nationwide alphanumeric paging
and data messaging services. The new alphanumeric service is expected to be
deployed over the Company's new nationwide two-way network in 1997. The new
two-way network uses less spectrum by determining the location of the
alphanumeric pager, and sending the message via typically the closest
transmitter, rather than by all transmitters simultaneously. By utilizing the
closest transmitter to send the message the costs of providing nationwide
alphanumeric service approximates the cost of providing local alphanumeric
service today. The Company expects that this new low-cost system will enable
it to provide nationwide alphanumeric service to customers at lower prices and
that this will increase the demand for alphanumeric paging and will expand the
Company's market position.
DISTRIBUTION -- The Company believes its distribution channels provide the
broadest marketing reach in the industry. The Company uses three distribution
channels -- direct, indirect and its National Accounts Division. In the direct
channel, the Company leases or sells pagers to customers and charges a monthly
fee for paging service. In the indirect channel, the Company sells pagers to
third parties and provides paging service at reduced rates. The resellers, in
turn, lease or resell the pagers to their own subscribers and resell the
Company's paging service under marketing agreements. The reseller is responsible
for customer service, billing, and other associated expenses. Through its
National Accounts Division, the Company partners with other companies that are
regional or national in scope with large client bases. These partners market the
Company's paging services to their customers or potential customers, with the
Company providing a variety of services, which can include pager leasing,
customer
39
<PAGE> 42
service, order fulfillment, and billing. Throughout 1995 and 1996 the Company
has been selected by a variety of companies to provide these services, including
Citizens Telecom, Comcast Cellular, Communications Expo, GTE, MCI, Sprint, and
TransNational Communications International. The Company believes these marketing
affiliates, which primarily reach the consumer market, also offer an excellent
means of selling, distributing and servicing its VoiceNow(R) product.
INTERNATIONAL EXPANSION -- On April 1, 1996, the Company's wholly owned
subsidiary, PageNet Canada, with its Canadian partner, Madison Venture Corp.,
commenced offering paging services in Canada. Based in Toronto, PageNet Canada
currently offers paging services in Montreal, Ottawa, Quebec City, Toronto and
Vancouver and provides paging transmission services covering a geographic area
containing more than 90% of the Canadian population. As of June 30, 1996 PageNet
Canada had approximately 6,000 paging units in service. In September 1996, the
Company announced that it had purchased a 25% interest in Sociedad de
Radiotelefonia Movil, S.A., which owns Compania Europea de Radiobusqueda, S.A.
("CERSA"), a Spanish paging company. The Company also announced that it had
entered into an agreement to provide operational assistance to CERSA. The
Company's agreement includes an option to acquire an additional 26% of CERSA if
Spanish foreign ownership restrictions change to permit such ownership. CERSA,
which began operations in 1993 and is currently the third largest paging carrier
in Spain, with approximately 20% of the total paging units in service in Spain,
provides local and nationwide paging services and has approximately 25,000 units
in service. The Company is considering other opportunities for international
expansion.
Paging market penetration in many international markets is relatively low,
and many such markets have only a small number of existing paging providers. The
Company believes that in these areas its strategy of low-cost, high quality
service is likely to be successful. The Company's goal is to create a portfolio
of international operations. The Company expects to invest up to $100 million in
this endeavor through 1998, including approximately $32 million invested to
date. Additional investments will depend on such factors as growth rates, new
market opportunities and execution of financing plans that maximize value for
the Company's stockholders.
ACQUISITION OF OTHER PAGING PROVIDERS -- The Company believes the paging
industry will experience additional consolidation which may create strategic
acquisition opportunities for the Company in the future. While much of the
Company's future growth will be internally generated, management believes that
the Company's current scale of operations now makes it possible to effectively
and efficiently integrate acquired paging operations into its own operations
while maintaining its low-cost structure. The Company will continue to consider
strategic acquisitions and combinations.
MARKETING
The Company's paging services are marketed through a regionally-deployed
direct sales force, some 6,000 nationwide resellers, and several marketing
affiliates such as GTE, MCI, and Sprint. As of December 31, 1995, direct sales
(which includes those from marketing affiliates) accounted for approximately 54%
of the Company's overall pagers in service and the indirect channel (which
include resellers and retailers) represented approximately 46%.
The Company promotes its many products and services through the use of
direct mail, print, radio, television, and Yellow Page advertising,
telemarketing, and co-op programs.
All of the Company's sales representatives that support the direct channel
are located in field locations across the U.S. and Canada. Historically, a
majority of the Company's subscribers were generated through the direct sales
force. The direct sales market should continue to increase and remain an
important source of new subscribers.
The Company provides services under marketing agreements with third-party
marketing organizations, or "resellers," in bulk quantities at wholesale rates
that are lower than the Company's retail rates through its direct sales channel.
The resellers endeavor to resell the Company's services to end users or
retailers who, in turn, market to the end user for a higher price. The Company's
costs of handling and
40
<PAGE> 43
billing bulk reseller accounts are generally lower than the costs of handling
and billing its other accounts. The portion of the Company's subscriber base
placed in service through resellers accounted for approximately 37% of the
Company's pagers in service at December 31, 1993, approximately 44% at December
31, 1994 and approximately 45% at December 31, 1995. Resellers represented
approximately 61% of the Company's net unit additions during 1994, and
approximately 47% of the Company's net unit additions during 1995. The
successful expansion of the reseller program that began in 1990 targeted the use
of resellers to those market segments which it was not cost-effective for the
Company's direct sales force to reach. Management believes that this sales
channel generates attractive incremental cash flow contribution and enables the
Company to increase operating efficiencies and lower per unit costs by further
amortizing its network infrastructure investment over a larger subscriber base.
In addition, because other companies bear the economic burden of pager capital
investment, direct selling expense, and certain administrative costs, management
believes that the resulting cash flow stream from pagers serviced through
resellers represents an attractive return on the Company's total capital
investment.
The Company's National Accounts Division represents a large growth area for
the Company. Paging units and services are offered to potential customers
through business arrangements with national companies that have large customer
bases. The Company also handles the fulfillment for the national accounts
through its National Accounts Division locations in Richardson and Plano, Texas.
Subscribers to the Company's paging and other communications services are
generally individuals and organizations whose businesses require a high degree
of mobility or involve multiple work locations. Typical paging subscribers
include, among others, medical personnel, sales and service organizations,
specialty trades, construction and manufacturing companies, and governmental
agencies.
The Company is not dependent on any single customer. No single subscriber
or reseller accounted for more than 2.6% of the Company's Net Revenues in 1995.
SYSTEM EQUIPMENT AND PAGERS
The equipment used in the Company's paging operations is available for
purchase from multiple sources, and the Company anticipates that equipment and
pagers will continue to be available to the Company in the foreseeable future,
consistent with normal manufacturing and delivery lead times. Because of the
high degree of compatibility among different models of transmitters, computers
and other paging equipment manufactured by suppliers, the Company is able to
design its systems without being dependent upon any single source of such
equipment. The Company continually evaluates new developments in paging
technology in connection with the design and enhancement of its paging systems
and selection of products to be offered to subscribers.
The Company does not manufacture any of the pagers or related transmitting
and computerized paging terminal equipment used in the Company's paging
operations. In order to achieve significant cost savings from volume purchases,
the Company currently purchases a vast majority of its pagers from Motorola,
Inc. The Company purchases its transmitters from three competing sources and its
paging terminals from Glenayre Technologies, Inc., a manufacturer of mobile
communications equipment. Motorola, Inc. will provide VoiceNow(R) subscriber
devices to the Company. Motorola, Inc. and Glenayre Technologies, Inc. will
provide the transmission and network equipment for VoiceNow(R). Motorola, Inc.
has agreed to sell its VoiceNow(R) subscriber devices to the Company on a
first-to-market basis in the United States for a period of six months from beta
system acceptance by the Company. After the end of this six-month period,
Motorola, Inc. may provide VoiceNow(R) subscriber devices to other companies.
Glenayre Technologies, Inc. has agreed to a commercial exclusivity period
relating to the deployment of the PCS InFLEXion system, which is used to provide
VoiceNow(R). Glenayre Technologies, Inc. agreed to delay the commercial turn-on
of InFLEXion systems for other service providers in the United States, Canada,
and Brazil until an InFLEXion portable pager device is commercially available to
paging service providers other than the Company, or April 1, 1997, whichever is
earlier.
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<PAGE> 44
The Company's rapid expansion, including greater market share of existing
markets, requires significant capital expenditures, including purchases of
additional transmitters, paging terminals, and new pagers.
COMPETITION
The Company experiences direct competition from one or more competitors in
all the locations in which it operates. Competition for subscribers to the
Company's paging services in most geographic markets is based primarily on
price, quality of services offered and the geographic area covered. The Company
believes that its price, quality of its services and its geographic coverage
areas generally compare favorably with those of its competitors.
Although some of the Company's competitors are small privately-owned
companies serving only one market area, others are subsidiaries or divisions of
larger companies, such as regulated Bell operating companies, that provide
paging services in multiple market areas. In addition, the industry has been
experiencing a significant amount of consolidation over the last year, as
various competitors attempt to expand their service area and market share. Among
the Company's competitors are AT&T Wireless Messaging, Air Touch Communications,
Inc., Arch Communications Group, Inc., and MobileMedia Communications, Inc.
(using the trade name MobileComm via their recent acquisition of the MobileComm
subsidiary of Bell South). Certain of these competitors possess financial
resources greater than those of the Company.
A variety of wireless two-way communication technologies, including
cellular telephone service, narrowband and broadband personal communications
services, Enhanced Specialized Mobile Radio, and mobile satellite services, are
currently in use or under development. Although these technologies currently are
more highly priced than paging services or are not commercially available,
technological improvements could result in increased capacity and efficiency for
wireless two-way communication and, accordingly, could result in increased
competition for the Company. In addition, future technological advances in the
telecommunications industry could create new services or products competitive
with the paging services currently provided by the Company. Recent and proposed
regulatory changes by the FCC are aimed at encouraging such technological
advances and new services, such as narrowband and broadband PCS, which will
increase the amount of spectrum available for paging or similar services. There
can be no assurance that the Company would not be adversely affected in the
event of such technological change.
REGULATION
The Company's paging operations are subject to regulation by the FCC under
the Communications Act of 1934, as amended (the "Communications Act").
Currently, paging services are offered over radio frequencies the FCC has
allocated for either common carrier or private carrier use. A radio common
carrier ("RCC") is generally licensed with respect to a specific radio frequency
in a particular locality or region. Private carrier paging ("PCP") licenses may
be on either exclusive or shared frequencies, as discussed below. The Company's
operations are all classified as Commercial Mobile Radio Services ("CMRS") and
are subject to common carrier regulation by the FCC. The FCC has granted the
Company RCC and PCP licenses to use the radio frequencies necessary to conduct
its paging operations. Licenses issued by the FCC to the Company set forth the
technical parameters, such as power strength and tower height, under which the
Company is authorized to use those frequencies.
In late 1993, the FCC separated the frequencies used for PCP into two
groups. The larger group of frequencies, which the Company utilizes in its
operations, are available only on an exclusive basis. The FCC has recognized
three types of exclusivity: local, regional and national, each requiring a
specified number of transmission sites to qualify. Licensees granted local and
regional exclusivity will receive the exclusive right to use the specific
frequency in the area served by their system as defined by coverage contours and
separation requirements. Licenses granted nationwide exclusivity will have the
sole right to use that frequency anywhere in the United States, not just in the
specific areas they actually serve. Any
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<PAGE> 45
exclusivity rights granted by the FCC are subject to continued sharing with
facilities in place or applied for on or prior to October 14, 1993. Exclusivity
rights with respect to a proposed local, regional or nationwide system may be
lost if the licensee fails to actually build and place the system in operation
with the required number of transmitters.
The Communications Act was amended in August 1993 ("August 1993
Amendments") to permit the FCC to grant applications for new services which are
mutually exclusive by competitive bidding including broadband and narrowband
PCS. The August 1993 Amendments also required the FCC to conduct a rulemaking to
determine whether non-assigned frequencies for existing services will be
auctioned. The August 1993 Amendments do not permit auctions to be used for
license renewals or license modifications. The FCC has initiated a rulemaking
proceeding in which it is considering changes to its application process for RCC
and PCP frequencies. The FCC will likely adopt a competitive bidding process for
all paging frequencies and may choose to rely on geographic parameters rather
than transmitter coverage contours, i.e., market area licensing, for licenses
awarded in the competitive bidding process. Market area licensing proposals will
require additional coverage area for the Company's frequencies to be purchased
at auction. In the interim, subject to the exclusivity rules, the FCC is only
accepting certain applications to enable carriers to modify existing paging
systems. The Company believes that a reasonable process for assigning licenses
by competitive bidding will be beneficial in that the Company will have a
greater degree of control over whether it obtains licenses that it desires in
order to offer additional service(s) than it did under the lottery, comparative
hearing or other assignment processes which the FCC has used.
At the first such auction, held in July 1994, the Company was a successful
bidder for three newly allocated nationwide narrowband PCS frequencies which it
will hold on an exclusive basis. Current FCC regulations do not permit the
Company to acquire more than three narrowband PCS licenses in any market and,
because the Company has already acquired three nationwide narrowband PCS
licenses, prohibit the Company from participating in further narrowband PCS
auctions. In April, 1996, the FCC auctioned frequencies in the 900 MHz range,
which previously have been utilized for SMR services, and the Company acquired
126 such licenses across the United States for a total cost of $45.6 million.
The Company participated in this auction as a method of obtaining additional
frequencies for future needs. The Company is in the process of purchasing
exclusive rights to certain of these frequencies from incumbent operators. Each
FCC license held by the Company has construction and operational requirements.
The FCC licenses granted to the Company are varying terms of up to 10
years, at the end of which time renewal applications must be approved by the
FCC. In the past, FCC renewal applications routinely have been granted in most
cases upon a demonstration of compliance with FCC regulations and adequate
service to the public. The FCC has granted each renewal license the Company has
filed. Although the Company is unaware of any circumstances which would prevent
the grant of any pending or future renewal applications, no assurance can be
given that any of the Company's licenses will be renewed by the FCC.
Furthermore, although revocation and involuntary modification of licenses are
extraordinary regulatory measures, the FCC has the authority to restrict the
operation of licensed facilities or revoke or modify licenses. No license of the
Company has ever been revoked or modified involuntarily.
The Communications Act requires licensees, such as the Company to obtain
prior approval from the FCC of the transfer of control of any construction
permit or station license, or any rights thereunder. The Communications Act also
requires prior approval by the FCC of acquisitions of other paging companies by
the Company and transfers by the Company of a controlling interest in any of its
licenses or construction permits, or any rights thereunder. The FCC has approved
each acquisition and transfer of control for which the Company has sought
approval. The Company also regularly applies for FCC authority to use additional
frequencies, modify the technical parameters of existing licenses, expand its
service territory, provide new services and modify the conditions under which it
provides service. Although there can be no assurance that any requests for
approval of applications filed by the Company will be approved or acted upon in
a timely manner by the FCC, or that the FCC will grant the relief requested,
subject to the forthcoming rules for competitive bidding, the Company knows of
no reason to
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<PAGE> 46
believe any such requests, applications or relief will not be approved or
granted. The Company makes no representations, however, about the continued
availability of additional frequencies used to provide paging services.
The Communications Act also limits foreign ownership of entities that
directly or indirectly hold certain licenses from the FCC, including certain of
those held by the Company. Because the Company holds licenses from the FCC only
through its subsidiaries, up to 25% of the Company's stock can be owned or voted
by aliens or their representatives, a foreign government or its representatives,
or a foreign corporation. If the Company were to directly hold FCC licenses, the
Communications Act would allow up to 20% of the Company's stock to be owned or
voted by aliens or their representatives, a foreign government or its
representatives, or a foreign corporation. Based upon information obtained by
it, the Company believes that substantially less than 25% of its issued and
outstanding common stock is owned by aliens or their representatives, foreign
governments or their representatives or foreign corporations.
The Company obtains telephone numbers for its paging service from the
predominant local telephone company, which is known as the Numbering Plan Area
("NPA") Code Administrator. Under the 1996 Act, the FCC has adopted a process
through which telephone company administrators are intended to be replaced by
neutral third parties in 1997. Increased demand for numbers, particularly in
metropolitan areas, is causing depletion of numbers in certain area codes ("NPA
codes"). As this occurs, the Code Administrator devises a relief plan. Recent
plans have included certain elements that could impact on the Company's
operations including the take-back of numbers already assigned for use and
service-specific plans whereby only certain services, such as paging and
cellular, would be assigned numbers using a new NPA code. The Company, along
with two other paging companies, filed a request for declaratory ruling with the
FCC to establish federal policies that will preclude discriminatory and unfair
elements of relief plans. In January 1995 the FCC issued a declaratory ruling
substantially granting the relief requested by the Company and prohibiting
unreasonable discrimination in assigning numbers. Subsequently, certain
participants to state proceedings continue to advocate numbering relief plans
contrary to the FCC's ruling. The Company can provide no assurance that such
plans will not be adopted by a state commission. In addition, the Company is
actively participating at the state level in proceedings before public service
commissions where individual NPA code relief plans are being filed for approval
and contain objectionable elements.
In addition to potential regulation by the FCC, several states have the
authority to regulate paging services, except where such regulation constitutes
rate or entry, both of which have been preempted by the August 1993 Amendments,
as interpreted by the FCC. Appeals of the FCC action with respect to rate
regulation are pending, but the Company believes the FCC will be upheld in its
preemption of rate regulation by state commissions. A few states have also
indicated that they are considering continuing to assert jurisdiction over
transfers of paging company's assets or operations. Nevertheless, all state
approvals of acquisitions or transfers made by the Company have been approved,
and the Company knows of no reason to believe such approvals will not continue
to be granted in connection with any future requests, even if states exercise
that review. The August 1993 Amendments do not preempt state regulatory
authority over other aspects of the Company's operations, and some states may
choose to exercise such authority.
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act")
was signed into law. This new legislation amends the Communications Act of 1934,
as amended, and modifies the Consent Decrees governing the provision of
telecommunications services by the Bell Operating Companies and the GTE
Companies. The new legislation is intended to promote competition in local
exchange services through the removal of legal or other barriers to entry. Under
the 1996 Act, the Bell Operating Companies and other local exchange carriers may
be permitted to jointly market commercial mobile service in conjunction with
their traditional local exchange services. It imposes upon all
telecommunications carriers the duty to interconnect with the facilities and
equipment of other telecommunications carriers. The FCC has interpreted the 1996
Act to require local exchange carriers to compensate wireless carriers if
terminating LEC originated calls on the wireless carrier's network.
Simultaneously, the FCC found unlawful certain charges levied against paging
carriers in the past that have been assessed on a monthly
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<PAGE> 47
basis for the use of certain network facilities, including telephone numbers.
These findings by the FCC will be challenged at the FCC and in the courts. The
Company cannot predict with certainty the ultimate outcome of these proceedings.
For paging carriers, compensation amounts may be determined in subsequent
proceedings either at the federal or state level, or may be determined based on
negotiations between the local exchange companies, and the paging carriers. Any
agreements reached between the local exchange carriers and paging companies may
be required to be submitted to state regulatory commissions for approval. The
1996 Act, as ultimately interpreted by the appropriate regulatory bodies, may
require commercial mobile service providers such as the Company to contribute to
"Universal Service" or other funds to assure the continued availability of local
exchange service to high costs areas as well as contribute funds to cover the
costs of number portability and dialing parity implementation. It limits the
circumstances under which states and local governments may deny a request by a
commercial mobile service provider to place facilities, and gives the FCC the
authority to preempt the states in some circumstances.
TRADEMARKS
The Company markets its paging and related services under various names and
marks, including PageNet(R), PageMail(R), PageMate(R), Voice Now(R), PageNet
Nationwide(R), SurePage(R), FaxNow(R), MessageNow(R) and the Company's "beeper
man" logo, all of which are federally registered service marks. The Company's
federal mark registrations expire at various times between 2000 and 2005, unless
they are then renewed by the Company. The Company has filed applications with
the United States Patent and Trademark Office to register additional names and
marks.
CORPORATE ORGANIZATION
The Company conducts its domestic operations through 50 wholly owned
subsidiaries of the Company, each of which operates in a specified geographic
area. The Company's subsidiaries operate as largely independent business units,
consistent with senior management's philosophy that a decentralized organization
is more responsive to market demands and provides greater incentives to
employees. Each subsidiary makes its own staffing, administrative, operational
and marketing decisions within guidelines established by the senior executive
officers of the Company in the annual budget process. Except for his or her
participation in the Company's stock option plans, the General Manager of each
subsidiary is compensated primarily on the basis of the performance of the
subsidiary over which he or she has oversight responsibility without regard to
the performance of other subsidiaries of the Company.
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<PAGE> 48
DESCRIPTION OF SENIOR DEBT
As of October 28, 1996, the Company had no borrowings outstanding and
approximately $333.2 million was available for borrowing under its Second
Amended and Restated Credit Agreement dated as of June 5, 1996 (the "Credit
Agreement"). In addition to the Credit Agreement borrowings and accrued
interest, Senior Debt, as defined in the Credit Agreement, includes the
Company's $22.6 million non-recourse guarantee of a portion of the borrowings of
Paging Network of Canada Inc. and Madison Telecommunications Holdings Inc.
The Credit Agreement provides for a $1 billion revolving credit facility
with a group of 36 lenders. The Company is able to borrow, provided it meets
certain financial covenants, the lesser of $1 billion or an amount based upon
several calculations including a calculation which is reduced by total
outstanding indebtedness for borrowed monies (as defined) and outstanding
letters of credit. The amount available for borrowing calculation is equal to a
specified multiple of EBITDA for the most recently ended fiscal quarter
multiplied by four. The Credit Agreement expires on December 31, 2004. The
maximum borrowings which may be outstanding under the Credit Agreement begin
reducing in 2001.
Under the Credit Agreement, the Company may designate all or a portion of
the revolving loan borrowings thereunder to be either a Base Rate loan or a
LIBOR Rate loan. The portion designated as a Base Rate loan bears interest at a
rate equal to the sum of (i) the higher of (a) the rate established by the
Administrative Agent from time to time as its reference rate for the
determination of interest rates for loans of varying maturities in U.S. Dollars
to U.S. persons, and (b) the Federal funds rate plus .50%, and (ii) a predefined
amount (the "spread") ranging from 0% to 1.00% based on the level of borrowings
outstanding relative to annualized earnings. The portion designated as a LIBOR
Rate loan bears interest at a rate equal to the London Interbank Offered Rate
plus a spread ranging from .625% to 2.00% based on the level of borrowings
outstanding relative to annualized EBITDA.
The capital stock of the Company's domestic subsidiaries (as well as the
assets of the Company and its domestic subsidiaries) is pledged to the Company's
bank lenders to secure the Company's obligations under the Credit Agreement. The
Credit Agreement prohibits the Company from paying cash dividends or other cash
distributions to stockholders. The Credit Agreement also prohibits the Company
from paying more than a total of $5 million in connection with the purchase of
Common Stock.
The Credit Agreement contains other covenants that, among other things,
limit the ability of the Company and its subsidiaries to incur indebtedness,
engage in transactions with affiliates, dispose of assets, and engage in
mergers, consolidations and acquisitions.
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DESCRIPTION OF THE EXCHANGE NOTES
The following summaries of certain provisions of the Exchange Notes and the
Indenture do not purport to be complete and are subject, and are qualified in
their entirety by reference, to all the provisions of the Indenture, including
the definitions therein of certain terms. Capitalized terms not otherwise
defined herein have the meaning given to them in the Indenture.
The Outstanding Notes were issued, and the Exchange Notes will be issued,
under the Indenture. The form and terms of the Exchange Notes will be the same
as the form and terms of the Outstanding Notes, except that the Exchange Notes
will be registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and will not have the benefit of any
registration rights agreement or special interest provisions relating thereto.
The Exchange Notes will evidence the same indebtedness as the Outstanding Notes,
will be entitled to the benefits of the Indenture, and will be treated as a
single class under the Indenture with any Outstanding Notes that remain
outstanding after the Exchange Offer. The Outstanding Notes and the Exchange
Notes will be considered collectively to be a single class for all purposes
under the Indenture, including waivers, amendments, redemptions and Offers to
Purchase, and for purposes of this Description of the Exchange Notes (except
under the caption "-- Registration Rights; Exchange Offer"), all references
herein to "Notes" shall be deemed to refer collectively to the Outstanding Notes
and any Exchange Notes, unless the context otherwise requires.
GENERAL
The Exchange Notes will bear interest from October 16, 1996 at the rate of
10% per annum. Interest on the Exchange Notes will be payable on April 15 and
October 15, commencing April 15, 1997 to the person in whose name the Exchange
Note (or any Predecessor Exchange Note) is registered at the close of business
on the April 1 or October 1 next preceding such interest payment date.
(sec.sec. 301 and 307) Interest on the Exchange Notes shall be computed on the
basis of a 360-day year of twelve 30-day months. (sec. 310) Payments of
principal and interest will be made in immediately available funds. At the
option of the Company, principal of and premium, if any, and interest on the
Exchange Notes may be paid at the corporate trust office of the Trustee or by
check mailed to the registered address of such holders. (sec.sec. 301, 305 and
1002)
Holders of Outstanding Notes whose Outstanding Notes are accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Outstanding Notes.
OPTIONAL REDEMPTION
The Exchange Notes will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after October 15, 2001 and prior
to maturity, upon not less than 30 nor more than 60 days notice mailed to each
holder of Exchange Notes to be redeemed at his address appearing in the Security
Register, in amounts of $1,000 or an integral multiple of $1,000, at the
following Redemption Prices (expressed as percentages of principal amount) plus
accrued interest to but excluding the Redemption Date (subject to the right of
holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the Redemption Date). If
redeemed during the 12-month period beginning October 15, of the years
indicated,
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----- ----------
<S> <C> <C>
2001........................................................... 105.000 %
2002........................................................... 103.333 %
2003........................................................... 101.667 %
2004 and thereafter............................................ 100%
</TABLE>
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<PAGE> 50
If less than all the Notes are to be redeemed, the Trustee shall select, in
such manner as it shall deem fair and appropriate, the particular Notes to be
redeemed or any portion thereof that is an integral multiple of $1,000.
([Sections] 203, 1101, 1105 and 1107)
The Exchange Notes will not have the benefit of any sinking fund
obligations.
SUBORDINATION
The Exchange Notes will, to the extent set forth in the Indenture, be
subordinate in right of payment to the prior payment in full of all Senior Debt.
Upon any payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of Senior Debt will first be entitled to
receive payment in full of principal of (and premium, if any) and interest on,
such Senior Debt before the holders of Exchange Notes are entitled to receive
any payment of principal of (and premium, if any) or interest on the Exchange
Notes or on account of the purchase or redemption or other acquisition of
Exchange Notes by the Company or any subsidiary of the Company. In the event
that notwithstanding the foregoing, the Trustee or the holder of any Exchange
Note receives any payment or distribution of assets of the Company of any kind
or character (excluding shares of stock of the Company or securities of the
Company provided for in a plan of reorganization or readjustment which are
subordinate in right of payment to all Senior Debt to substantially the same
extent as the Exchange Notes are so subordinated), before all the Senior Debt is
paid in full, then such payment or distribution will be required to be paid over
or delivered forthwith to the trustee in bankruptcy or other Person making
payment or distribution of assets of the Company for application to the payment
of all Senior Debt remaining unpaid, to the extent necessary to pay the Senior
Debt in full. ([Section] 1402)
The Company may not make any payments on account of the Exchange Notes or
on account of the purchase or redemption or other acquisition of Exchange Notes
if there shall have occurred and be continuing a default in the payment of
principal of (or premium, if any) or interest on Senior Debt, the payment of
commitment or facility fees, letter of credit fees and agency fees under a
Credit Facility, and payments with respect to letter of credit reimbursement
arrangements with one or more lenders under a Credit Facility when due (a
"Senior Payment Default"). In addition, if any default (other than a Senior
Payment Default) with respect to any Senior Debt permitting the holders thereof
(or a trustee on behalf thereof) to accelerate the maturity thereof (a "Senior
Nonmonetary Default") has occurred and is continuing and the Company and the
Trustee have received written notice thereof from the Agent Bank for a Credit
Facility or from an authorized person on behalf of any Designated Senior Debt,
then the Company may not make any payments on account of the Exchange Notes or
on account of the purchase or redemption or other acquisition of Exchange Notes
for a period (a "blockage period") commencing on the date the Company and the
Trustee receive such written notice and ending on the earlier of (x) 179 days
after such date and (y) the date, if any, on which the Senior Debt to which such
default relates is discharged or such default is waived or otherwise cured. In
any event, not more than one blockage period may be commenced during any period
of 360 consecutive days, and there shall be a period of at least 181 consecutive
days in each period of 360 consecutive days when no blockage period is in
effect. No Senior Nonmonetary Default that existed or was continuing on the date
of the commencement of any blockage period with respect to the Senior Debt
initiating such blockage period will be, or can be, made the basis for the
commencement of a subsequent blockage period, unless such default has been cured
or waived for a period of not less than 90 consecutive days. In the event that,
notwithstanding the foregoing, the Company makes any payment to the Trustee or
the holder of any Exchange Note prohibited by the subordination provisions, then
such payment will be required to be paid over and delivered forthwith to the
holders of the Senior Debt remaining unpaid, to the extent necessary to pay in
full all the Senior Debt. For the purposes hereof, "Designated Senior Debt"
means any Senior Debt (other than under a Credit Facility which has an Agent
Bank) in an original principal amount of not less than $75 million where the
instrument governing such Senior Debt expressly states that such Debt is
"Designated Senior Debt" for purposes of the Indenture and a Board Resolution
setting forth such designation by the Company has been filed with the Trustee.
([Section] 1403)
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<PAGE> 51
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Debt or of the Exchange Notes may
recover less, ratably, than holders of Senior Debt and may recover more,
ratably, than the holders of the Exchange Notes.
"Senior Debt" means (a) the principal of (and premium, if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, penalties
and any obligation of the Company for reimbursement, indemnities and fees
relating to, Debt outstanding pursuant to a Credit Facility, (b) all other Debt
for money borrowed of the Company referred to in the definition of Debt other
than clauses (iv), (vi) and (vii) (with respect to clauses (iv) and (vi) of such
definition) thereof and other than the Company's 11.75% Senior Subordinated
Notes due May 15, 2002, the Company's 8.875% Senior Subordinated Notes due
February 1, 2006, and the Company's 10.125% Senior Subordinated Notes due August
1, 2007, (c) payment obligations of the Company under interest rate swap or
similar agreements or foreign currency hedge, exchange or similar agreements
required by a Credit Facility, where the counterparty to such agreement is a
lender or former lender under such Credit Facility, and (d) all renewals,
extensions, modifications, refinancings, refundings and amendments of any Debt
or payment obligations referred to in clause (a), (b), or (c) above(including,
without limitation, any interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements that are entered into by the
Company for the purpose of modifying, terminating or hedging any agreement that
constitutes Senior Debt under clause (c) above whether or not such modification,
termination or hedge was required by a Credit Facility and whether or not the
counterparty to such agreement is a lender or former lender under such Credit
Facility), unless, in the case of any particular Debt referred to above, (A)
such Debt is owed to a Restricted Subsidiary of the Company, (B) the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Debt is not superior in right of payment to the
Notes, (C) such Debt is Incurred in violation of the Indenture, other than Debt
Incurred under a Credit Facility not to exceed $200 million aggregate principal
amount at any one time outstanding so long as the lender of such Debt did not
have actual knowledge that such Debt was Incurred in violation of the Indenture,
or (D) such Debt is by its terms subordinate in right of payment in respect of
any other Debt of the Company. (sec. 101)
The subordination provisions described above will cease to be applicable to
the Exchange Notes upon any defeasance or covenant defeasance of the Exchange
Notes as described under "Defeasance and Covenant Defeasance." (Article
Thirteen)
As of October 28, 1996, the aggregate amount of Senior Debt outstanding was
$24.5 million. The Company may from time to time hereafter incur additional Debt
constituting Senior Debt under the Credit Agreement or otherwise, subject to the
limitation on consolidated Debt described below.
REGISTRATION RIGHTS; EXCHANGE OFFER
The Company has entered into a Registration Rights Agreement pursuant to
which the Company agreed, for the benefit of the holders of the Outstanding
Notes, (i) to file with the Commission, within 30 days following the Closing an
Exchange Offer Registration Statement, and (ii) to use its best efforts to cause
the Exchange Offer Registration Statement to become effective as soon as
practicable, but no later than 75 days following the Closing. The Company has
further agreed to hold the Exchange Offer open for at least 30 days, and to
issue Exchange Notes for all Outstanding Notes validly tendered and not
withdrawn before the expiration of the Exchange Offer.
The Exchange Notes do not have the benefit of a registration rights
agreement.
If on or before the date of consummation of the Exchange Offer the existing
Commission interpretations are changed such that the Exchange Notes would not in
general be freely transferable on such date, the Company will, in lieu of
effecting registration of Exchange Notes, use its best efforts to cause a
registration statement under the Securities Act relating to a shelf registration
of the Outstanding Notes for resale by holders (the "Resale Registration") to
become effective and to remain effective for a period of up to three years after
the time and date as of which the Commission declares the Resale Registration
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<PAGE> 52
effective. The Company would, in the event of the Resale Registration, provide
to the holders of the Outstanding Notes copies of the prospectus that is a part
of the registration statement filed in connection with the Resale Registration,
notify such holders when the Resale Registration for the Outstanding Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Outstanding Notes. A holder of Outstanding Notes
that sells such Notes pursuant to the Resale Registration generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement that are
applicable to such a holder (including certain indemnification obligations).
In the event that (i) the Company has not filed the Exchange Offer
Registration Statement (or, if applicable, a registration statement relating to
the Resale Registration) within 30 days following the Closing, (ii) such
applicable registration statement has not become effective within 75 days
following the Closing, (iii) the Exchange Offer if any has not been consummated
within 45 days after the initial effective date of the Exchange Offer
Registration Statement or (iv) any registration statement required by the
Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically permitted therein)
without being succeeded promptly by an additional registration statement filed
and declared effective (any such event referred to in clauses (i) through (iv),
a "Registration Default"), then the per annum interest rate on the Outstanding
Notes will increase by adding 0.5% thereto for the period from the first day on
which the Registration Default occurs to the first day on which no Registration
Default is in effect (at which time the interest rate will be reduced by such
additional amount). If the Company has not consummated the Exchange Offer (or,
if applicable, the Resale Registration has not become effective) within 120 days
following the Closing, then the per annum interest rate on the Outstanding Notes
will increase by adding an additional 0.5% thereto for the period from such
120th day to the day on which the Company consummates the Exchange Offer or a
Resale Registration becomes effective (at which time the interest rate will be
reduced by such additional amount).
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete. A copy of the Registration Rights
Agreement has been filed as an exhibit to the registration statement of which
this Prospectus is a part.
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not, and may not permit any Restricted Subsidiary to, Incur
any Debt unless, immediately after giving effect to the Incurrence of such Debt
and the receipt and application of the proceeds thereof, the ratio of the
aggregate principal amount (or Attributable Value, or Accreted Value in the case
of an Original Issue Discount Security, as the case may be) of Debt of the
Company and its Restricted Subsidiaries outstanding as of the most recent
available quarterly or annual balance sheet to Pro Forma Consolidated Cash Flow
for the most recently ended full fiscal quarter multiplied by four, determined
on a pro forma basis as if any such Debt had been Incurred and the proceeds
thereof had been applied at the beginning of such fiscal quarter, would be not
more than 6.5 to 1.
Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, Incur the following without regard to the foregoing
limitation: (i) Debt under a Credit Facility in an aggregate principal amount
not to exceed $100 million at any one time outstanding; (ii) Debt evidenced by
the Notes; (iii) Debt owed by the Company to any Wholly owned Restricted
Subsidiary of the Company or owed by any Restricted Subsidiary of the Company to
the Company or any Wholly owned Restricted Subsidiary of the Company (but only
so long as such Debt is held by the Company or such a Wholly owned Restricted
Subsidiary); (iv) Debt Incurred or Incurrable in respect of letters of credit,
bankers' acceptances or similar facilities not to exceed $10 million at any one
time outstanding; (v) Capital Lease Obligations whose Attributable Value will
not exceed $2 million at any one time
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<PAGE> 53
outstanding; (vi) Debt (including trade letters of credit) which (a) constitutes
all or a part of the purchase price of property or (b) is Incurred prior to, at
the time of, or within 270 days after the acquisition of such property for the
purpose of financing all or any part of the purchase price thereof, not to
exceed $6 million at any one time outstanding; (vii) Debt of a Person guaranteed
by the Company or a Restricted Subsidiary in connection with a transaction which
results in such Person becoming a Restricted Subsidiary of the Company, provided
such Debt was not Incurred in anticipation of, and was outstanding prior to,
such transaction; (viii) Debt arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, provided that such Debt
is extinguished within two Business Days of its Incurrence; and (ix) renewals,
refundings or extensions of outstanding Debt, in any case in an amount not to
exceed the outstanding principal amount of the Debt so refinanced plus the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such refinancing
by means of a tender offer or privately negotiated repurchase, plus the expenses
of the Company incurred in connection with such refinancing, provided that, (A)
in the case of any refinancing of the Notes or any pari passu Debt, such
refinancing Debt is made pari passu or subordinate in right of payment to the
Notes, (B) in the case of any refinancing of Debt that is subordinate in right
of payment to the Notes, such refinancing Debt is made subordinate in right of
payment to the Notes, and (C) in the case of any refinancing of pari passu or
subordinated Debt, such refinancing Debt does not have an Average Life less than
the Average Life of the Debt being refinanced and does not have a final
scheduled maturity earlier than the final scheduled maturity, or permit
redemption at the option of the holder earlier than the earliest date of
redemption at the option of the holder, of the Debt being refinanced.
([Section]1008)
LIMITATION ON CERTAIN DEBT
The Indenture provides that so long as any of the Notes are Outstanding the
Company will not Incur or suffer to exist any Debt that is by its terms
subordinate in right of payment to any Senior Debt of the Company and that is
senior in right of payment to the Notes. ([Sections]1009)
LIMITATION ON RESTRICTED PAYMENTS
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution, in respect of its Capital Stock or to the
holders thereof (including pursuant to a merger or consolidation of the Company,
but excluding any dividends or distributions payable solely in shares of its
Capital Stock (other than Disqualified Stock) or in options, warrants or other
rights to acquire its Capital Stock (other than Disqualified Stock)), (ii) may
not, and may not permit any Restricted Subsidiary of the Company to, directly or
indirectly, purchase, redeem or otherwise acquire or retire for value (a) any
Capital Stock of the Company or any Related Person of the Company or (b) any
options, warrants, or rights to purchase or acquire shares of Capital Stock of
the Company or any Related Person of the Company, (iii) may not make, or permit
any Restricted Subsidiary of the Company to make, any loan, advance, capital
contribution to or investment in, or payment on a Guarantee of any obligation
of, any Affiliate or any Related Person, other than the Company or a Wholly
owned Restricted Subsidiary of the Company, and (iv) may not, and may not permit
any Restricted Subsidiary of the Company to, redeem, defease, repurchase, retire
or otherwise acquire or retire for value prior to any scheduled maturity,
repayment or sinking fund payment, Debt of the Company which is subordinate in
right of payment to the Notes (each of clauses (i) through (iv) being a
"Restricted Payment"), if: (1) an Event of Default, or an event that with the
lapse of time or the giving of notice, or both, would constitute an Event of
Default, shall have occurred and be continuing, or (2) upon giving effect to
such Restricted Payment, the aggregate of all Restricted Payments from the date
of the Indenture exceeds the sum of: (a) the remainder of (x) 100% of cumulative
Consolidated Cash Flow after December 31, 1993 through the last day of the last
full fiscal quarter immediately preceding such Restricted Payment for which
quarterly or annual financial statements of the Company are available minus (y)
the product of 1.4 times cumulative Consolidated Interest Expense after December
31, 1993 through the last day of the last full fiscal quarter immediately
preceding such Restricted Payment for which quarterly or annual financial
statements of the
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Company are available; and (b) 100% of the aggregate net proceeds after the date
of the Indenture (including the fair value of property other than cash) from the
issuance of Capital Stock (other than Disqualified Stock) of the Company and
options, warrants or other rights on Capital Stock (other than Disqualified
Stock) of the Company and the principal amount of Debt of the Company that has
been converted into Capital Stock (other than Disqualified Stock) of the Company
after the date of the Indenture.
The foregoing provision will not be violated by reason of (i) the payment
of any dividend within 60 days after declaration thereof if at the declaration
date such payment would have complied with the foregoing provision; (ii)
Restricted Payments consisting of investments in telecommunications businesses
in an aggregate amount not exceeding $50 million; (iii) payment in redemption of
Capital Stock of the Company or options to purchase such Capital Stock granted
to officers or employees of the Company pursuant to the 1982 Incentive Stock
Option Plan in connection with the severance or termination of officers or
employees not to exceed $3 million in the aggregate; and (iv) the making of
other Restricted Payments not in excess of $25 million. Any payment made
pursuant to clause (i), (ii), (iii) or (iv) of this paragraph shall be a
Restricted Payment for purposes of calculating aggregate Restricted Payments
under the next preceding paragraph.([Section] 1010)
LIMITATIONS CONCERNING DISTRIBUTIONS BY AND TRANSFERS TO RESTRICTED
SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, suffer to exist any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (i) to pay, directly or indirectly,
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. Notwithstanding the foregoing, the Company may, and
may permit any Restricted Subsidiary to, suffer to exist any such encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company if and to
the extent (i) subject to the provisions described under "Mergers,
Consolidations and Certain Sales and Purchases of Assets," such encumbrance or
restriction existed prior to the time any Person became a Restricted Subsidiary
of the Company and such restriction or encumbrance was not Incurred in
anticipation of such acquisition of such Person by the Company; (ii) subject to
the provisions described under "Mergers, Consolidations and Certain Sales and
Purchases of Assets," "Limitation on Certain Asset Dispositions" and "Limitation
on Issuances and Sales of Capital Stock of Wholly owned Restricted
Subsidiaries," such encumbrance or restriction exists by reason of a customary
merger or acquisition agreement for the purchase or acquisition of the stock or
assets of the Company or any of its Restricted Subsidiaries by another Person;
(iii) such encumbrance or restriction is contained in an operating lease for
real property and is effective only upon the occurrence and during the
continuance of a default in the payment of rent; and (iv) such encumbrance or
restriction is the result of applicable corporate law or regulation relating to
the payment of dividends or distributions.([Section] 1011)
LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, directly or indirectly, enter into any transaction after the date of
the Indenture with any Affiliate or Related Person (other than the Company or a
Wholly owned Restricted Subsidiary of the Company), unless (1) a majority of the
disinterested members of the Board of Directors of the Company determines in its
good faith judgment evidenced by a Board Resolution that the terms of such
transaction are in the best interests of the Company or such Restricted
Subsidiary; and (2) such transaction is, in the good faith judgment of the Board
of Directors evidenced by a Board Resolution, on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate or a
Related Person.([Section] 1012)
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LIMITATION ON CERTAIN ASSET DISPOSITIONS
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, make any Asset Disposition in one or more transactions unless: (i)
the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such sale or other disposition at least equal to
the fair market value for the assets sold or disposed of as determined by the
Board of Directors; (ii) the consideration for such disposition consists of cash
or readily marketable cash equivalents or the assumption of Debt of the Company
or other obligations relating to such assets and release from all liability on
the Debt or other obligations assumed; and (iii) all Net Available Proceeds,
less any amounts invested within 180 days of such disposition in accordance with
the next sentence, in assets related to the business of the Company, of such
disposition and from the sale of any marketable cash equivalents received
therein are applied within 180 days of such disposition, (A) first, to the
permanent reduction of any Debt then outstanding under a Credit Facility to the
extent the terms of such Credit Facility require such application or prohibit
prepayment of the Notes or other Debt to be prepaid as described in this
paragraph, (B) second, to the repayment of any other Senior Debt to the extent
the terms of such Debt require such application or prohibit prepayment of the
Notes or other Debt to be prepaid as described in this paragraph, (C) third, to
the extent remaining Net Available Proceeds exceed $5 million, to make an offer
to purchase the Company's outstanding 11.75% Senior Subordinated Notes due May
15, 2002, and (D) fourth, to the extent remaining Net Available Proceeds exceed
$5 million, to make an Offer to Purchase the Notes Outstanding, the Company's
outstanding 8.875% Senior Subordinated Notes due February 1, 2006, the Company's
outstanding 10.125% Senior Subordinated Notes due August 1, 2007, and other pari
passu Debt, on a pro rata basis according to their respective principal amounts
then outstanding (or Accreted Value in the case of an Original Issue Discount
Security), at 100% of their principal amount plus accrued interest to the date
of the purchase. Notwithstanding the foregoing, the Company shall not be
required to repurchase or redeem Notes or to repay other Debt pursuant to clause
(iii) above unless the Net Available Proceeds from any Asset Disposition, less
any amounts invested within 180 days of such disposition in assets related to
the business of the Company, exceed $5 million (such lesser amount to be carried
forward on a cumulative basis for any fiscal year). The Company shall not be
entitled to any credit against such obligation to purchase Notes for the
principal amount of any Notes acquired by the Company otherwise than pursuant to
such Offer to Purchase. These provisions will not apply to a transaction which
is permitted under the provisions described under "Mergers, Consolidations and
Certain Sales and Purchases of Assets."(sec. 1013)
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED RESTRICTED
SUBSIDIARIES
The Company (i) shall not, and shall not permit any Wholly owned Restricted
Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of such or any other Wholly owned Restricted Subsidiary to any Person
(other than the Company or a Wholly owned Restricted Subsidiary) unless such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly owned Restricted Subsidiary and the Net Available Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with "Limitation on Certain Asset Dispositions" and (ii) shall not
permit any Wholly owned Restricted Subsidiary to issue shares of its Capital
Stock (other than directors' qualifying shares), or securities convertible into,
or warrants, rights or options to subscribe for or purchase shares of, its
Capital Stock to any Person other than to the Company or a Wholly owned
Restricted Subsidiary.(sec. 1014)
PROVISION OF FINANCIAL INFORMATION
So long as any of the Exchange Notes are Outstanding, the Company will file
with the Commission the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to Section 13(a) or 15(d) of the 1934 Act if the Company were subject to such
Sections and will also provide to all holders and file with the Trustee copies
of such reports.(sec. 1015)
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MERGERS, CONSOLIDATIONS AND CERTAIN SALES AND PURCHASES OF ASSETS
The Company (i) may not consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company or any
Restricted Subsidiary of the Company (in a transaction in which such Restricted
Subsidiary remains a Restricted Subsidiary of the Company); (ii) may not,
directly or indirectly, transfer, convey, sell, lease or otherwise dispose of
all or substantially all of its assets; (iii) may not, and may not permit any
Restricted Subsidiary of the Company to, directly or indirectly, acquire Capital
Stock of any other Person such that such Person becomes a Restricted Subsidiary
of the Company; and (iv) may not, and may not permit any Restricted Subsidiary
of the Company to, directly or indirectly, purchase, lease or otherwise acquire
(x) all or substantially all of the assets or (y) any existing business (whether
existing as a separate entity, subsidiary, division, unit or otherwise) of any
Person unless: (1) immediately before and after giving effect to such
transaction and treating any Debt Incurred by the Company or a Restricted
Subsidiary of the Company as a result of such transaction as having been
Incurred by the Company or such Restricted Subsidiary at the time of the
transaction, no Event of Default or event that with the passing of time or the
giving of notice, or both, shall constitute an Event of Default shall have
occurred and be continuing; (2) in a transaction in which the Company does not
survive or in which the Company conveys, sells, leases or otherwise disposes of
all or substantially all of its assets, the successor entity to the Company is
organized under the laws of the United States or any State thereof or the
District of Columbia and expressly assumes, by a supplemental indenture executed
and delivered to the Trustee in form satisfactory to the Trustee, all of the
Company's obligations under the Indenture; and (3) immediately after giving
effect to such transaction, the Company and its Restricted Subsidiaries or the
successor entity to the Company and its Restricted Subsidiaries would have a
ratio of aggregate principal amount (or Attributable Value, or Accreted Value in
the case of an Original Discount Security, as the case may be) of Debt
outstanding as of the most recent available quarterly or annual balance sheet to
Pro Forma Consolidated Cash Flow for the most recently ended full fiscal quarter
multiplied by four, determined on a pro forma basis as if any such transaction
had taken place at the beginning of such fiscal quarter, of not more than 6.5 to
1; provided, however, that the provisions of this clause (3) shall not apply to
transactions described in clauses (i) through (iv) above which are (x) between
the Company and one or more of its Wholly owned Restricted Subsidiaries or (y)
between two or more Wholly owned Restricted Subsidiaries of the Company.
Notwithstanding the foregoing, the Company or any Restricted Subsidiary of
the Company may acquire the Capital Stock of a Person in a transaction in which
such Person becomes a Restricted Subsidiary of the Company or directly or
indirectly purchase, lease or otherwise acquire (x) all or substantially all of
the assets or (y) any existing business (whether existing as a separate entity,
subsidiary, division, unit or otherwise) of any Person so long as the sum of the
consideration paid for such Capital Stock or assets and the Debt assumed in
connection therewith plus the sum of the aggregate amount of consideration paid
for all other such acquisitions consummated during the twelve-month period
immediately preceding the date of such acquisition and the Debt Incurred in
connection therewith does not exceed 5% of Consolidated Tangible Assets of the
Company immediately prior to such acquisition.([Section] 801)
CHANGE OF CONTROL
Within 30 days following the date of the consummation of a transaction
resulting in a Change of Control, the Company will commence an Offer to Purchase
all Notes Outstanding at a purchase price equal to 101% of their aggregate
principal amount plus accrued interest to the date of purchase. A Change of
Control will be deemed to have occurred at such time after the date of the
Indenture as any Person or any Persons (other than The Golder Thoma Fund or any
of its officers), acting together which would constitute a "group" (a "Group")
for purposes of Section 13(d) of the 1934 Act, together with any Affiliates or
Related Persons thereof, shall beneficially own at least 50% of the total voting
power of all classes of Voting Stock of the Company or at such time as any
Person or Group, together with any Affiliates or Related Persons thereof,
succeeds in having sufficient of its nominees elected to the Board of Directors
of the Company such that such nominees, when added to any existing director
remaining on the Board of Directors of the Company after such election who is an
Affiliate or Related Person of such Person
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or Group, will constitute a majority of the Board of Directors of the Company;
provided, however, that this provision shall not apply to any Person or Group,
or the Affiliates or Related Persons thereof, who shall have succeeded on or
prior to the date of the Indenture in electing directors which constitute a
majority of the Board of Directors.([Section] 1016)
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. ([Section] 101)
"Accreted Value" of any Original Issue Discount Security as of or to any
date of determination means an amount equal to the sum of (i) the issue price of
such Original Issue Discount Security as determined in accordance with Section
1273 of the Internal Revenue Code plus (ii) the aggregate of the portions of the
original issue discount (the excess of the amounts considered as part of the
"stated redemption price at maturity" of such Original Issue Discount Security
within the meaning of Section 1273(a)(2) of the Code or any successor
provisions, whether denominated as principal or interest, over the issue price
of such Original Issue Discount Security) that shall theretofore have accrued
pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of
the Code) from the date of issue of such Original Issue Discount Security to the
end of the preceding fiscal quarter, plus (iii) accrued and unpaid interest to
the date such Accreted Value is paid (without duplication of any amount set
forth in (ii) above), minus all amounts theretofore paid in respect of such
Original Issue Discount Security, which amounts are considered as part of the
"stated redemption price at maturity" of such Original Issue Discount Security
within the meaning of Section 1273(a)(2) of the Code or any successor provisions
(whether such amounts paid were denominated principal or interest).
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted Subsidiaries
(including a consolidation or merger or other sale of any such Restricted
Subsidiary with, into or to another Person in a transaction in which such
Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a
disposition by a Restricted Subsidiary of such Person to such Person or a Wholly
owned Restricted Subsidiary of such Person or by such Person to a Wholly owned
Restricted Subsidiary of such Person, and excluding the creation of a lien,
pledge or security interest) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Restricted
Subsidiary of such Person, (ii) substantially all of the assets of such Person
or any of its Restricted Subsidiaries representing a division or line of
business or (iii) other assets or rights of such Person or any of its Restricted
Subsidiaries outside of the ordinary course of business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon
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which it may be so terminated. "Attributable Value" means, as to a Capital Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with generally accepted accounting principles.
"Average Life" means, as of the date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the dates of
each successive scheduled principal or liquidation value payments of such Debt
or Preferred Stock, respectively, and the amount of such principal or
liquidation value payments, by (ii) the sum of all such principal or liquidation
value payments.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the City of Boston,
Massachusetts or the Borough of Manhattan, The City of New York, New York are
authorized or obligated by law or executive order to close.
"Capital Expenditures" means, with respect to any Person for any period,
the aggregate of all direct and indirect expenditures (including capitalized
interest) of such Person during such period which are required to be included in
property, plant or equipment or similar tangible property account, including,
without limitation, additions to equipment and leasehold improvements, on a
consolidated balance sheet of such Person and its Restricted Subsidiaries
prepared in accordance with generally accepted accounting principles.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which 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 generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other 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" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow" of any Person means for any period the
Consolidated Net Income of such Person for such period increased by (i)
Consolidated Interest Expense of such Person for such period, plus (ii)
Consolidated Income Tax Expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of such Person and its Restricted Subsidiaries for such period, plus
(iv) other non-cash charges deducted from consolidated revenues in determining
Consolidated Net Income for such period, minus (v) non-cash items increasing
consolidated revenues for such period.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Restricted
Subsidiaries for such period.
"Consolidated Interest Expense" of any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Restricted
Subsidiaries for such period determined in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit, bankers'
acceptances or similar facilities; (iii) fees with respect to interest rate swap
or similar agreements or foreign currency hedge, exchange or similar agreements,
other than fees or charges related to the acquisition or termination thereof
which are not allocable to interest expense in accordance
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with generally accepted accounting principles; and (iv) Preferred Stock
dividends declared and payable in cash.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period determined in accordance with generally accepted accounting
principles; provided that there shall be excluded therefrom (a) the net income
(or loss) of any Person acquired by such Person or a Restricted Subsidiary of
such Person in a pooling-of-interests transaction for any period prior to the
date of such transaction, (b) the net income (but not the net loss) of any
Restricted Subsidiary of such Person which is subject to restrictions which
prevent the payment of dividends and the making of distributions (by loans,
advances, intercompany transfers or otherwise) to such Person to the extent of
such restrictions, (c) the net income (or loss) of any Person that is not a
Restricted Subsidiary of such Person except to the extent of the amount of
dividends or other distributions actually paid to such Person by such other
Person during such period, (d) gains or losses on Asset Dispositions by such
Person or its Restricted Subsidiaries and (e) all extraordinary gains and
extraordinary losses.
"Consolidated Tangible Assets" of any Person means the sum of the Tangible
Assets of such Person and its Restricted Subsidiaries after eliminating
inter-company items, all determined in accordance with generally accepted
accounting principles, including appropriate deductions for any minority
interest in Tangible Assets of such Restricted Subsidiaries; provided, however,
that, with respect to the Company and its Restricted Subsidiaries, adjustments
following the date of the Indenture to the accounting books and records of the
Company and its Restricted Subsidiaries in accordance with Accounting Principles
Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise
resulting from the acquisition of control of the Company by another Person shall
not be given effect.
"Credit Facility" means a credit or loan agreement or facility (which may
include a revolving or working capital facility) with a bank or other financial
institution or group of banks or other financial institutions, as such agreement
or facility may be amended (including any amendment and restatement thereof),
modified, supplemented, restated or replaced from time to time.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (iv) every 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), (v) every Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of Redeemable Stock of such Person at the
time of determination and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, such Person has Guaranteed or for which
such Person is responsible or liable, directly or indirectly, as obligor,
Guarantor or otherwise.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Company, any
Restricted Subsidiary of the Company or the holder thereof, in whole or in part,
on or prior to the Stated Maturity of the Notes.
"Golder Thoma Fund" means The Golder Thoma Fund, L.P., an Illinois limited
partnership, each general partner thereof and any successor thereto.
"Guaranty" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any Debt
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or
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to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Debt, (ii) to purchase property, securities or services for
the purpose of assuring the holder of such Debt of the payment of such Debt, or
(iii) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Debt (and "Guaranteed," "Guaranteeing" and "Guarantor" shall
have meanings correlative to the foregoing); provided, however, that the
Guaranty by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Debt or other obligations relating to such properties or assets or
received in any other noncash form) therefrom by such Person, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, provincial, foreign and local taxes required to
be accrued as a liability as a consequence of such Asset Disposition, (ii) all
payments made by such Person or its Restricted Subsidiaries on any Debt which is
secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or which must by the terms of such Lien, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law be
repaid out of the proceeds from such Asset Disposition, and (iii) all
distributions and other payments made to minority interest holders in Restricted
Subsidiaries of such Person or joint ventures as a result of such Asset
Disposition.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at its address appearing in
the Securities Register on the date of the Offer offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer. Unless otherwise required by applicable law, the Offer
shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase which shall be, subject to any contrary requirements of applicable law,
not less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for the purchase of Notes within five
Business Days after the Expiration Date. The Company shall notify the Trustee at
least 15 Business Days (or such shorter period as is acceptable to the Trustee)
prior to the mailing of the Offer of the Company's obligation to make an Offer
to Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. The Offer
shall contain information concerning the business of the Company and its
Subsidiaries which the Company in good faith believes will enable such holders
to make an informed decision with respect to the Offer to Purchase (which at a
minimum will include (i) the most recent annual and quarterly financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the documents required to be filed with the
Trustee pursuant to the provisions described under "Covenants -- Provision of
Financial Information" (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the
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date of the latest of such financial statements referred to in clause (i)
(including a description of the events requiring the Company to make the Offer
to Purchase), (iii) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Company to make
the Offer to Purchase and (iv) any other information required by applicable law
to be included therein. The Offer shall contain all instructions and materials
necessary to enable such holders to tender Notes pursuant to the Offer to
Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes offered to
be purchased by the Company pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such has been determined pursuant to
the Section of the Indenture requiring the Offer to Purchase) (the
"Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture);
(5) that the holder may tender all or any portion of the Notes
registered in the name of such holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the purchase price will become due and
payable upon each Note accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each holder electing to tender a Note pursuant to the Offer
to Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Expiration
Date (such Note being, if the Company or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the holder
thereof or his attorney duly authorized in writing and bearing appropriate
signature guarantees);
(10) that holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
principal amount of the Note the holder tendered, the certificate number of
the Note the holder tendered and a statement that such holder is
withdrawing all or a portion of such tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 or
integral multiples thereof shall be purchased); and
(12) that in case of any holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver
to such holder without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
"pari passu," when used with respect to the ranking of any Debt of any
Person in relation to other Debt of such Person, means that such Debt (a) either
(i) is not subordinate in right of payment to any other Debt of such Person or
(ii) is subordinate in right of payment to the same Debt of such Person as is
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the other and is so subordinate to the same extent and (b) is not subordinate in
right of payment to the other or to any Debt of such Person as to which the
other is not so subordinate.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Pro Forma Consolidated Cash Flow" of any Person means for any period the
Consolidated Cash Flow of such Person for such period calculated on a pro forma
basis to give effect to any Asset Disposition or acquisition of assets not in
the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during such period as if
such acquisition had taken place on the first day of such period.
"Redeemable Stock" means any equity security that by its terms or otherwise
is required to be redeemed prior to the Stated Maturity of the Notes, or is
redeemable at the option of the holder thereof at any time prior to the Stated
Maturity of the Notes.
"Related Person" of any Person means, without limitation, any other Person
owning (a) 5% or more of the outstanding Common Stock of such Person or (b) 5%
or more of the Voting Stock of such Person.
"Restricted Subsidiary" of the Company means any Subsidiary, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding 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 thereof or (ii) any other Person (other than
a corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Tangible Assets" of any Person means, at any date, the gross book value as
shown by the accounting books and records of such Person of all its property
both real and personal, less (i) the net book value of all its licenses,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
non-compete agreements or organizational expenses and other like intangibles,
(ii) unamortized Debt discount and expense, (iii) all reserves for depreciation,
obsolescence, depletion and amortization of its properties and (iv) all other
proper reserves which in accordance with generally accepted accounting
principles should be provided in connection with the business conducted by such
Person; provided, however, that, with respect to the Company and its Restricted
Subsidiaries, adjustments following the date of the Indenture to the accounting
books and records of the Company and its Restricted Subsidiaries in accordance
with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions
thereto) or otherwise resulting from the acquisition of control of the Company
by another Person shall not be given effect.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such by
the Board of Directors as set forth below where (a) neither the Company nor any
of its other Subsidiaries (other than another Unrestricted Subsidiary) (i)
provides credit support for, or Guaranty of, any Debt of such Subsidiary or any
Subsidiary of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary or any Subsidiary of such Subsidiary, and (b) no
default with respect to any Debt of such Subsidiary or any Subsidiary of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company and its Restricted
Subsidiaries to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity and
(2) any Subsidiary of an Unrestricted Subsidiary. Subject to the foregoing, the
Board of Directors may designate any 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 which is not a Subsidiary
of the Subsidiary
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to be so designated or otherwise an Unrestricted Subsidiary, provided that
either (x) the Subsidiary to be so designated has total assets of $1,000 or less
or (y) immediately after giving effect to such designation, the Company could
Incur at least $1.00 of additional Debt pursuant to the first paragraph under
"Covenants -- Limitation on Consolidated Debt" above. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided
that, immediately after giving effect to such designation, the Company could
Incur at least $1.00 of additional Debt pursuant to the first paragraph under
"Covenants -- Limitation on Consolidated Debt" above.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly owned
Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay any interest on any Note when due, continued for 30 days; (b) failure to pay
principal of (or premium, if any, on) any Note when due; (c) default in the
payment of principal and interest on Notes required to be purchased pursuant to
an Offer to Purchase as described under "-- Covenants -- Limitation on Certain
Asset Dispositions" and "-- Covenants -- Change of Control" when due and
payable; (d) failure to perform or comply with the provisions described under
"-- Covenants -- Mergers, Consolidations and Certain Sales and Purchases of
Assets"; (e) failure to perform or breach of any other covenant or warranty of
the Company in the Indenture, continued for 60 days after written notice from
the Trustee or holders of at least 25% in principal amount of the Notes
Outstanding as provided in the Indenture; (f) a default under any bonds,
debentures, notes or other evidences of indebtedness of the Company or any
Restricted Subsidiary of the Company or under any mortgages, indentures or
instruments under which there may be issued or by which there may be secured or
evidenced any indebtedness by the Company or any Restricted Subsidiary of the
Company, in any case with a principal amount of at least $5 million outstanding,
which shall have resulted in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise be due and payable or
which shall constitute the failure to pay principal when due at the stated
maturity of such indebtedness; (g) the rendering of a final judgment or
judgments (not subject to appeal) against the Company or any of its Restricted
Subsidiaries in an aggregate amount in excess of $5 million which remains
unstayed, in effect and unpaid for a period of 60 consecutive days thereafter;
and (h) certain events in bankruptcy, insolvency or reorganization affecting the
Company or any Restricted Subsidiary of the Company. ([Section] 501)
If an Event of Default (other than an Event of Default described in clause
(h) above) with respect to the Notes shall occur and be continuing, either the
Trustee or the holders of at least 25% in aggregate principal amount of the
Notes by notice as provided in the Indenture may declare the principal amount of
the Notes to be due and payable immediately. If an Event of Default described in
clause (h) above with respect to the Notes shall occur, the principal amount of
all the Notes will automatically, and without any action by the Trustee or any
holder, become immediately due and payable. After any such acceleration, but
before a judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount of the Notes may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
non-payment of accelerated principal (or other specified amount), have been
cured or waived as provided in the Indenture. ([Section] 502) For information
as to waiver of defaults, see "Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights
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or powers under the Indenture at the request or direction of any of the holders,
unless such holders shall have offered to the Trustee reasonable indemnity.
([Section] 603) Subject to such provisions for the indemnification of the
Trustee, the holders of a majority in aggregate principal amount of the Notes
will 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 with respect to the Notes. ([Sections] 512)
No holder of an Exchange Note will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Notes, (ii) the holders of at least 25% in aggregate
principal amount of the Notes have made written request, and such holder or
holders have offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee and (iii) the Trustee has failed to institute such
proceeding, and has not received from the holders of a majority in aggregate
principal amount of the Notes a direction inconsistent with such request, within
60 days after such notice, request and offer. ([Section] 507) However, such
limitations do not apply to a suit instituted by a holder of an Exchange Note
for the enforcement of payment of the principal of or any premium or interest on
such Exchange Note on or after the applicable due date specified in such
Exchange Note. ([Section] 508)
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the performance or observance of any of the terms, provisions
and conditions of the Indentures and, if so, specifying all such known defaults.
([Section] 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the Notes; provided, however, that no such modification or
amendment may, without the consent of the holder of each Note Outstanding
affected thereby, (a) change the Stated Maturity of the principal of, or any
instalment of interest on, any Note, (b) reduce the principal amount of (or the
premium) or interest on, any Note, (c) change the place or currency of payment
of principal of (or premium) or interest on, any Note, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Note, (e) reduce the above-stated percentage of Notes Outstanding necessary to
modify or amend the Indenture, (f) reduce the percentage of aggregate principal
amount of Notes Outstanding necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, (g) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past defaults or covenants, except as otherwise
specified, (h) modify any of the provisions of the Indenture relating to the
subordination of the Notes in a manner adverse to the holders, or (i) following
the mailing of an offer with respect to an Offer to Purchase the Notes as
described under "-- Covenants -- Limitation on Certain Asset Dispositions" and
" -- Change of Control," modify the Indenture with respect to such Offer to
Purchase in a manner adverse to such holder. ([Sections] 902 and 1017)
The holders of a majority in principal amount of the Notes may
prospectively waive compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1017) The holders of a majority in
principal amount of the Notes may waive any past default under the Indenture,
except a default in the payment of principal, premium or interest and certain
covenants and provisions of the Indenture which cannot be amended without the
consent of the holder of each Note affected. ([Section] 513)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that (A) if applicable, the Company will be
discharged from any and all obligations in respect of the Notes (including the
provisions referred to under "Subordination") or (B) if applicable, the Company
may omit to comply with certain restrictive covenants, and that such omission
shall not be deemed to be an Event of Default under the Indenture and the Notes,
in either case (A) or (B) upon irrevocable deposit with the Trustee, in trust,
of money and/or U.S. government obligations which will provide money in an
amount sufficient in the opinion of a nationally recognized firm of
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independent certified public accountants to pay the principal of and premium, if
any, and each instalment of interest, if any, on the Notes. With respect to
clause (B), the obligations under the Indenture other than with respect to such
covenants and the Events of Default other than the Events of Default relating to
such covenants shall remain in full force and effect. Such trust may only be
established if, among other things (i) with respect to clause (A), the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling or there has been a change in law, which in the Opinion of Counsel
provides that holders of the Notes will not recognize gain or loss for Federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to Federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge had not occurred; or, with respect to clause (B), the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the holders of
the Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred; (ii) no Event of
Default or event that with the passing of time or the giving of notice, or both,
shall constitute an Event of Default has occurred and is continuing; (iii) such
deposit shall not cause the trust so created to be subject to the Investment
Company Act of 1940 unless such trust shall be registered under such Act or
exempt from registration; (iv) no default in the payment of principal or
interest on any Senior Debt or which results in the Senior Debt becoming due and
payable or permits the holders of Senior Debt to declare such Debt due and
payable in advance of its stated maturity has occurred and is continuing; and
(v) certain other customary conditions precedent are satisfied. (Article
Thirteen)
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Exchange Notes will be issued only in fully registered form, without
interest coupons, in denominations of $1,000 and integral multiples thereof.
Exchange Notes will not be issued in bearer form.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES. The descriptions of the
operations and procedures of the Depository Trust Company ("DTC") that follow
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to change from time to
time. The Company takes no responsibility for these operations and procedures
and urges investors to contact DTC or its participants directly to discuss these
matters.
Some or all of the Exchange Notes may be represented, in whole or in part,
by one or more Global Notes which will have an aggregate principal amount equal
to that of the Exchange Notes represented thereby. Each Global Note will be
registered in the name of DTC, or a nominee thereof, will be deposited with DTC
or nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof referred to
below.
DTC may determine to discontinue providing its services with respect to the
Global Notes at any time by giving reasonable written notice to the Trustee and
the Company and discharging its responsibilities under applicable law. In
addition, the Company at its sole discretion may terminate the services of DTC
(or substitute depositary or its successor) with respect to the Global Notes.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code, and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
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AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE EXCHANGE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES
UNDER THE INDENTURE AND THE EXCHANGE NOTES. A beneficial interest in a Global
Note may not be exchanged for an Exchange Note in certificated form unless (i)
DTC (x) notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Note or (y) has ceased to be a clearing agency
registered under the Exchange Act, and in either case the Company thereupon
fails to appoint a successor Depositary, (ii) the Company, at its option,
notifies the Trustee in writing that all Global Notes shall be exchanged in
whole for Exchange Notes that are not Global Notes, or (iii) there shall have
occurred and be continuing an Event of Default or any event which after notice
or lapse of time or both would be an Event of Default with respect to the
Exchange Notes. In all cases, certificated Exchange Notes delivered in exchange
for any Global Note or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the Depositary (in accordance with its customary procedures).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of its participants, which in
turn act on behalf of indirect participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither the
Company, the Trustee nor any of their respective agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee , upon receipt of any payment
of principal or interest in respect of a Global Note representing any Exchange
Notes held by it or its nominee, will immediately credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Note for such Exchange Notes as shown on
the records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Note held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
registered in "street name." Such payments will be the responsibility of such
participants.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such participant or participants has or have
given such direction. However, if there is an Event of Default under the Notes,
DTC reserves the right to exchange the Global Notes for Exchange Notes in
certificated form, and to distribute such Exchange Notes to its participants.
NOTICES
Notices to holders of Exchange Notes will be given by mail to the addresses
of such holders as they may appear in the applicable Register. (sec.sec. 101 and
106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name an Exchange Note is registered as the absolute
owner thereof (whether or not such Exchange Note may be overdue) for the purpose
of making payment and for all other purposes. (sec. 308)
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GOVERNING LAW
The Indenture and the Exchange Notes will be governed by, and construed in
accordance with, the law of the State of New York. (sec. 112)
REGARDING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the continuance of an Event of Default, the Trustee
will exercise such rights and powers vested in the Trustee under the Indenture
and use the same degree of care and skill in such exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. (sec.sec. 601 and 603)
The Indenture and provisions of the Trust Indenture Act of 1939
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases or to realize on certain property received by it in respect of
any such claim as security or otherwise. The Trustee is permitted to engage in
other transactions with the Company or any Affiliate; provided, however, that if
the Trustee acquires any conflicting interest (as defined in the Indenture or in
the Trust Indenture Act), it must eliminate such conflict or resign. (sec. 608)
Fleet National Bank serves as the Trustee under the Indenture dated as of
May 15, 1992 relating to the Company's 11.75% Senior Subordinated Notes due May
15, 2002 (the "11.75% Notes"), as the Trustee under the Indenture dated as of
January 15, 1994 relating to the Company's 8.875% Senior Subordinated Notes due
February 1, 2006, and as the Trustee for the Company's 10.125% Senior
Subordinated Notes due August 1, 2007 issued under the Indenture dated as of
July 15, 1995 and the First Supplemental Indenture thereto dated as of July 15,
1995. Upon the occurrence of an Event of Default, or any event of default under
any such other indenture, the Trustee may be deemed to have a conflicting
interest with respect to the Notes for purposes of the Trust Indenture Act of
1939 and, accordingly, may be required to resign as trustee under the Indenture.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes as reflected in the Company's accounting records on the date
of the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OF NOTES
The following summary of all material federal income tax consequences of
the exchange of Notes is based on the opinion of Bingham, Dana & Gould LLP,
counsel to the Company, which opinion has been filed as an exhibit to the
Registration Statement. Such opinion is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and
proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions in effect as of the date hereof, all of which are subject to
change (possibly with retroactive effect) or different interpretations. The
following summary is not binding on the Internal Revenue Service ("IRS") and
there can be no assurance that the IRS will take a similar view with respect to
the tax consequences described below. No ruling has been or will be requested by
the Company from the IRS on any tax matters relating to the Notes or the
Exchange Offer. This discussion is for general information only and does not
purport to address the possible federal income tax consequences or any state,
local or foreign tax consequences of the acquisition, ownership and disposition
of the Notes or the Exchange Notes other than the exchange of Outstanding Notes
for Exchange Notes in this Exchange Offer.
This summary deals only with holders that will hold Notes as capital assets
and does not address tax considerations applicable to investors that may be
subject to special tax rules, such as banks, tax exempt organizations, insurance
companies, dealers in securities or currencies, persons that will hold Notes as
a
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<PAGE> 68
position in a "straddle" for tax purposes, persons that hold Notes that are a
hedge or that are hedged against currency risks or that are part of a conversion
transaction, or persons that have a "functional currency" other than the U.S.
dollar. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR
SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
The exchange of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" because the Exchange Notes
should not be considered to differ materially in kind or extent from the
Outstanding Notes. Rather, the Exchange Notes received by a holder of the
Outstanding Notes should be treated as a continuation of the Outstanding Notes
in the hands of such holder. As a result, there should be no federal income tax
consequences to holders exchanging the Outstanding Notes for the Exchange Notes
pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Based on positions taken by the staff of the Commission that have been
enunciated in no-action letters issued to Exxon Capital Holdings Corp. and
Morgan Stanley & Co. Inc., among others, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is (i) an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act, or (ii) a broker-dealer who
acquired Outstanding Notes for resale pursuant to an exemption from the
registration requirements of the Securities Act) without compliance with the
registration and prospectus delivery provisions under the Securities Act,
provided that (A) such Exchange Notes are acquired in the ordinary course of
such holders' business, (B) such holders are not engaged in, and do not intend
to engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes, and (C) as provided in
the next paragraph certain broker-dealers will be subject to a prospectus
delivery requirement with respect to resales of such Exchange Notes.
Each holder who is a broker-dealer and who receives Exchange Notes for its
own account in exchange for Outstanding Notes that were acquired by it as a
result of market making activities or other trading activities (a "Participating
Broker-Dealer") will be required to acknowledge that it will deliver a
prospectus in connection with any resale by it of such Exchange Notes. To date,
the staff of the Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as the exchange
pursuant to the Exchange Offer (other than a resale of an unsold allotment from
the sale of the Outstanding Notes to the Initial Purchasers thereof) with the
Prospectus contained in the Exchange Offer Registration Statement. Pursuant to
the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Company has agreed that, for a period of 90
days after the Exchange Offer has been consummated, it will make this
Prospectus, and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company. In addition, each holder who is a broker-dealer
and who receives Exchange Notes for its own account in exchange for Outstanding
Notes that were acquired by it as a result of market-making activities or other
trading activities, will be required to acknowledge that it will deliver a
prospectus in connection with any resale by it of such Exchange Notes. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
66
<PAGE> 69
Holders who tender Outstanding Notes in the Exchange Offer with the
intention to participate in a distribution of the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the Exchange Notes (unless an exemption
from such requirements is otherwise available).
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees, printing costs and
related fees and expenses.
LEGAL MATTERS
Certain legal matters regarding the validity of the Exchange Notes offered
hereby and the United States federal income tax consequences of the Exchange
Offer will be passed upon for the Company by Bingham, Dana & Gould LLP, Boston,
Massachusetts.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31, 1995
and appearing in or incorporated by reference in this Prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports appearing or incorporated by reference therein and herein. Such
consolidated financial statements and schedule are included or incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The financial statements of Comtech, Inc. -- Paging Division as of December
31, 1994 and 1993 and for the years then ended appearing in the Company's
Current Report (Form 8-K/A) dated April 3, 1995, have been audited by McGladrey
& Pullen, LLP, independent auditors, as set forth in their report appearing
therein and incorporated by reference herein. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of SNET Paging, Inc., as of December
31, 1994 and 1993 and for the years then ended, appearing in the Company's
Current Report (Form 8-K/A) dated April 3, 1995, have been audited by Coopers &
Lybrand L.L.P., independent auditors, as set forth in their report appearing
therein and incorporated by reference herein. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of TNI Associates as of December 31,
1992 and 1991 and for the years then ended, appearing in the Company's Current
Report (Form 8-K/A) dated April 3, 1995, have been audited by Coopers & Lybrand
L.L.P., independent auditors, as set forth in their report appearing therein and
incorporated by reference herein. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
67
<PAGE> 70
The financial statements of Celpage, Inc. (Atlanta Branch) at March 31,
1995 and for the ten months then ended, appearing in the Company's Current
Report (Form 8-K) dated October 31, 1995, have been audited by Price Waterhouse,
independent auditors, as set forth in their report appearing therein and
incorporated by reference herein. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The statements set forth under "Business -- Regulation" have been made
under the authority of Reed Smith Shaw & McClay, attorneys, Washington, D.C., as
experts in telecommunications law. Holders of the Outstanding Notes should not
rely on Reed Smith Shaw & McClay with respect to any matters other than as set
forth under the caption "Business -- Regulation."
68
<PAGE> 71
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors................................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1993,
1994 and 1995............................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995............................................................... F-5
Consolidated Statements of Stockholders' Deficit for the Years Ended December
31, 1993, 1994 and 1995..................................................... F-6
Notes to Consolidated Financial Statements..................................... F-7
UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996.......... F-16
Consolidated Statements of Operations for the six months ended June 30, 1995
and 1996.................................................................... F-17
Consolidated Statements of Cash Flows for the six months ended June 30, 1995
and 1996.................................................................... F-18
Notes to Consolidated Financial Statements..................................... F-19
</TABLE>
F-1
<PAGE> 72
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Paging Network, Inc.
We have audited the accompanying consolidated balance sheets of Paging
Network, Inc. as of December 31, 1994 and 1995, and the related consolidated
statements of operations, cash flows and stockholders' deficit for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our 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 consolidated financial position of Paging Network,
Inc. at December 31, 1994 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
February 16, 1996
F-2
<PAGE> 73
PAGING NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
--------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 2,451 $ 198,182
Accounts receivable (less allowance for doubtful accounts of
$3,806 and $4,704 in 1994 and 1995, respectively)............ 22,389 41,335
Inventories..................................................... 9,932 14,084
Prepaid expenses................................................ 4,603 8,814
--------- ----------
Total current assets.................................... 39,375 262,415
Property, equipment and leasehold improvements, at cost........... 583,620 841,022
Less accumulated depreciation and amortization.................. (161,711) (225,413)
--------- ----------
Net property, equipment and leasehold improvements...... 421,909 615,609
Intangible assets:
PCS licenses.................................................... 197,272 197,272
Excess of cost over fair market value of net assets acquired
(less accumulated amortization of $4,470 and $5,110 in 1994
and 1995, respectively)...................................... 10,023 29,421
Other (less accumulated amortization of $12,487 and $25,220 in
1994 and 1995, respectively)................................. 37,429 123,621
--------- ----------
Net intangible assets................................... 244,724 350,314
--------- ----------
$ 706,008 $1,228,338
========= ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Payable for PCS licenses........................................ $ 157,600 $ --
Accounts payable................................................ 27,916 69,776
Accrued expenses................................................ 39,201 69,091
Customer deposits............................................... 17,199 20,255
--------- ----------
Total current liabilities............................... 241,916 159,122
Long-term obligations............................................. 504,000 1,150,000
Commitments and contingencies -- --
Stockholders' deficit:
Common Stock -- $.01 par, authorized 250,000,000 shares; issued
and outstanding 101,405,800 shares at December 31, 1994 and
102,245,807 shares at December 31, 1995...................... 1,014 1,022
Paid-in capital................................................. 118,384 121,701
Accumulated deficit............................................. (159,306) (203,507)
--------- ----------
Total stockholders' deficit............................. (39,908) (80,784)
--------- ----------
$ 706,008 $1,228,338
========= ==========
</TABLE>
See accompanying notes
F-3
<PAGE> 74
PAGING NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Services, rent and maintenance revenues.................. $294,979 $389,919 $532,079
Product sales............................................ 78,915 99,765 113,943
-------- -------- --------
Total revenues................................. 373,894 489,684 646,022
Cost of products sold.................................... (62,495) (78,102) (93,414)
-------- -------- --------
311,399 411,582 552,608
Operating expenses:
Services, rent and maintenance......................... 57,343 74,453 109,484
Selling................................................ 44,836 60,555 67,561
General and administrative............................. 108,993 136,539 174,432
Depreciation and amortization.......................... 87,430 107,362 148,997
-------- -------- --------
Total operating expenses....................... 298,602 378,909 500,474
-------- -------- --------
Operating income......................................... 12,797 32,673 52,134
Other income (expense):
Interest expense....................................... (32,808) (53,717) (102,846)
Interest income........................................ -- 3,079 6,511
-------- -------- --------
Total other income (expense)................... (32,808) (50,638) (96,335)
-------- -------- --------
Net loss................................................. $(20,011) $(17,965) $(44,201)
======== ======== ========
Net loss per share....................................... $ (0.20) $ (0.18) $ (0.43)
======== ======== ========
</TABLE>
See accompanying notes
F-4
<PAGE> 75
PAGING NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net loss............................................ $ (20,011) $ (17,965) $ (44,201)
Adjustments to reconcile net loss to cash provided
by operating activities:
Depreciation and amortization.................... 87,430 107,362 148,997
Accounts receivable loss provision............... 11,525 11,664 12,209
Write-off of debt issuance costs on $450 million
credit agreement............................... -- -- 6,641
Amortization of debt issuance costs.............. 2,385 2,764 4,313
Payment of consent solicitation on 11.75% Senior
Notes.......................................... -- (5,896) --
Changes in operating assets and liabilities:
Accounts receivable.............................. (9,039) (20,289) (28,393)
Inventories...................................... 837 (2,501) (3,495)
Prepaid expenses................................. (1,298) 711 (4,144)
Accounts payable................................. (1,452) 9,532 41,860
Accrued expenses................................. 8,615 18,941 24,715
Customer deposits................................ 2,694 3,421 2,127
--------- --------- ---------
Net cash provided by operating activities............. 81,686 107,744 160,629
--------- --------- ---------
Investing activities:
Additions to property, equipment and leasehold
improvements..................................... (145,625) (213,308) (312,289)
Payments for PCS licenses........................... -- (39,672) (157,600)
Payments for business acquisitions.................. -- (5,705) (111,872)
Other............................................... (3,094) (2,154) (7,626)
--------- --------- ---------
Net cash used in investing activities................. (148,719) (260,839) (589,387)
--------- --------- ---------
Financing activities:
Increase in long-term obligations under credit
agreements....................................... 155,000 4,000 564,850
Repayments of long-term obligations under credit
agreements....................................... (79,500) (142,500) (318,850)
Proceeds from Senior Notes offerings................ -- 300,000 400,000
Debt issuance costs on Senior Notes offerings....... -- (8,250) (10,132)
Debt issuance costs on credit agreements............ (8,400) -- (13,531)
Proceeds from exercise of Common Stock options...... 1,463 1,423 3,325
Other............................................... (326) (1,618) (1,173)
--------- --------- ---------
Net cash provided by financing activities............. 68,237 153,055 624,489
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents......................................... 1,204 (40) 195,731
Cash and cash equivalents at beginning of year........ 1,287 2,491 2,451
--------- --------- ---------
Cash and cash equivalents at end of year.............. $ 2,491 $ 2,451 $ 198,182
========= ========= =========
</TABLE>
See accompanying notes
F-5
<PAGE> 76
PAGING NETWORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT DEFICIT
------ -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992................ $1,006 $115,506 $(121,330) $ (4,818)
Issuance of 524,394 shares of Common
Stock upon exercise of stock
options.............................. 5 1,458 -- 1,463
Net loss................................ -- -- (20,011) (20,011)
------ -------- --------- --------
Balance, December 31, 1993................ 1,011 116,964 (141,341) (23,366)
Issuance of 319,302 shares of Common
Stock upon exercise of stock
options.............................. 3 1,420 -- 1,423
Net loss................................ -- -- (17,965) (17,965)
------ -------- --------- --------
Balance, December 31, 1994................ 1,014 118,384 (159,306) (39,908)
Issuance of 840,007 shares of Common
Stock upon exercise of stock
options.............................. 8 3,317 -- 3,325
Net loss................................ -- -- (44,201) (44,201)
------ -------- --------- --------
Balance, December 31, 1995................ $1,022 $121,701 $(203,507) $ (80,784)
====== ======== ========= ========
</TABLE>
See accompanying notes
F-6
<PAGE> 77
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The Company -- Paging Network, Inc. (the Company) is a provider of paging
and wireless messaging services. The Company provides paging services in all 50
states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico,
including local paging service in virtually all of the largest 100 markets (in
population) in the United States. The consolidated financial statements include
the accounts of all of its wholly-owned subsidiaries. All intercompany
transactions have been eliminated.
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.
Inventories -- Inventories consist of pagers which are held specifically
for resale. Inventories are stated at the lower of cost or market, with cost
determined on a first-in, first-out basis.
Property, equipment and leasehold improvements -- Property, equipment and
leasehold improvements are stated at cost, less accumulated depreciation and
amortization. Expenditures for maintenance are charged to expense as incurred.
Upon retirement of units of equipment, the costs of units retired and the
related accumulated depreciation amounts are removed from the accounts.
Depreciation and amortization are computed using the straight-line method based
on the following estimated useful lives:
<TABLE>
<S> <C>
Machinery and equipment........................................ 3 to 7 years
Pagers......................................................... 4 years
Furniture and fixtures......................................... 7 years
Leasehold improvements......................................... 5 years*
Buildings and building improvements............................ 20 years
</TABLE>
- ---------------
* or term of lease if shorter
The Company does not manufacture any of the pagers or related transmitting
and computerized paging terminal equipment used in the Company's paging
operations. The Company currently purchases the vast majority of its pagers from
Motorola, Inc. However, pagers are available for purchase from multiple sources,
consistent with normal manufacturing and delivery lead times.
Intangible assets -- The excess of the cost of acquired net assets of
paging companies over the aggregate fair values assigned to identified tangible
and intangible net assets acquired is amortized over twenty years on a
straightline basis.
Other intangible assets -- Other intangible assets generally consist of
narrowband personal communications services (PCS) licenses (see Note 12), other
paging licenses, customer lists, debt issuance costs, and start-up costs and
Federal Communications Commission (FCC) application costs, and are amortized on
a straight-line basis over their estimated useful lives ranging from 18 months
to twelve years.
The Company continually evaluates intangible assets to determine whether
current events and circumstances warrant adjustment to the carrying values or
amortization periods.
Income taxes -- Income taxes are provided based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." If it is more likely than not that some portion
or all of a deferred tax asset will not be realized, a valuation allowance is
recognized.
F-7
<PAGE> 78
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications -- Certain 1993 and 1994 amounts have been reclassified
to conform with the 1995 presentation.
2. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The cost of property, equipment and leasehold improvements consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment............................ $248,652 $ 394,331
Pagers............................................. 278,791 372,128
Furniture and fixtures............................. 35,381 46,189
Leasehold improvements............................. 20,796 25,036
Land, buildings and building improvements.......... -- 3,338
-------- ----------
Total cost............................... $583,620 $ 841,022
======== ==========
</TABLE>
3. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Accrued compensation, benefits and related items... $ 7,024 $ 8,231
Accrued taxes...................................... 6,420 9,900
Accrued interest................................... 14,284 34,670
Other accrued expenses............................. 11,473 16,290
-------- ----------
Total accrued expenses................... $ 39,201 $ 69,091
======== ==========
</TABLE>
4. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Revolving loan..................................... $ 4,000 $ --
Term loans due March 31, 2002...................... -- 250,000
11.75% Senior Subordinated Notes due May 15,
2002............................................. 200,000 200,000
8.875% Senior Subordinated Notes due February 1,
2006............................................. 300,000 300,000
10.125% Senior Subordinated Notes due August 1,
2007............................................. -- 400,000
-------- ----------
Total long-term obligations.............. $504,000 $1,150,000
======== ==========
</TABLE>
On May 2, 1995 the Company established a new $750.0 million credit facility
under a new credit agreement with a group of 44 lenders (the Credit Agreement),
which amended and restated a $450.0 million credit agreement (the Old Credit
Agreement). The Credit Agreement as amended provides for a $100.0 million term
loan, a $150.0 million term loan, and a $500.0 million revolving loan under
which the Company is able to borrow, provided it meets certain financial
covenants, the lesser of
F-8
<PAGE> 79
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$750.0 million or an amount based upon a calculation which is reduced by total
outstanding indebtedness for borrowed monies (as defined) and outstanding
letters of credit. The amount available for borrowing calculation is equal to a
specified multiple of earnings before interest, income taxes, depreciation and
amortization for the most recent three calendar months times four. Prepayments
of borrowings under the Credit Agreement may be required should certain defined
tests not be met. As of December 31, 1995, the Company had $250.0 million of
term loan borrowings outstanding under its Credit Agreement and approximately
$326.2 million was available for borrowing under the revolving credit facility.
The Credit Agreement expires on March 31, 2002. In connection with the
consummation of the Credit Agreement, in 1995 the Company expensed debt issuance
costs of approximately $6.6 million related to the Old Credit Agreement.
Under the terms of the Credit Agreement, the credit facility is permanently
reduced as follows:
<TABLE>
<CAPTION>
PERMANENT REDUCTIONS
-------------------------------------------------------
TYPE OF LOAN 1998 1999 2000 2001 2002
- ------------------------------------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
100.0 million term loan.............. $10,000 $ 20,000 $ 20,000 $ 30,000 $ 20,000
150.0 million term loan.............. -- 1,000 2,000 2,000 145,000
500.0 million revolving loan......... 50,000 100,000 100,000 150,000 100,000
</TABLE>
Under the Credit Agreement, the Company may designate all or a portion of
the $100.0 million term loan and revolving loan to be either a Base Rate loan or
a London Interbank Offered Rate (LIBOR) loan. At December 31, 1995, the Company
had designated the $100.0 million term loan as a LIBOR Rate loan which bears
interest at a rate equal to the LIBOR rate plus a spread of 2.25% based on the
Company's total leverage ratio as defined. The interest rate for the $100.0
million LIBOR Rate loan at December 31, 1995 was 7.90%. Under the Credit
Agreement, the $150.0 million term loan is designated to be a LIBOR Rate loan
which bears interest at a rate equal to the LIBOR rate plus a spread of 2.875%.
The interest rate for the $150.0 million LIBOR Rate loan at December 31, 1995
was 8.695%.
The Credit Agreement prohibits the Company from paying cash dividends or
other cash distributions to stockholders. The Credit Agreement also prohibits
the Company from paying more than a total $2.0 million in connection with the
purchase of Common Stock owned by employees whose employment with the Company is
terminated (see Note 6). The Credit Agreement contains other covenants that,
among other things, limit the ability of the Company and its subsidiaries to
incur indebtedness, engage in transactions with affiliates, dispose of assets,
and engage in mergers, consolidations, and other acquisitions. Amounts owing
under the Credit Agreement are secured by a security interest in substantially
all of the Company's assets, the assets of the Company's subsidiaries and the
capital stock of the subsidiaries of the Company.
The 11.75% Senior Subordinated Notes (11.75% Notes), the 8.875% Senior
Subordinated Notes (8.875% Notes), and the 10.125% Senior Subordinated Notes
(10.125% Notes) are redeemable on or after May 15, 1997, February 1, 1999, and
August 1, 2000, respectively, at the option of the Company, in whole or in part
from time to time, at certain prices declining annually to 100 percent of the
principal amount on or after May 15, 1999, February 1, 2002, and August 1, 2003,
respectively, plus accrued interest. The 11.75% Notes, the 8.875% Notes, and the
10.125% Notes are subordinated in right of payment to all senior debt, and
contain various covenants that, among other things, limit the type and amount of
debt the Company may incur and limit restricted payments and distributions (as
defined), asset dispositions, mergers and asset purchases.
Based on quoted market prices, the fair value of the 11.75% Notes, the
8.875% Notes, and the 10.125% Notes at December 31, 1995 was $221.3 million,
$307.1 million, and $435.5 million, respectively.
F-9
<PAGE> 80
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1994, the Company received consent from holders of its 11.75%
Notes to amend the Indenture governing the 11.75% Notes. The purpose of this
amendment was to provide the Company with greater flexibility in pursuing
corporate opportunities (including the incurrence of additional debt) and to
conform certain covenants in the Indenture to the less restrictive covenants
contained in the indenture governing the Company's 8.875% Notes. The Company
paid an aggregate of $5.9 million to the holders of the 11.75% Notes who had
given consent and the Indenture was amended accordingly.
5. INCOME TAXES
For the years ended December 31, 1993, 1994 and 1995, the Company had no
provision or benefit for income taxes because the deferred benefit from the
operating losses was offset by an increase in the valuation allowance of $9.5
million, $6.8 million, and $14.6 million, respectively. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................... $ 44,794 $ 74,038
Deferred revenue................................... 1,030 2,003
Bad debt reserve................................... 1,484 1,834
Other tax credit carryforwards..................... 721 691
Other.............................................. 6,640 3,907
-------- --------
Total deferred tax assets.................. 54,669 82,473
Valuation allowance................................ (36,036) (50,642)
-------- --------
Net deferred tax assets.................... 18,633 31,831
Deferred tax liabilities:
Depreciation....................................... (17,789) (28,122)
Amortization....................................... (844) (3,709)
-------- --------
Total deferred tax liabilities............. (18,633) (31,831)
-------- --------
$ -- $ --
======== ========
</TABLE>
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $190 million that expire in years 1999 through 2010.
6. STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock option plans. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
The 1982 Incentive Stock Option Plan, as amended (1982 Plan), for officers
and key employees of the Company provides for the granting of stock options
intended to qualify as Incentive Stock Options (ISOs) to purchase Common Stock
at not less than 100% of the fair market value on the date the option is
granted, as determined by the Board of Directors. No further options may be
granted under the 1982 Plan. At December 31, 1995, options for 432,040 shares
were exercisable under the 1982 plan, of which 430,102 shares were fully vested.
F-10
<PAGE> 81
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options granted were exercisable immediately, or in installments as the
Board of Directors determined at the time it granted such options, and have a
duration of ten years from the date of grant. Any stock issued is subject to
repurchase at the option of the Company which occurs at the exercise price for
the unvested portion of the shares issued and at fair market value, as defined
or allowed in the Stock Option Agreement, for the vested portion. Such options
vest ratably over a five-year period from the date they first become
exercisable. However, in the event of a change in ownership control of the
Company, all options vest immediately.
The 1991 Stock Option Plan (1991 Plan) for officers and key employees of
the Company provides for the granting of ISOs and non-statutory options to
purchase Common Stock at not less than 100% of the fair market value on the date
the options are granted. The 1991 Plan is administered by a committee consisting
of two members of the Board (Committee). Approximately 2.05 million shares
remain available for grant under the 1991 Plan at December 31, 1995. A total of
1.10 million shares were vested and exercisable under the 1991 Plan at December
31, 1995. Options granted under the 1991 Plan are non-transferable except by the
laws of descent and distribution and are exercisable upon vesting, which occurs
either immediately or in installments, as the Board of Directors or the
Committee may determine at the time it grants such options.
The 1992 Stock Option Plan for Directors (Directors' Plan), for
non-employee Directors of the Company, provides for the granting of
non-statutory options to purchase Common Stock at not less than 100% of the fair
market value on the date the options are granted. The Directors' Plan is
administered by the Committee. The total number of shares of Common Stock with
respect to which options may be granted under the Directors' Plan may not exceed
750,000. Approximately 480,000 shares remain available for grant under the
Directors' Plan at December 31, 1995. A total of 72,000 shares were vested and
exercisable at December 31, 1995. Options granted under the Directors' Plan are
non-transferable except by the laws of descent and distribution and are
exercisable upon vesting, which occurs either immediately or in installments, as
the Board of Directors or the Committee may determine at the time it grants such
options.
With respect to the 1991 Plan and Directors' Plan, notwithstanding the
above, ten business days before a merger or a change in the ownership control of
the Company or a sale of substantially all the assets of the Company, all
options issued vest immediately and become exercisable in full; upon a merger or
a change in ownership control of the Company or the sale of substantially all
the assets of the Company, all options issued under the 1991 Plan and Directors'
Plan which have not been exercised terminate.
Information concerning options at December 31, 1993, 1994 and 1995 is as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Outstanding January 1................. 5,239,540 4,773,106 4,737,420
Granted............................. 1,390,994 522,400 1,605,800
Cancelled........................... (1,333,034) (238,784) (838,478)
Exercised........................... (524,394) (319,302) (840,007)
------------ ------------ ------------
Outstanding December 31............... 4,773,106 4,737,420 4,664,735
============ ============ ============
Options exercisable................... 1,705,092 1,862,826 1,601,440
============ ============ ============
Option price range-options
outstanding......................... $0.40-$12.67 $0.40-$16.50 $2.67-$23.56
Option price range-options
exercised........................... $0.40-$ 8.05 $0.40-$ 9.59 $0.40-$14.38
</TABLE>
F-11
<PAGE> 82
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS
The Company has operating leases for office and transmitting sites with
lease terms ranging from a month to approximately ten years. There are no
significant renewal or purchase options. In most cases, the Company expects that
in the normal course of business, leases will be renewed or replaced by other
leases. Total rent expense for 1993, 1994 and 1995 was approximately $23.2
million, $31.2 million, and $47.9 million, respectively.
The following is a schedule by year of future minimum rental payments
required under operating leases that have remaining noncancellable lease terms
in excess of one year at December 31, 1995.
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
--------------
(IN THOUSANDS)
<S> <C>
1996.......................................................... $ 20,501
1997.......................................................... 19,101
1998.......................................................... 13,489
1999.......................................................... 10,379
2000.......................................................... 7,144
Later years................................................... 5,674
-------
Total minimum payments required.......................... $ 76,288
=======
</TABLE>
8. CONTINGENCIES
The Company is involved in various lawsuits arising in the normal course of
business. In management's opinion, the ultimate outcome of these lawsuits will
not have a material adverse effect on the Company's financial position or
results of operations.
9. COMMON STOCK AND NET LOSS PER SHARE
Net loss per share amounts are computed based on the weighted average
number of common shares outstanding. The number of shares used to compute per
share amounts for the years ended December 31, 1993, 1994 and 1995, was 101.0
million, 101.2 million, and 101.9 million, respectively.
On May 18, 1995, pursuant to stockholder approval, the Company increased
the number of authorized shares of stock from 250.0 million to 275.0 million, of
which 250.0 million are Common Stock and 25.0 million are preferred stock. As of
December 31, 1995 there were no preferred shares issued or outstanding.
Effective September 15, 1995, the Company effected a two-for-one stock
split recorded in the form of a 100.0% stock dividend paid September 29, 1995.
Share and per share amounts for all periods presented have been restated to
reflect the stock split.
On February 14, 1996, the Board of Directors of the Company approved an
employee stock purchase plan of up to 2.0 million shares of the Company's Common
Stock. This matter is subject to stockholder approval.
10. STATEMENT OF CASH FLOWS INFORMATION
Cash and cash equivalents include highly liquid debt instruments with an
original maturity of three months or less. As of December 31, 1995, cash
equivalents also include investments in money market instruments, which are
carried at fair market value. Cash payments made for interest for the years
ended December 31, 1995, 1994 and 1993 were approximately $71.2 million, $40.5
million, and $29.4 million,
F-12
<PAGE> 83
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively. There were no significant federal or state income taxes paid or
refunded for the years ended December 31, 1995, 1994 and 1993.
11. EMPLOYEE BENEFIT PLANS
Effective January 1, 1993, the Company adopted a plan to provide retirement
benefits under the provisions of Section 401(k) of the Internal Revenue Code
(Code) for all employees who have completed a specified term of service. As of
December 31, 1995 the Company contributions equalled 25% of employee
contributions up to a maximum of 4% of the employee's compensation. Effective
January 1, 1996, the Company contributions equal 50% of employee contributions
up to a maximum of 6% of the employee's compensation. Employees may elect to
contribute up to 15% of their compensation on a pre-tax basis, not to exceed the
maximum amount allowed as determined by the Code. The Company's contributions
aggregated approximately $300,000 in 1993, $400,000 in 1994, and $460,000 in
1995.
12. NARROWBAND PERSONAL COMMUNICATIONS SERVICES LICENSES
During July 1994, the Company participated in an auction of narrowband PCS
frequencies conducted by the FCC. As a result of the auction, the Company
acquired three nationwide narrowband PCS frequencies for a total purchase price
of $197.0 million. The Company paid $39.4 million of this amount to the FCC in
August 1994. As of December 31, 1994, the unpaid amount of $157.6 million was
included in current liabilities in the accompanying balance sheet. In 1995, the
Company was granted licenses for all three nationwide narrowband PCS frequencies
and paid the $157.6 million remaining purchase price. Amortization of narrowband
PCS licenses will commence when placed in service, which is expected to be
during the second half of 1996.
13. STOCK PURCHASE RIGHTS
In September 1994, the Board of Directors of the Company adopted a Stock
Purchase Rights Plan and declared a distribution of one common share purchase
right for each outstanding share of the Company's Common Stock. This dividend
distribution occurred on September 28, 1994 to shareholders of record as of the
close of business on that date.
Generally, the rights will become exercisable only if a person or group (i)
acquires 20% or more of the Company's Common Stock or (ii) announces a tender
offer that would result in ownership of 20% or more of the Company's Common
Stock or (iii) is declared to be an "Adverse Person" by the Board of Directors.
Adverse Person includes any person or group who owns at least 10% of the
Company's Common Stock and attempts an action that would adversely impact the
Company.
Once a person or group has acquired 20% or more of the outstanding Common
Stock of the Company, each right may entitle its holder (other than the 20%
person or group) to purchase, at an exercise price of $150, shares of Common
Stock of the Company (or of any company that acquires the Company) at a price
equal to 50% of their current market price. Under certain circumstances, the
Continuing Directors (as defined in the rights plan) may exchange the rights for
Common Stock (or equivalent securities) on a one-for-one basis.
Until declaration of an Adverse Person, or ten (10) days after public
announcement that any person or group has acquired 20% or more of the Common
Stock of the Company, the rights are redeemable at the option of the Board of
Directors, in certain cases with the concurrence of the Continuing Directors.
Thereafter, they may be redeemed by the Continuing Directors in connection with
certain acquisitions not involving any acquiring person or Adverse Person or in
certain circumstances following a disposition of
F-13
<PAGE> 84
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares by the acquiring person or Adverse Person. The redemption price is $0.01
per right. The rights will expire on September 27, 2004, unless redeemed prior
to that date.
14. ACQUISITIONS
During 1995 the Company acquired certain paging assets of Comtech,
Inc. -- Paging Division; SNET Paging, Inc. and its wholly owned subsidiary, TNI
Associates, Inc.; two subsidiaries of PageAmerica Group, Inc.; Page Florida;
International Paging Corp.; and Celpage, Inc. -- Atlanta Branch, including
various frequencies and approximately 343,000 pagers in service. The cost of
these purchases aggregated approximately $123.6 million, subject to increase or
decrease based on post-closing events of certain acquisitions.
The acquisitions have been accounted for under the purchase method and,
accordingly, the operating results of these entities have been included in the
consolidated operating results of the Company since the respective dates of
their acquisition. The aggregate purchase price of the acquisitions was
allocated as follows: $85.0 million to identified intangibles, $16.4 million to
equipment, $2.7 million to current assets, and $19.5 million to excess of cost
over fair market value of net assets acquired (which is amortized over twenty
years on a straight-line basis).
The following represents the unaudited pro forma results of operations as
if the above acquisitions had occurred as of January 1, 1994, after giving
effect to certain adjustments, including amortization of intangibles resulting
from the allocation of the purchase price and interest expense on acquisition
debt.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
--------------------- ---------------------
(IN THOUSANDS, EXCEPT (IN THOUSANDS, EXCEPT
PER SHARE PER SHARE
INFORMATION) INFORMATION)
<S> <C> <C>
Total revenues........................ $ 538,229 $ 665,235
Net revenues.......................... 449,909 567,847
Operating income...................... 23,885 46,411
Net loss.............................. (34,937) (54,422)
Net loss per share.................... (0.35) (0.53)
</TABLE>
The pro forma results given above are not necessarily indicative of what
actually would have occurred if the acquisitions had been in effect during the
periods presented, and is not intended to be a projection of future results or
trends.
F-14
<PAGE> 85
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial information for the two years ended December 31, 1995
is summarized below.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995:
Services, rent and maintenance revenues...... $116,132 $124,178 $139,771 $151,998
Product sales................................ 25,973 28,783 29,336 29,851
-------- -------- -------- --------
Total revenues..................... 142,105 152,961 169,107 181,849
Cost of products sold........................ (20,646) (23,700) (23,607) (25,461)
-------- -------- -------- --------
121,459.. 129,261 145,500 156,388
Operating income............................. 10,696 10,699 14,857 15,882
Net loss..................................... (6,821) (16,169)(1) (10,046) (11,165)
Net loss per share........................... (0.07) (0.16)(1) (0.10) (0.11)
1994:
Services, rent and maintenance revenues...... $ 86,039 $ 93,934 $101,741 $108,205
Product sales................................ 22,333 24,869 26,664 25,899
-------- -------- -------- --------
Total revenues..................... 108,372 118,803 128,405 134,104
Cost of products sold........................ (17,718) (19,489) (20,402) (20,493)
-------- -------- -------- --------
90,654 99,314 108,003 113,611
Operating income............................. 3,856 7,177 9,716 11,924
Net loss..................................... (7,729) (5,468) (3,171) (1,597)
Net loss per share........................... (0.08) (0.05) (0.03) (0.02)
</TABLE>
- ---------------
(1) Includes the write-off of debt issuance costs of approximately $6.6 million
related to the Old Credit Agreement (see Note 4).
F-15
<PAGE> 86
PAGING NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 198,182 $ 34,333
Accounts receivable, less allowance for doubtful accounts...... 41,335 43,716
Inventories.................................................... 14,084 32,264
Prepaid expenses............................................... 5,495 7,452
---------- ----------
Total current assets................................... 259,096 117,765
Property, equipment and leasehold improvements, at cost.......... 841,022 993,283
Less accumulated depreciation.................................. (225,413) (272,129)
---------- ----------
Net property, equipment and leasehold improvements..... 615,609 721,154
Other non-current assets:
PCS licenses................................................... 197,272 197,272
Other licenses, net............................................ 48,625 54,351
Other intangible assets, net................................... 67,438 61,852
Other non-current assets, net.................................. 40,298 65,628
---------- ----------
Total other non-current assets......................... 353,633 379,103
---------- ----------
$1,228,338 $1,218,022
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................... $ 69,776 $ 42,901
Accrued expenses............................................... 69,091 67,847
Customer deposits.............................................. 20,255 20,991
---------- ----------
Total current liabilities.............................. 159,122 131,739
Long-term obligations............................................ 1,150,000 1,195,516
Commitments and contingencies.................................... -- --
Stockholders' deficit:
Common Stock: $.01 par, 250,000,000 shares authorized,
102,534,887 and 102,245,807 shares issued and outstanding in
1996 and 1995, respectively................................. 1,022 1,025
Paid-in capital................................................ 121,701 123,887
Accumulated deficit............................................ (203,507) (234,145)
---------- ----------
Total stockholders' deficit............................ (80,784) (109,233)
---------- ----------
$1,228,338 $1,218,022
========== ==========
</TABLE>
See accompanying notes
F-16
<PAGE> 87
PAGING NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Services, rent and maintenance revenues............................ $240,310 $325,811
Product sales...................................................... 54,756 59,741
-------- --------
Total revenues........................................... 295,066 385,552
Cost of products sold.............................................. (44,346) (50,476)
-------- --------
250,720 335,076
Operating expenses:
Services, rent and maintenance................................... 48,727 69,561
Selling.......................................................... 31,938 39,081
General and administrative....................................... 81,240 102,867
Depreciation and amortization.................................... 67,420 96,855
-------- --------
Total operating expenses................................. 229,325 308,364
-------- --------
Operating income................................................... 21,395 26,712
Other income (expense):
Interest expense................................................. (44,385) (59,888)
Interest income.................................................. -- 2,538
-------- --------
Total other income (expense)............................. (44,385) (57,350)
-------- --------
Net loss........................................................... $(22,990) $(30,638)
======== ========
Net loss per share................................................. $ (0.23) $ (0.30)
======== ========
</TABLE>
See accompanying notes
F-17
<PAGE> 88
PAGING NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
-----------------------
1995 1996
--------- ---------
<S> <C> <C>
Operating activities:
Net loss........................................................ $ (22,990) $ (30,638)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.............................. 67,420 96,855
Provision for doubtful accounts............................ 5,176 5,817
Debt issuance costs........................................ (13,531) (3,432)
Write off of debt issuance costs........................... 6,641 --
Amortization of debt issuance costs........................ 1,978 2,573
Changes in operating assets and liabilities:
Accounts receivable........................................ (5,774) (8,198)
Inventories................................................ (2,433) (18,180)
Prepaid expenses........................................... (216) (1,957)
Accounts payable........................................... (6,414) (26,875)
Accrued expenses........................................... 3,865 (1,244)
Customer deposits.......................................... 1,186 736
--------- ---------
Net cash provided by operating activities......................... 34,908 15,457
--------- ---------
Investing activities:
Capital expenditures............................................ (120,400) (191,340)
Payments for licenses........................................... (157,600) (7,683)
Payments for business acquisitions and investments.............. (62,772) (5,276)
Restricted cash invested in money market instruments............ -- (19,200)
Other........................................................... (3,610) (3,464)
--------- ---------
Net cash used in investing activities............................. (344,382) (226,963)
--------- ---------
Financing activities:
Borrowings under credit agreements.............................. 556,850 45,516
Repayments of long-term obligations............................. (250,000) --
Proceeds from exercise of Common Stock options.................. 1,749 2,149
Other........................................................... (776) (8)
--------- ---------
Net cash provided by financing activities......................... 307,823 47,657
--------- ---------
Net decrease in cash and cash equivalents......................... (1,651) (163,849)
Cash and cash equivalents at beginning of period.................. 2,451 198,182
--------- ---------
Cash and cash equivalents at end of period........................ $ 800 $ 34,333
========= =========
</TABLE>
See accompanying notes
F-18
<PAGE> 89
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. THE COMPANY
Paging Network, Inc. (the Company) is a provider of paging and wireless
messaging services. The Company provides paging services in all 50 states, the
District of Columbia, the U.S. Virgin Islands, Puerto Rico, and Canada,
including local paging service in virtually all of the largest 100 markets (in
population) in the United States. The consolidated financial statements include
the accounts of all of its wholly and majority owned subsidiaries. All
intercompany transactions have been eliminated.
2. UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim consolidated financial information contained herein is
unaudited but, in the opinion of management, includes all adjustments, which are
of a normal recurring nature, necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods presented. These
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at December 31,
1995, has been derived from the audited financial statements at that date.
Results of operations for the periods presented herein are not necessarily
indicative of results of operations for the entire year. These financial
statements and related notes should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
3. STATEMENT OF CASH FLOWS INFORMATION
Cash and cash equivalents include highly liquid debt instruments with an
original maturity of three months or less and investments in money market
instruments. Cash payments made for interest during the six months ended June
30, 1996 and 1995 were approximately $59.4 million and $32.0 million,
respectively. There were no significant federal or state income taxes paid or
refunded for the six months ended June 30, 1996 and 1995.
4. LONG-TERM OBLIGATIONS
On June 5, 1996, the Company amended its credit agreement with its group of
lenders (the Credit Agreement). The Credit Agreement provides for a $1.0 billion
revolving loan. Under the Credit Agreement, the Company is able to borrow,
provided it meets certain financial covenants, the lesser of $1.0 billion or an
amount based upon a calculation which is reduced by total outstanding
indebtedness for borrowed monies (as defined) and outstanding letters of credit.
The amount available for borrowing is equal to a specified multiple of
annualized earnings before interest, income taxes, depreciation and amortization
based on the most recent three calendar months. As of June 30, 1996, the Company
had $274.3 million of borrowings outstanding under its Credit Agreement and had
approximately $504.5 million available for additional borrowings. The Credit
Agreement expires on December 31, 2004. The maximum borrowings which may be
outstanding under the revolving loan begin reducing on June 30, 2001. In
addition, the Company has $500.0 million available for potential future
offerings of public debt securities under shelf registration statements filed
with the Securities and Exchange Commission in 1995 and 1993.
On June 5, 1996, the Company's wholly-owned Canadian subsidiary, Paging
Network of Canada Inc. (PageNet Canada), along with its majority-owned Canadian
subsidiary, Madison Telecommunications
F-19
<PAGE> 90
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Holdings, Inc. (MadTel Holdings), established new credit facilities in Canada.
The credit facilities are denominated in Canadian dollars. The amounts reported
herein are the U.S. dollar equivalents as of June 30, 1996. The credit
agreements provide for borrowings in the amounts of $40.3 million and $25.7
million, respectively. The Company is a guarantor of both credit agreements to
the extent of the cash collateral deposited with the lender. Madison Venture
Corp., the minority interest shareholder in MadTel Holdings, is an additional
guarantor of the MadTel Holdings credit agreement. Other non-current assets
include $19.2 million of cash deposited with the lender to collateralize such
borrowings. Under the credit agreements, PageNet Canada and MadTel Holdings are
able to borrow $20.2 million and $16.5 million, respectively, provided these
borrowings are collateralized. The remaining amounts are available for borrowing
provided they are either collateralized or certain financial covenants are met
by the borrowers. As of June 30, 1996, PageNet Canada had $11.0 million and
MadTel Holdings had $10.2 million of borrowings outstanding under the credit
facilities. The maximum borrowings which may be outstanding under the credit
facilities begin reducing on June 30, 1999. Both credit agreements expire on
June 30, 2003.
5. INCOME TAX PROVISION
No provision or benefit for income taxes has been made for the six months
ended June 30, 1996 and 1995 as the deferred benefit from operating losses was
offset by the increase in the valuation allowance.
6. COMMON STOCK AND NET LOSS PER SHARE
Net loss per share amounts are computed based on the weighted average
number of common shares outstanding. The number of shares used to compute per
share amounts for the six months ended June 30, 1996 and 1995 were 102.4 and
101.7 million, respectively.
The Company has 275.0 million authorized shares, of which 250.0 million are
Common Stock and 25.0 million are preferred stock. As of June 30, 1996 there
were no preferred shares issued or outstanding.
Effective September 15, 1995, the Company effected a two-for-one stock
split recorded in the form of a 100.0% stock dividend paid September 29, 1995.
Share and per share amounts for 1995 periods presented have been restated to
reflect the stock split.
On May 23, 1996, the Company's stockholders approved an employee stock
purchase plan of up to 2.0 million shares of the Company's Common Stock, which
the Company intends to implement on January 1, 1997.
7. ACQUISITIONS
During 1995, the Company acquired certain paging assets of Comtech,
Inc. -- Paging Division; SNET Paging, Inc. and its wholly owned subsidiary, TNI
Associates, Inc.; two subsidiaries of PageAmerica Group, Inc.; Page Florida;
International Paging Corp.; and Celpage, Inc. -- Atlanta Branch, including
various frequencies and approximately 343,000 pagers in service. The cost of
these purchases aggregated approximately $123.6 million, subject to increase or
decrease based on post-closing events of certain acquisitions.
F-20
<PAGE> 91
PAGING NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following represents the unaudited pro forma results of operations as
if the above acquisitions had occurred as of January 1, 1995, after giving
effect to certain adjustments, including amortization of intangibles resulting
from the allocation of the purchase price and interest expense on acquisition
debt.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
----------------------
(IN THOUSANDS, EXCEPT
PER SHARE INFORMATION)
<S> <C>
Total revenues............................................ $311,591
Net revenues.............................................. 264,085
Operating income.......................................... 17,127
Net loss.................................................. (31,041)
Net loss per share........................................ (0.31)
</TABLE>
The pro forma results given above are not necessarily indicative of what
actually would have occurred if the acquisitions had been in effect during the
periods presented, and are not intended to be a projection of future results or
trends.
F-21
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Registrant's Certificate of Incorporation provides as
follows:
The corporation shall indemnify, defend and hold harmless any person
who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or other, including appeals, by
reason of the fact that he or she is or was a director, officer, employee
or other agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or other agent of any
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or other agent of any corporation, partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or other
agent, to the fullest extent authorized by the Delaware General Corporation
Law, against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes and penalties, and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such person in
connection therewith; provided, however, that except with respect to
proceedings seeking to enforce the rights to indemnification granted
herein, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if the proceeding (or part thereof) was authorized by
the Board of Directors of the corporation. Without limiting the generality
or the effect of the foregoing, the Corporation may enter into one or more
agreements with any person which provide for indemnification greater or
different than that provided in this Article Tenth. Any amendment or repeal
of this Article Tenth shall not adversely affect any right or protection
existing hereunder immediately prior to such amendment or repeal.
Article VI of the Registrant's By-laws contains indemnification provisions
permitted by Section 145 of Delaware's General Corporation Law as follows:
Indemnification of Officers and Others. Section 1. The corporation
shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he or she is or was an officer of the corporation, or is or was
serving at the request of the corporation as director or officer of another
corporation, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was an
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, against
expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection with the defense or settlement of such action or
suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
II-1
<PAGE> 93
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. To the extent that an officer of the corporation or person
serving at the request of the corporation as a director or officer of
another corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 and 2
of this Article VI or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article
VI (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the officer or person serving at the request of the corporation as a
director or officer of another corporation is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article VI. Such determination shall be made (1)
by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the officer or person serving at the request
of the corporation as a director or officer of another corporation to repay
such amount entitled to be indemnified by the corporation as authorized in
this Article VI.
Section 6. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Article VI shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any by-
law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was an officer of the
corporation or is or was serving at the request of the corporation as a
director or officer of another corporation against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
the provisions of this Article VI.
Section 8. For purposes of this Article VI, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors
and officers so that any person who is or was a director or officer of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director or officer of another corporation
shall stand in the same position under the provisions of this Article VI
with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence
had continued.
Section 9. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be
an officer, employee or person serving at the request of the corporation as
a director or officer of another corporation and shall inure to the benefit
of the heirs, executors and administrators of such a person.
II-2
<PAGE> 94
Section 10. This Article VI may be amended or repealed only by the
affirmative vote of the holders of a majority of the Voting Stock; provided
that no such amendment or repeal shall adversely affect any right to
indemnification for any act or omission of any person referred to in
Sections 1 and 2 of this Article VI which occurred or allegedly occurred
prior to the effective date of such amendment or repeal.
Section 11. If in any action, suit or other proceeding or
investigation, a director of the corporation is held not liable for
monetary damages because that director is relieved of personal liability
under Article VI of the Certificate of Incorporation or otherwise, the
director shall be deemed to have met the standards of conduct set forth
above and to be entitled to indemnification as provided above.
Pursuant to a certain Amended and Restated Registration Agreement dated as
of January 1, 1987 among the Registrant and certain stockholders of the
Registrant, such stockholders are obligated, under certain circumstances, to
indemnify Directors, officers and controlling persons of the Registrant against
certain liabilities arising out of the registration of the shares of the
Registrant owned by such stockholders under the Act. Reference is made to such
agreement filed as Exhibit 10.1 hereto.
The Exchange and Registration Rights Agreement filed as Exhibit 4.3 hereto
contains certain provisions pursuant to which certain officers, Directors and
controlling persons of the Company may be entitled to be indemnified by the
Initial Purchasers and other holders of Notes.
The Company has entered into indemnification agreements with each of its
present Directors and executive officers. These agreements provide rights of
indemnification that are substantially similar to those provided by the
Company's Certificate of Incorporation and By-laws, and in addition provide that
within thirty days of a written demand for indemnification, and within five
business days of a request for an advance of expenses, the Company shall either
make payment or determine that the relevant standards for indemnification have
not been met; that in any action brought by an indemnitee to enforce the right
to indemnification or advances, the burden of proving that any indemnification
or advance is not appropriate shall be on the Company; that neither the timing
of the Company's decision whether to indemnify nor any Company determination
that the indemnitee has not met such standards shall create any presumption in
such an action that the indemnitee has not met such standards; and that the
indemnitee's expenses incurred in bringing such an action and/or in an action
seeking recovery under any Directors' and officers' liability insurance policies
maintained by the Company shall also be indemnified by the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- --------- -----------------------------------------------------------------------------
<C> <S> <C>
*3.1 -- Articles of Incorporation of the Registrant.
*3.2 -- By-laws of the Registrant.
**4.1 -- Indenture dated as of July 15, 1995.
4.2 -- Second Supplemental Indenture dated as of October 15, 1996.
4.3 -- Exchange and Registration Rights Agreement dated as of October 16, 1996 among
the Company and the Initial Purchasers.
4.4 -- Form of Exchange Note.
5.1 -- Opinion of Bingham, Dana & Gould LLP.
8.1 -- Tax Opinion of Bingham, Dana & Gould LLP.
*10.1 -- Amended and Restated Registration Agreement dated as of January 1, 1987.
***12.1 -- Computation of ratio of earnings to fixed charges.
23.1 -- Consent of Bingham, Dana & Gould LLP (included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of McGladrey & Pullen, LLP with respect to Comtech, Inc. -- Paging
Division.
23.4 -- Consent of Coopers & Lybrand L.L.P., with respect to TNI Associates, Inc.
</TABLE>
II-3
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- --------- -----------------------------------------------------------------------------
<S> <C>
23.5 -- Consent of Coopers & Lybrand L.L.P., with respect to SNET Paging, Inc.
23.6 -- Consent of Price Waterhouse, with respect to Celpage, Inc. (Atlanta Branch).
23.7 -- Consent of Reed Smith Shaw & McClay.
24.1 -- Powers of Attorney (included on signature pages).
25.1 -- Statement of Eligibility of Trustee.
99.1 -- Form of Transmittal Letter.
99.2 -- Form of Guaranteed Delivery Procedures.
</TABLE>
- ---------------
* Previously filed as an exhibit to Registration Statement No. 33-42253 on
Form S-1 (as filed on August 15, 1991) and incorporated herein by reference.
** Previously filed as an exhibit to Registration Statement No. 33-87224 on
Form S-3 (as filed on December 9, 1994) and incorporated herein by
reference.
*** Previously filed in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, and the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996, and incorporated herein by
reference.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (i) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(ii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Plano, State of Texas, on the 31st day of October,
1996.
PAGING NETWORK, INC.
By:GLENN W. MARSCHEL
---------------------------------
GLENN W. MARSCHEL
President and Chief Executive
Officer
We, the undersigned officers and Directors of Paging Network, Inc., hereby
severally constitute and appoint Kenneth W. Sanders, G. Robert Thompson and
Roger D. Feldman, and each of then singly, our true and lawful attorneys with
full power to them, and each of them, and each of them singly, to sign for us
and in our names in the capacities indicated below, the Registration Statement
on Form S-4 filed herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and generally to do an such things in
our names and on our behalf in our capacities as officers and Directors to
enable Paging Network, Inc. to comply with the provisions of the Securities Act
of 1933, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as then may be signed by our said
attorneys or any of them, to said Registration Statement and any and all
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on October 31, 1996 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------------------ -------------------------------------------------
<C> <S>
GEORGE M. PERRIN Chairman of the Board of Directors
- ------------------------------------------
GEORGE M. PERRIN
GLENN W. MARSCHEL President, Chief Executive Officer and Director
- ------------------------------------------ (Principal Executive Officer)
GLENN W. MARSCHEL
KENNETH W. SANDERS Senior Vice President -- Finance, Treasurer,
- ------------------------------------------ Chief Financial Officer and Assistant Secretary
KENNETH W. SANDERS (Principal Financial Officer and Principal
Accounting Officer)
RICHARD C. ALBERDING Director
- ------------------------------------------
RICHARD C. ALBERDING
BRYAN C. CRESSEY Director
- ------------------------------------------
BRYAN C. CRESSEY
JOHN P. FRAZEE, JR. Director
- ------------------------------------------
JOHN P. FRAZEE, JR.
LEE M. MITCHELL Director
- ------------------------------------------
LEE M. MITCHELL
CARL D. THOMA Director
- ------------------------------------------
CARL D. THOMA
</TABLE>
II-5
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
-------- ----------------------------------------------------------------------------
<C> <S> <C>
*3.1 -- Articles of Incorporation of the Registrant.
*3.2 -- By-laws of the Registrant.
**4.1 -- Indenture dated as of July 15, 1995.
4.2 -- Second Supplemental Indenture dated as of October 15, 1996.
4.3 -- Exchange and Registration Rights Agreement dated as of October 16, 1996
among the Company and the Initial Purchasers.
4.4 -- Form of Exchange Note.
5.1 -- Opinion of Bingham, Dana & Gould LLP.
8.1 -- Tax Opinion of Bingham, Dana & Gould LLP.
*10.1 -- Amended and Restated Registration Agreement dated as of January 1, 1987.
***12.1 -- Computation of ratio of earnings to fixed charges.
23.1 -- Consent of Bingham, Dana & Gould LLP (included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of McGladrey & Pullen, LLP with respect to Comtech, Inc.-Paging
Division.
23.4 -- Consent of Coopers & Lybrand L.L.P., with respect to TNI Associates, Inc.
23.5 -- Consent of Coopers & Lybrand L.L.P., with respect to SNET Paging, Inc.
23.6 -- Consent of Price Waterhouse, with respect to Celpage, Inc. (Atlanta Branch).
23.7 -- Consent of Reed Smith Shaw & McClay.
24.1 -- Powers of Attorney (included on signature pages).
25.1 -- Statement of Eligibility of Trustee.
99.1 -- Form of Transmittal Letter.
99.2 -- Form of Guaranteed Delivery Procedures.
</TABLE>
- ---------------
* Previously filed as an exhibit to Registration Statement No. 33-42253 on
Form S-1 (as filed on August 15, 1991) and incorporated herein by
reference.
** Previously filed as an exhibit to Registration Statement No. 33-87224 on
Form S-3 (as filed on December 9, 1994) and incorporated herein by
reference.
*** Previously filed in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, and the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996, and incorporated herein by
reference.
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
PAGING NETWORK, INC.
TO
FLEET NATIONAL BANK
Trustee
-------
----------------
Second Supplemental Indenture
Dated as of October 15, 1996
TO
Indenture
Dated as of July 15, 1995
----------------
$500,000,000
10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Parties.............................................................. 1
Recitals of the Company.............................................. 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions............................................ 2
Accreted Value............................................. 3
Additional Interest........................................ 3
Agent Bank................................................. 3
Agent Member............................................... 3
Applicable Procedures...................................... 3
Asset Disposition.......................................... 3
Attributable Value......................................... 4
Average Life............................................... 4
Capital Expenditures....................................... 5
Capital Lease Obligation................................... 5
Capital Stock.............................................. 5
Cedel .................................................. 5
Change of Control.......................................... 5
Common Stock............................................... 5
Consolidated Cash Flow..................................... 5
Consolidated Income Tax Expense............................ 6
Consolidated Interest Expense.............................. 6
Consolidated Net Income.................................... 6
Consolidated Tangible Assets............................... 7
Credit Facility............................................ 7
Debt .................................................. 7
Designated Senior Debt..................................... 7
Disqualified Stock......................................... 7
DTC .................................................. 8
Euroclear.................................................. 8
Exchange Offer............................................. 8
Exchange and Registration Rights Agreement................. 8
Exchange Registration Statement............................ 8
Exchange Securities........................................ 8
Golder Thoma Fund.......................................... 8
Guaranty .................................................. 8
primary obligor............................................ 8
<FN>
- -------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Second Supplemental Indenture.
</TABLE>
-i-
<PAGE> 3
<TABLE>
Page
----
<CAPTION>
<S> <C>
Incur...................................................... 9
Lien ...................................................... 9
Net Available Proceeds..................................... 9
Offer to Purchase.......................................... 10
Officers' Certificate...................................... 12
Original Securities........................................ 12
Other Securities........................................... 13
pari passu................................................. 13
Payment Blockage Period.................................... 13
Preferred Stock............................................ 13
Proceeding................................................. 13
Pro Forma Consolidated Cash Flow........................... 13
Purchase Agreement......................................... 13
Purchasers................................................. 13
Redeemable Stock........................................... 13
Regular Record Date........................................ 14
Regulation S............................................... 14
Regulation S Certificate................................... 14
Regulation S Global Security............................... 14
Regulation S Legend........................................ 14
Regulation S Securities.................................... 14
Related Person............................................. 14
Resale Registration Statement.............................. 14
Restricted Global Security................................. 14
Restricted Period.......................................... 14
Restricted Securities...................................... 14
Restricted Securities Certificate.......................... 15
Restricted Securities Legend............................... 15
Restricted Subsidiary...................................... 15
Rule 144A.................................................. 15
Rule 144A Securities....................................... 15
Securities Act Legend...................................... 15
Securities Payment......................................... 15
Senior Debt................................................ 15
Senior Nonmonetary Default................................. 16
Senior Payment Default..................................... 16
Special Step-Down Date..................................... 16
Special Step-Up............................................ 16
Step-Down Date............................................. 16
Step-Up.................................................... 16
Subsidiary................................................. 16
Successor Security......................................... 17
Tangible Assets............................................ 17
<FN>
- -------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Second Supplemental Indenture.
</TABLE>
-ii-
<PAGE> 4
<TABLE>
Page
----
<CAPTION>
<S> <C>
Unrestricted Securities Certificate........................ 17
Unrestricted Subsidiary.................................... 17
Voting Stock............................................... 18
Wholly owned Restricted Subsidiary......................... 18
ARTICLE TWO
Security Forms
SECTION 201. Form of Securities of this Series...................... 19
SECTION 202. Form of Face of Security............................... 19
SECTION 203. Form of Reverse of Security............................ 24
ARTICLE THREE
The Series of Securities
SECTION 301. Title and Terms........................................ 28
ARTICLE FOUR
Modifications and Additions to the Indenture
SECTION 401. Modifications to Registration,
Registration of Transfer and Exchange
Provisions............................................. 40
SECTION 402. Modifications to Remedies Provisions................... 40
SECTION 403. Modifications to the Consolidation,
Merger, Conveyance, Transfer or Lease
Provisions............................................. 42
SECTION 404. Modifications to the Supplemental
Indentures with Consent of Holders
Provisions............................................. 44
SECTION 405. Modifications to the Defeasance and
Covenant Defeasance Provisions......................... 44
<FN>
- ----------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Second Supplemental Indenture.
</TABLE>
-iii-
<PAGE> 5
<TABLE>
Page
<CAPTION>
----
<S> <C> <C>
SECTION. 406. Additional Covenants; Terms of
Subordination.......................................... 45
SECTION 1008. Limitation on Consolidated Debt........................ 45
SECTION 1009. Limitation on Certain Debt............................. 48
SECTION 1010. Limitation on Restricted Payments...................... 48
SECTION 1011. Limitations Concerning Distributions by
and Transfers to Restricted Subsidiaries............... 50
SECTION 1012. Limitation on Transactions with
Affiliates and Related Persons......................... 50
SECTION 1013. Limitation on Certain Asset Dispositions............... 51
SECTION 1014. Limitation on Issuances and Sales of
Capital Stock of Wholly owned Restricted
Subsidiaries........................................... 53
SECTION 1015. Provision of Financial Statements...................... 54
SECTION 1016. Change of Control...................................... 54
SECTION 1017. Waiver of Certain Covenants............................ 56
SECTION 1018. Compliance with Rule 144A.............................. 56
SECTION 1019. Resale of Certain Securities........................... 57
SECTION 1401. Securities Subordinate to Senior Debt.................. 57
SECTION 1402. Payment Over of Proceeds Upon
Dissolution, Etc....................................... 57
SECTION 1403. No Payment When Senior Debt in Default................. 59
SECTION 1404. Payment Permitted if No Default........................ 60
SECTION 1405. Subrogation to Rights of Holders of
Senior Debt............................................ 61
<FN>
- -------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Second Supplemental Indenture.
</TABLE>
-iv-
<PAGE> 6
<TABLE>
Page
----
<CAPTION>
<S> <C>
SECTION 1406. Provisions Solely to Define Relative
Rights................................................. 61
SECTION 1407. Trustee to Effectuate Subordination.................... 62
SECTION 1408. No Waiver of Subordination Provisions.................. 62
SECTION 1409. Notice to Trustee...................................... 62
SECTION 1410. Reliance on Judicial Order or Certificate
of Liquidating Agent................................... 63
SECTION 1411. Trustee Not Fiduciary for Holders of
Senior Debt............................................ 64
SECTION 1412. Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's Rights................. 64
SECTION 1413. Article Applicable to Paying Agents.................... 64
SECTION 1414. Defeasance of this Article Fourteen.................... 64
ARTICLE FIVE
Miscellaneous
SECTION 501. Miscellaneous.......................................... 65
TESTIMONIUM.......................................................... 67
SIGNATURES AND SEALS................................................. 67
ACKNOWLEDGMENTS...................................................... 68
Annex A -- Form of Regulation S Certificate
Annex B -- Form of Restricted Securities Certificate
Annex C -- Form of Unrestricted Securities Certificate
<FN>
- ----------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Second Supplemental Indenture.
</TABLE>
-v-
<PAGE> 7
SECOND SUPPLEMENTAL INDENTURE, dated as of October 15, 1996, between
Paging Network, Inc., a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company"), having its principal
office at 4965 Preston Park Boulevard, Plano, Texas, and Fleet National Bank, a
national bank duly organized and existing under the laws of the United States of
America, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has heretofore executed and delivered to the Trustee
(through its predecessor Shawmut Bank, N.A.) an Indenture, dated as of July 15,
1995 (the "Indenture"), providing for the issuance from time to time of the
Company's unsecured debentures, notes or other evidences of indebtedness (herein
and therein called the "Securities"), to be issued in one or more series as in
the Indenture provided.
Section 201 of the Indenture permits the form of the securities of
any series to be established pursuant to an indenture supplemental to the
Indenture.
Section 301 of the Indenture permits the terms of the securities of
any series to be established in an indenture supplemental to the Indenture.
Section 901(8) of the Indenture provides that, without 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 enter into one or more
indentures supplemental to the Indenture for the purpose of establishing the
form or terms of Securities of any series as permitted by Sections 201 and 301
of the Indenture.
Section 901(10) of the Indenture provides that, without 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 enter into one or more
indentures supplemental to the Indenture for the purpose of curing any
ambiguity, correcting or supplementing any provision in the Indenture which may
be inconsistent with any other provision therein, or making any other provisions
with respect to matters or questions arising under the Indenture, provided that
such action shall not adversely affect the interests of the Holders of
Securities of any series in any material respect.
The Company, pursuant to the foregoing authority, proposes in and
by this Second Supplemental Indenture to
<PAGE> 8
establish the terms and form of the Securities of a new series and to amend and
supplement the Indenture in certain respects with respect to the Securities of
such series.
All things necessary to make this Second Supplemental Indenture a
valid agreement of the Company, and a valid amendment of and supplement to the
Indenture, have been done.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities of the series to be
created hereby, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
-----------
(a) For all purposes of this Second Supplemental Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Second
Supplemental Indenture and, where so specified, to the Articles and
Sections of the Indenture as supplemented by this Second Supplemental
Indenture; and
(3) The terms "hereof", "herein", "hereby", "hereto", "hereunder" and
"herewith" refer to this Second Supplemental Indenture.
(b) For all purposes of the Indenture and this Second Supplemental
Indenture, with respect to the Securities of the series created hereby, except
as otherwise expressly provided or unless the context otherwise requires
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<PAGE> 9
(Section references contained in the following definitions are to Sections of
the Indenture as supplemented by this Second Supplemental Indenture unless
otherwise specified):
"Accreted Value" of any Original Issue Discount Security as of or to
any date of determination means an amount equal to the sum of (i) the issue
price of such Original Issue Discount Security as determined in accordance with
Section 1273 of the Internal Revenue Code of 1986, as amended (the "Code") plus
(ii) the aggregate of the portions of the original issue discount (the excess of
the amounts considered as part of the "stated redemption price at maturity" of
such Original Issue Discount Security within the meaning of Section 1273(a)(2)
of the Code or any successor provisions, whether denominated as principal or
interest, over the issue price of such Original Issue Discount Security) that
shall theretofore have accrued pursuant to Section 1272 of the Code (without
regard to Section 1272(a)(7) of the Code) from the date of issue of such
Original Issue Discount Security to the end of the next preceding fiscal
quarter, plus (iii) accrued and unpaid interest to the date such Accreted Value
is paid (without duplication of any amount set forth in (ii) above), minus all
amounts therefore paid in respect of such Original Issue Discount Security,
which amounts are considered as part of the "stated redemption price at
maturity" of such Original Issue Discount Security within the meaning of Section
1273(a)(2) of the Code or any successor provisions (whether such amounts paid
were denominated principal or interest).
"Additional Interest" has the meaning specified in the form of the
Securities set forth in Section 202.
"Agent Bank" means the Person or Persons designated as an agent under
a Credit Facility from time to time.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, Euroclear and Cedel,
in each case to the extent applicable to such transaction and as in effect from
time to time.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including a consolidation or merger or other sale of any such
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<PAGE> 10
Restricted Subsidiary with, into or to another Person in a transaction in which
such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a
disposition by a Restricted Subsidiary of such Person to such Person or a Wholly
owned Restricted Subsidiary of such Person or by such Person to a Wholly owned
Restricted Subsidiary of such Person, and excluding the creation of a lien,
pledge or security interest) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Restricted
Subsidiary of such Person, (ii) substantially all of the assets of such Person
or any of its Restricted Subsidiaries representing a division or line of
business or (iii) other assets or rights of such Person or any of its Restricted
Subsidiaries outside of the ordinary course of business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated. "Attributable Value" means, as to a Capital Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with generally accepted accounting principles.
"Average Life" means, as of the date of determination, with respect to
any Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal or liquidation value payments of such
Debt or
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<PAGE> 11
Preferred Stock, respectively, and the amount of such principal or liquidation
value payments, by (ii) the sum of all such principal or liquidation value
payments.
"Capital Expenditures" means, with respect to any Person for any
period, the aggregate of all direct and indirect expenditures (including
capitalized interest) of such Person during such period which are required to be
included in property, plant or equipment or similar tangible property account,
including, without limitation, additions to equipment and leasehold
improvements, on a consolidated balance sheet of such Person and its Restricted
Subsidiaries prepared in accordance with generally accepted accounting
principles.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which 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 generally accepted
accounting principles. The stated maturity of such obligation shall be the date
of the last payment of rent or any other 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" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Cedel" means Cedel Bank, S.A. (or any successor securities clearing
agency).
"Change of Control" has the meaning specified in Section 1016.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow" of any Person means for any period the
Consolidated Net Income of such Person for such period increased by (i)
Consolidated Interest Expense of such Person for such period, plus (ii)
Consolidated Income Tax Expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense
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<PAGE> 12
included in the income statement of such Person and its Restricted Subsidiaries
for such period, plus (iv) other non-cash charges deducted from consolidated
revenues in determining Consolidated Net Income for such period, minus (v)
non-cash items increasing consolidated revenues for such period.
"Consolidated Income Tax Expense" of any Person means for any period
the consolidated provision for income taxes of such Person and its Restricted
Subsidiaries for such period.
"Consolidated Interest Expense" of any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Restricted
Subsidiaries for such period determined in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit, bankers'
acceptances or similar facilities; (iii) fees with respect to interest rate swap
or similar agreements or foreign currency hedge, exchange or similar agreements,
other than fees or charges related to the acquisition or termination thereof
which are not allocable to interest expense in accordance with generally
accepted accounting principles; and (iv) Preferred Stock dividends declared and
payable in cash.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period determined in accordance with generally accepted accounting
principles; PROVIDED that there shall be excluded therefrom (a) the net income
(or loss) of any Person acquired by such Person or a Restricted Subsidiary of
such Person in a pooling-of-interests transaction for any period prior to the
date of such transaction, (b) the net income (but not the net loss) of any
Restricted Subsidiary of such Person which is subject to restrictions which
prevent the payment of dividends and the making of distributions (by loans,
advances, intercompany transfers or otherwise) to such Person to the extent of
such restrictions, (c) the net income (or loss) of any Person that is not a
Restricted Subsidiary of such Person except to the extent of the amount of
dividends or other distributions actually paid to such Person by such other
Person during such period, (d) gains or losses on Asset Dispositions by such
Person or its Restricted Subsidiaries and (e) all extraordinary gains and
extraordinary losses.
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<PAGE> 13
"Consolidated Tangible Assets" of any Person means the sum of the
Tangible Assets of such Person and its Restricted Subsidiaries after eliminating
inter-company items, all determined in accordance with generally accepted
accounting principles, including appropriate deductions for any minority
interest in Tangible Assets of such Restricted Subsidiaries; PROVIDED, HOWEVER,
that, with respect to the Company and its Restricted Subsidiaries, adjustments
following the date of this Indenture to the accounting books and records of the
Company and its Restricted Subsidiaries in accordance with Accounting Principles
Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise
resulting from the acquisition of control of the Company by another Person shall
not be given effect.
"Credit Facility" means a credit or loan agreement or facility (which
may include a revolving or working capital facility) with a bank or other
financial institution or group of banks or other financial institutions, as such
agreement or facility may be amended (including any amendment and restatement
thereof), modified, supplemented, restated or replaced from time to time.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every 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), (v) every Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Redeemable Stock of
such Person at the time of determination and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or for which such Person is responsible or liable, directly or indirectly, as
obligor, Guarantor or otherwise.
"Designated Senior Debt" has the meaning specified in Section 1403.
"Disqualified Stock" of any Person means any Capital Stock of such
Person which, by its terms (or by the terms of any security into which it is
convertible or for
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<PAGE> 14
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the Company, any Restricted Subsidiary of the
Company or the holder thereof, in whole or in part, on or prior to the Stated
Maturity of the Securities.
"DTC" means The Depository Trust Company, a New York corporation.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Exchange Offer" means an offer made pursuant to an effective
registration statement under the Securities Act by the Company to exchange
securities substantially identical to Outstanding Securities (except for the
differences provided for herein) for Outstanding Securities.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of October 16, 1996, between the
Company, the Purchasers and the Holders from time to time as provided therein,
as such agreement may be amended from time to time.
"Exchange Registration Statement" means a registration statement of
the Company under the Securities Act registering Exchange Securities for
distribution pursuant to the Exchange Offer.
"Exchange Securities" means the Securities issued pursuant to the
Exchange Offer and their Successor Securities.
"Golder Thoma Fund" means The Golder, Thoma Fund, L.P., an Illinois
limited partnership, each general partner thereof, and any successor thereto.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Debt of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of assuring the holder
of such Debt of the payment of such Debt, or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity
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<PAGE> 15
of the primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to
the foregoing); PROVIDED, HOWEVER, that the Guaranty by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); PROVIDED, HOWEVER, that a
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, instalment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Debt or other obligations relating to such properties or assets or
received in any other noncash form) therefrom by such Person, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, provincial, foreign and local taxes required to
be accrued as a liability as a consequence of such Asset Disposition, (ii) all
payments made by such Person or its Restricted Subsidiaries on any Debt which is
secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or which must by the terms of such Lien, or in order to
obtain a necessary
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<PAGE> 16
consent to such Asset Disposition or by applicable law be repaid out of the
proceeds from such Asset Disposition, and (iii) all distributions and other
payments made to minority interest holders in Restricted Subsidiaries of such
Person or joint ventures as a result of such Asset Disposition.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at its address
appearing in the Security Register on the date of the Offer offering to purchase
up to the principal amount of Securities specified in such Offer at the purchase
price specified in such Offer. Unless otherwise required by applicable law, the
Offer shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase which shall be, subject to any contrary requirements of applicable law,
not less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for the purchase of Securities within five
Business Days after the Expiration Date. The Company shall notify the Trustee at
least 15 Business Days (or such shorter period as is acceptable to the Trustee)
prior to the mailing of the Offer of the Company's obligation to make an Offer
to Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. The Offer
shall contain information concerning the business of the Company and its
Restricted Subsidiaries which the Company in good faith believes will enable
such Holders to make an informed decision with respect to the Offer to Purchase
(which at a minimum will include (i) the most recent annual and quarterly
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the documents required to be
filed with the Trustee pursuant to Section 1015 (which requirements may be
satisfied by delivery of such documents together with the Offer), (ii) a
description of material developments in the Company's business subsequent to the
date of the latest of such financial statements referred to in clause (i)
(including a description of the events requiring the Company to make the Offer
to Purchase), (iii) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Company to make
the Offer to Purchase and (iv) any other information required by applicable law
to be included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Offer to
Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
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<PAGE> 17
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such has been determined
pursuant to the Section hereof requiring the Offer to Purchase) (the
"Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender a Security pursuant to the
Offer to Purchase will be required to surrender such Security at the place
or places specified in the Offer prior to the close of business on the
Expiration Date (such Security being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing and
bearing appropriate signature guarantees);
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(10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder tendered, the certificate
number of the Security the Holder tendered and a statement that such Holder
is withdrawing all or a portion of such tender;
(11) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 or integral multiples thereof shall be purchased);
and
(12) that in case of any Holder whose Security is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to such Holder without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
an aggregate principal amount equal to and in exchange for the unpurchased
portion of the Security so tendered.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Original Securities" means all Securities of the series created
hereby other than Exchange Securities.
"Other Securities" means the Original Securities sold by the
Purchasers in the initial offering contemplated
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<PAGE> 19
by the Purchase Agreement in reliance on an exemption from the registration
requirements of the Securities Act other than Rule 144A and Regulation S.
"PARI PASSU", when used with respect to the ranking of any Debt of any
Person in relation to other Debt of such Person, means that such Debt (a) either
(i) is not subordinate in right of payment to any other Debt of such Person or
(ii) is subordinate in right of payment to the same Debt of such Person as is
the other and is so subordinate to the same extent and (b) is not subordinate in
right of payment to the other or to any Debt of such Person as to which the
other is not so subordinate.
"Payment Blockage Period" has the meaning specified in Section 1403.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Proceeding" has the meaning specified in Section 1402.
"Pro Forma Consolidated Cash Flow" of any Person means for any period
the Consolidated Cash Flow of such Person for such period calculated on a pro
forma basis to give effect to any Asset Disposition or acquisition of assets not
in the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during such period as if
such acquisition had taken place on the first day of such period.
"Purchase Agreement" means the Purchase Agreement, dated as of
October 10, 1996, between the Company and the Purchasers, as such agreement may
be amended from time to time.
"Purchasers" means Goldman, Sachs & Co., Salomon Brothers, Inc and
Bear, Stearns & Co. Inc.
"Redeemable Stock" means any equity security that by its terms or
otherwise is required to be redeemed prior to the Stated Maturity of the
Securities, or is redeemable at the option of the holder thereof at any time
prior to the Stated Maturity of the Securities.
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"Registered Securities" means the Exchange Securities and all other
Securities sold or otherwise disposed of pursuant to an effective registration
statement under the Securities Act, together with their respective Successor
Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 1 or October 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially in the
form set forth in Annex A.
"Regulation S Global Security" has the meaning specified in Section
201.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security set forth in Section 202 to be placed
upon each Regulation S Security.
"Regulation S Securities" means all Securities required pursuant to
Section 305(c) to bear a Regulation S Legend. Such term includes the Regulation
S Global Security.
"Related Person" of any Person means, without limitation, any other
Person owning (a) 5% or more of the outstanding Common Stock of such Person or
(b) 5% or more of the Voting Stock of such Person.
"Resale Registration Statement" means a shelf registration statement
under the Securities Act filed by the Company, if required by, and meeting the
requirements of, the Exchange and Registration Rights Agreement, registering
Original Securities for resale.
"Restricted Global Security" has the meaning specified in Section 201.
"Restricted Period" means the period of 41 consecutive days beginning
on and including the later of (i) the day on which Securities are first offered
to persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities. In the event
the Restricted Period does
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not begin on the original issue date of the Securities, the Company shall notify
the Trustee of the dates upon which such Restricted Period begins and ends.
"Restricted Securities" means all Securities required pursuant to
Section 305(c) to bear any Restricted Securities Legend. Such term includes the
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially
in the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 202 to be placed upon each Restricted Security.
"Restricted Subsidiary" of the Company means any Subsidiary, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" means the Securities purchased by the
Purchasers from the Company pursuant to the Purchase Agreement, other than the
Other Securities and the Regulation S Securities.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Securities Payment" has the meaning set forth in Section 1402.
"Senior Debt" means (a) the principal of (and premium, if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, penalties,
and any obligation of the Company for reimbursement, indemnities and fees
relating to Debt outstanding pursuant to a Credit Facility, (b) all other Debt
for money borrowed of the Company referred to in the definition of Debt other
than Clauses (iv), (vi) and (vii) (with respect to Clauses (iv) and (vi))
thereof and other than the Company's 11.75% Senior Subordinated Notes Due May
15, 2002, the Company's 8.875% Senior Subordinated Notes due February 1, 2006
and the Company's 10.125% Senior Subordinated Notes
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<PAGE> 22
due August 1, 2007, (c) payment obligations of the Company under interest rate
swap or similar agreements or foreign currency hedge, exchange or similar
agreements entered into when required by a Credit Facility, where the
counterparty to such agreement is a lender or former lender under such Credit
Facility, and (d) all renewals, extensions, modifications, refinancings,
refundings and amendments of any Debt or payment obligation referred to in
Clause (a), (b) or (c) above (including, without limitation, any interest rate
swap or similar agreements or foreign currency hedge, exchange or similar
agreements that are entered into by the Company for the purpose of modifying,
terminating or hedging any agreement that constitutes Senior Debt under Clause
(c) above whether or not such modification, termination or hedge was required by
a Credit Facility and whether or not the counterparty to such agreement is a
lender or former lender under such Credit Facility), unless, in the case of any
particular Debt referred to above, (A) such Debt is owed to a Restricted
Subsidiary of the Company, (B) the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such Debt is
not superior in right of payment to the Securities, (C) such Debt is Incurred in
violation of this Indenture, other than Debt Incurred under a Credit Facility
not to exceed $200 million aggregate principal amount at any one time
outstanding so long as the lender of such Debt did not have actual knowledge
that such Debt was Incurred in violation of this Indenture, or (D) such Debt is
subordinate by its terms in right of payment in respect of any other Debt of the
Company; PROVIDED, HOWEVER, that for the purposes of this definition, Debt shall
not be deemed subordinate in right of payment in respect of any other Debt
because of (i) distinctions between categories of Debt which exist by reason of
any Liens arising or created in respect of some but not all Debt, (ii) any
intercreditor agreements (to which the Company is not a party) among different
classes of creditors of the Company or (iii) distinctions between categories of
Senior Debt which permit or require the application of Net Available Proceeds
from Asset Dispositions in the order set forth in Section 1013(a).
"Senior Nonmonetary Default" has the meaning specified in Section
1403.
"Senior Payment Default" has the meaning specified in Section 1403.
"Special Step-Down Date" has the meaning specified in the form of the
Securities set forth in Section 202.
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<PAGE> 23
"Special Step-Up" has the meaning specified in the form of the
Securities set forth in Section 202.
"Step-Down Date" has the meaning specified in the form of the
Securities set forth in Section 202.
"Step-Up" has the meaning specified in the form of the Securities set
forth in Section 202.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the outstanding 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 thereof or (ii) any other Person (other than
a corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Tangible Assets" of any Person means, at any date, the gross book
value as shown by the accounting books and records of such Person of all its
property both real and personal, less (i) the net book value of all its
licenses, patents, patent applications, copyrights, trademarks, trade names,
goodwill, non-compete agreements or organizational expenses and other like
intangibles, (ii) unamortized Debt discount and expense, (iii) all reserves for
depreciation, obsolescence, depletion and amortization of its properties and
(iv) all other proper reserves which in accordance with generally accepted
accounting principles should be provided in connection with the business
conducted by such Person; PROVIDED, HOWEVER, that, with respect to the Company
and its Restricted Subsidiaries, adjustments following the date of this
Indenture to the accounting books and records of the Company and its Restricted
Subsidiaries in accordance with Accounting Principles Board Opinions Nos. 16 and
17 (or successor opinions thereto) or otherwise resulting from the acquisition
of control of the Company by another Person shall not be given effect.
-17-
<PAGE> 24
"Unrestricted Securities Certificate" means a certificate
substantially in the form set forth in Annex C.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such
by the Board of Directors as set forth below where (a) neither the Company nor
any of its other Subsidiaries (other than another Unrestricted Subsidiary) (i)
provides credit support for, or Guaranty of, any Debt of such Subsidiary or any
Subsidiary of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary or any Subsidiary of such Subsidiary, and (b) no
default with respect to any Debt of such Subsidiary or any Subsidiary of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company and its Restricted
Subsidiaries to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity and
(2) any Subsidiary of an Unrestricted Subsidiary. Subject to the foregoing, the
Board of Directors may designate any 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 which is not a Subsidiary
of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary,
provided that either (x) the Subsidiary to be so designated has total assets of
$1,000 or less or (y) immediately after giving effect to such designation, the
Company could Incur at least $1.00 of additional Debt pursuant to Section 1008
hereof. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary, provided that, immediately after giving effect to such
designation, the Company could Incur at least $1.00 of additional Debt pursuant
to Section 1008 hereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly owned Restricted
Subsidiaries of such Person or by such Person and
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<PAGE> 25
one or more Wholly owned Restricted Subsidiaries of such Person.
ARTICLE TWO
Security Forms
SECTION 201. Form of Securities of this Series.
---------------------------------
The Securities of this series shall be in substantially the form set
forth in this Article.
Upon their original issuance, Rule 144A Securities shall be issued in
the form of one or more Global Securities registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee, as custodian for DTC,
for credit by DTC to the respective accounts of beneficial owners of the
Securities represented thereby (or such other accounts as they may direct). Such
Global Securities, together with their Successor Securities which are Global
Securities other than the Regulation S Global Security, are collectively herein
called the "Restricted Global Security". Upon their original issuance,
Regulation S Securities shall be issued in the form of one or more Global
Securities registered in the name of DTC, as depositary, or its nominee and
deposited with the Trustee, as custodian for DTC, for credit to the respective
accounts of the beneficial owners of the Securities represented thereby (or such
other accounts as they may direct), PROVIDED that upon such deposit all such
Securities shall be credited to or through accounts maintained at DTC by or on
behalf of Euroclear or Cedel. Such Global Securities, together with their
Successor Securities which are Global Securities other than the Restricted
Global Security, are collectively herein called the "Regulation S Global
Security".
Upon their original issuance, Other Securities shall not be issued in
the form of a Global Security or in any other form intended to facilitate
book-entry trading in beneficial interests in such Securities.
SECTION 202. Form of Face of Security.
------------------------
[FORM OF FACE]
[IF THIS SECURITY IS A RESTRICTED SECURITY, THEN INSERT -- THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) BY ANY INITIAL INVESTOR, (1) TO A
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<PAGE> 26
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING
WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (3)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) AND (B) BY SUBSEQUENT INVESTORS, AS SET FORTH
IN CLAUSE (A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN
A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES.]
[IF THE SECURITY IS A REGULATION S SECURITY, THEN INSERT -- THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS SUCH SECURITIES
ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREOF IS AVAILABLE.]
[IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT -- THIS SECURITY
IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS
SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND
NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME
OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[IF THE SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY TRUST
COMPANY IS TO BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS CERTIFICATE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
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<PAGE> 27
10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
No. _____________ U.S.$_____
[IF RESTRICTED GLOBAL SECURITY - CUSIP NO. 695542AE0]
[IF ANY REGULATION S SECURITY - CUSIP NO. U69560AA5]
[IF REGULATION S GLOBAL SECURITY - ISIN NO. USU69560AA5-7]
[IF OTHER SECURITY - CUSIP NO. - 695542AF7]
Paging Network, Inc., a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ________________ , or registered assigns,
the principal sum of _____________________ Dollars [IF THIS SECURITY IS A GLOBAL
SECURITY, THEN INSERT -- (which principal amount may from time to time be
increased or decreased to such other principal amounts (which, taken together
with the principal amounts of all other Outstanding Securities of the series
designated herein, shall not exceed $500,000,000 in the aggregate at any time)
by adjustments made on the records of the Trustee hereinafter referred to in
accordance with the Indenture)] on October 15, 2008, and to pay interest thereon
from October 16, 1996 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on April 15 and
October 15 in each year, commencing April 15, 1997, at the rate of 10% per
annum, until the principal hereof is paid or made available for payment [IF THE
SECURITY IS AN ORIGINAL SECURITY, THEN INSERT --, PROVIDED that if (i) the
Company has not filed an Exchange Registration Statement or, if applicable, a
Resale Registration Statement, in either case by November 15, 1996, (ii) either
the Exchange Registration Statement or, if applicable, the Resale Registration
Statement has not become or been declared effective by December 30, 1996, (iii)
the Exchange Offer, if any, has not been consummated within 45 days after the
date on which the Exchange Registration Statement has become or been declared
effective initially or (iv) either the Exchange Registration Statement or, if
applicable, the Resale Registration Statement is filed and declared effective
but shall thereafter cease to be effective (except as specifically permitted
pursuant to the agreement referred to below) without being succeeded immediately
by an additional registration statement filed and declared effective, in each
case (i) through (iv) upon the terms and conditions set forth in the Exchange
and Registration Rights Agreement (each such event referred to in Clauses (i)
through (iv), a "Registration Default"), then the per annum interest rate
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<PAGE> 28
borne by this Security shall increase (a "Step-Up") by adding 0.5% thereto for
the period from the first day on which the Registration Default occurs to the
first day thereafter on which no Registration Default is in effect (a "Step-Down
Date"), at which time such interest rate shall be reduced by the additional 0.5%
resulting from such Step-Up (subject to increase upon any subsequent Step-Up,
PROVIDED that, if a Step-Up has occurred, no further Step-Up (other than a
Special Step-Up) shall occur prior to the Step-Down Date next following such
Step-Up which has occurred), and PROVIDED, FURTHER, that if the Exchange Offer
has not been consummated or, if applicable, the Resale Registration Statement
has not become or been declared effective, in each case by February 13, 1997,
then the per annum interest rate then borne by this Security shall increase (a
"Special Step-Up", which may occur when a Step-Up is in effect) by adding 0.5%
thereto for the period from February 13, 1997 to the day on which the Company
consummates the Exchange Offer or, if applicable, the Resale Registration
Statement becomes or has been declared effective (a "Special Step-Down Date"),
at which time such interest rate shall be reduced by the additional 0.5%
resulting from such Special Step-Up (interest accruing as a result of any
Step-Up or Special Step-Up is herein called "Additional Interest" and shall be
paid semi-annually on each Interest Payment Date commencing on the first
Interest Payment Date after the day on which the relevant Step-Up or Special
Step-Up occurs).] 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 Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the April 1 or October 1 (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 will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) 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 Securities not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Whenever in this Security there is a reference, in any context, to
interest on, or in respect of, any Security
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<PAGE> 29
such mention shall be deemed to include mention of Additional Interest accrued
or payable as described in the preceding paragraph to the extent that, in such
context, Additional Interest is, was or would be accrued or payable in respect
of such Security and express mention of Additional Interest in any provisions of
this Security shall not be construed as excluding Additional Interest in those
provisions of this Security where such express mention is not made.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in Boston, Massachusetts or in the Borough of Manhattan, The City of New
York, New York, and at any other office or agency maintained by the Company 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 at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security
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 executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
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 under its corporate seal.
Dated: _____________________
PAGING NETWORK, INC.
By_______________________
Attest:
_____________________________
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<PAGE> 30
SECTION 203. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its 10% Senior Subordinated Notes due October 15, 2008
(herein called the "Securities"), limited in aggregate principal amount to
$500,000,000, issued and to be issued under an Indenture, dated as of July 15,
1995, as supplemented by the Second Supplemental Indenture, dated as of October
15, 1996 (collectively, herein called the "Indenture"), between the Company and
Fleet National Bank, Boston, Massachusetts, 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 and
immunities thereunder of the Company, the Trustee, the holders of Senior Debt
and the Holders of the Securities and of the terms upon which the Securities
are, and are to be, authenticated and delivered.
<TABLE>
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail, at any time on or after October 15, 2001, as
a whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount): If redeemed during
the 12-month period beginning October 15 of the years indicated,
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2001 105.000%
2002 103.333%
2003 101.667%
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Regular Record Dates referred to on the face hereof, all as provided in
the Indenture.
The Securities do not have the benefit of any sinking fund
obligations.
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<PAGE> 31
The Indenture provides that, subject to certain conditions, if (i) a
Change of Control (as defined in the Indenture) occurs or (ii) certain amounts
of Net Available Proceeds are available to the Company as a result of certain
Asset Dispositions, the Company shall be required to make an Offer to Purchase
Outstanding Securities at a Purchase Price equal to 101% of the principal amount
of the Securities, in the case of a Change of Control, and 100% of the principal
amount of the Securities so purchased, in the case of certain Asset
Dispositions, together in each case with accrued and unpaid interest to the
Purchase Date.
[IF NOT A GLOBAL SECURITY INSERT -- In the event of redemption or
purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.]
[IF A GLOBAL SECURITY INSERT -- In the event of a deposit or
withdrawal of an interest in this Security (including upon an exchange,
transfer, redemption or repurchase of this Security in part only) effected in
accordance with the Applicable Procedures, the Security Registrar, upon receipt
of notice of such event from the Depositary's custodian for this Security, shall
make an adjustment on its records to reflect an increase or decrease of the
Outstanding principal amount of this Security resulting from such deposit or
withdrawal, as the case may be.]
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness evidenced by this Security or (ii) certain restrictive
covenants and Events of
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<PAGE> 32
Default with respect to this Security, in each case upon compliance with certain
conditions set forth therein.
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 of the Securities 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 of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, 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 the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this
Security 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 Security 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 Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
Corporate Trust Office of the Trustee, as Security Registrar, in Boston,
Massachusetts or in the Borough of Manhattan, The City of New York, New York,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities 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, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
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<PAGE> 33
No service charge shall be made to the Holder for any such
registration of transfer or exchange, but the Company or the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security 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 Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 1013 or 1016 of the Indenture, check the box:
/ /
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Section 1013 or 1016 of the Indenture, state the amount:
$___________
Dated:________________ Your Signature:____________________________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:__________________________________________________________
(Signature must be guaranteed by
a participant in a recognized signature
guaranty medallion program)
-27-
<PAGE> 34
ARTICLE THREE
The Series of Securities
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Second Supplemental Indenture is limited
to $500,000,000, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
of this series pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture
as supplemented by this Second Supplemental Indenture or in connection with an
Offer to Purchase pursuant to Section 1013 or 1016 of the Indenture as
supplemented by this Second Supplemental Indenture. The Company may issue
Exchange Securities from time to time pursuant to an Exchange Offer, in each
case pursuant to a Board Resolution and subject to Section 303, in authorized
denominations in exchange for a like principal amount of Original Securities.
Upon any such exchange the Original Securities shall be cancelled in accordance
with Section 309 and shall no longer be deemed Outstanding for any purpose. In
no event shall the aggregate principal amount of Original Securities and
Exchange Securities Outstanding exceed $500,000,000.
The Securities of this series shall be known and designated as the
"10% Senior Subordinated Notes due October 15, 2008" of the Company. Their
Stated Maturity shall be October 15, 2008, and they shall bear interest at the
rate of 10% per annum, from October 16, 1996 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable semi-annually in each year on April 15 and October 15,
commencing April 15, 1997, until the principal thereof is paid or made available
for payment; PROVIDED, HOWEVER, with respect to Original Securities, that if a
Registration Default occurs on any day, a Step-Up will occur and the Original
Securities will bear Additional Interest as a result thereof (at an incremental
rate per annum of 0.5%) from such day to the next Step-Down Date and thereafter
upon each subsequent Step-Up to the Step-Down Date next following such Step-Up
(PROVIDED that, if a Step-Up has occurred, no further Step-Up (other than a
Special Step-Up) shall occur prior to the Step-Down Date next following such
Step-Up which has occurred) and, if either the Exchange Offer has not been
consummated or, if applicable, the Resale Registration Statement has not become
or been declared effective, in each case by February 13, 1997, a Special Step-Up
will occur and the Original Securities will bear Additional Interest as a result
thereof (at an incremental rate per annum
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<PAGE> 35
of 0.5%) from such date to the Special Step-Down Date, in each case as provided
in the form of the Securities set forth in Section 202. Accrued Additional
Interest, if any, shall be paid in cash in arrears semi-annually on each
Interest Payment Date, commencing on the first Interest Payment Date after the
day on which the relevant Step-Up or Special Step-Up occurs.
The principal of (and premium, if any) and interest on the Securities
of this series shall be payable at the office or agency of the Company in the
City of Boston, Massachusetts or in the Borough of Manhattan, The City of New
York, New York, maintained for such purpose and at any other office or agency
maintained by the Company for such purpose; PROVIDED, HOWEVER, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
The Securities of this series shall be subject to repurchase by the
Company pursuant to an Offer to Purchase as provided in Sections 1013 and 1016
of the Indenture as supplemented by this Second Supplemental Indenture.
The Securities of this series shall be redeemable as provided in
Article Eleven of the Indenture as supplemented by this Second Supplemental
Indenture.
The Securities of this series shall not have the benefit of any
sinking fund obligations, and the Event of Default set forth in Section 501(3)
of the Indenture shall be as modified pursuant to Section 402(a) of this Second
Supplemental Indenture and the provisions of Article Twelve of the Indenture
relating to sinking funds shall not be applicable to the Securities of this
series.
The Securities of this series shall be subordinated in right of
payment to Senior Debt as provided in Article Fourteen of the Indenture as
supplemented by this Second Supplemental Indenture.
The Securities of this series shall be subject to defeasance at the
option of the Company as provided in Article Thirteen of the Indenture as
supplemented by this Second Supplemental Indenture.
The Securities of this series shall rank PARI PASSU to the Company's
11.75% Senior Subordinated Notes Due May 15, 2002, to the Company's 8.875%
Senior Subordinated Notes due February 1, 2006 and to the Company's 10.125%
Senior Subordinated Notes due August 1, 2007.
-29-
<PAGE> 36
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under the
Indenture, including with respect to any amendment, waiver, acceleration or
other Act of Holders, redemption or Offer to Purchase.
ARTICLE FOUR
Modifications and Additions to the Indenture
SECTION 401. Modifications to Registration, Registration
of Transfer and Exchange Provisions.
-------------------------------------------
With respect to the Securities of this series:
(a) Section 303 of the Indenture is modified by inserting following
the eighth paragraph thereof the following:
"At any time and from time to time after the execution and delivery of
this Indenture and after the effectiveness of a registration statement under the
Securities Act with respect thereto, the Company may deliver Exchange Securities
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Exchange Securities
and a like principal amount of Original Securities for cancellation in
accordance with Section 309 of this Indenture, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. Prior to
authenticating such Exchange Securities, and accepting any additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, if requested, and (subject to Section 601)
shall be fully protected in relying upon, an Opinion of Counsel stating in
substance
(a) that all conditions hereunder precedent to the authentication and
delivery of such Exchange Securities have been complied with and that such
Exchange Securities, when such Securities have been duly authenticated and
delivered by the Trustee (and subject to any other conditions specified in
such Opinion of Counsel), have been duly issued and delivered and will
constitute valid and legally binding obligations of the Company,
respectively, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or
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affecting creditors' rights and to general equity principles; and
(b) that the issuance of the Exchange Securities in exchange for
Original Securities has been effected in compliance with the Securities
Act."
(c) Section 305 of the Indenture shall be deleted and the following
substituted therefor:
"SECTION 305. Registration, Registration of Transfer and Exchange; Restrictions
on Transfer; Global Securities.
(a) 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 of the Company in a Place of Payment being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers and exchanges of Securities as herein provided.
Subject to the other provisions of this Indenture regarding
restrictions on transfer, upon surrender for registration of transfer of any
Security at an office or agency of the Company in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount and bearing such restrictive legends as may
be required by this Indenture.
At the option of the Holder, and subject to the other provisions of
this Section 305, Securities of any series may be exchanged for other Securities
of the same series, of any authorized denomination and of like tenor and
aggregate principal amount, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
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Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security 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 of Securities, 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 Securities, other than
exchanges pursuant to Section 304, 305(d), 906, 1013, 1016 or 1107 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1103 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(b) CERTAIN TRANSFERS AND EXCHANGES. Notwithstanding any other
provision of this Indenture or the Securities, transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 305(b) shall be made only in accordance with this Section
305(b).
(i) RESTRICTED GLOBAL SECURITY TO REGULATION S GLOBAL SECURITY. If the
owner of a beneficial interest in the Restricted Global Security wishes at
any time to transfer such interest to a Person who wishes to acquire the
same in the form of a beneficial interest in the Regulation S Global
Security, such transfer may be effected only in accordance with the
provisions of this Clause (b)(i) and Clause (b)(vii) below and subject to
the Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Regulation S
Global Security in a specified principal amount be credited to a specified
Agent Member's account and that a beneficial interest in the Restricted
Global Security in an equal
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principal amount be debited from another specified Agent Member's account
and (B) a Regulation S Certificate, satisfactory to the Trustee and duly
executed by the owner of such beneficial interest in the Restricted Global
Security or his attorney duly authorized in writing, then the Trustee, as
Security Registrar but subject to Clause (b)(vii) below, shall reduce the
principal amount of the Restricted Global Security and increase the
principal amount of the Regulation S Global Security by such specified
principal amount as provided in Section 305(d)(3).
(ii) REGULATION S GLOBAL SECURITY TO RESTRICTED GLOBAL SECURITY. If
the owner of a beneficial interest in the Regulation S Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Restricted
Global Security, such transfer may be effected only in accordance with this
Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by
the Trustee, as Security Registrar, of (A) an order given by the Depositary
or its authorized representative directing that a beneficial interest in
the Restricted Global Security in a specified principal amount be credited
to a specified Agent Member's account and that a beneficial interest in the
Regulation S Global Security in an equal principal amount be debited from
another specified Agent Member's account and (B) if such transfer is to
occur during the Restricted Period, a Restricted Securities Certificate,
satisfactory to the Trustee and duly executed by the owner of such
beneficial interest in the Regulation S Global Security or his attorney
duly authorized in writing, then the Trustee, as Security Registrar, shall
reduce the principal amount of the Regulation S Global Security and
increase the principal amount of the Restricted Global Security by such
specified principal amount as provided in Section 305(d)(3).
(iii) RESTRICTED NON-GLOBAL SECURITY TO RESTRICTED GLOBAL SECURITY OR
REGULATION S GLOBAL SECURITY. If the Holder of a Restricted Security (other
than a Global Security) wishes at any time to transfer all or any portion
of such Restricted Security to a Person who wishes to take delivery thereof
in the form of a beneficial interest in the Restricted Global Security or
the Regulation S Global Security, such transfer may be effected only in
accordance with the provisions of this Clause (b)(iii) and Clause (b)(vii)
below and subject to the Applicable Procedures. Upon receipt by the
Trustee, as Security Registrar, of (A) such Restricted Security as
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provided in Section 305(a) and instructions satisfactory to the Trustee
directing that a beneficial interest in the Restricted Global Security or
Regulation S Global Security in a specified principal amount not greater
than the principal amount of such Security be credited to a specified Agent
Member's account and (B) a Restricted Securities Certificate, if the
specified account is to be credited with a beneficial interest in the
Restricted Global Security, or a Regulation S Certificate, if the specified
account is to be credited with a beneficial interest in the Regulation S
Global Security, in either case satisfactory to the Trustee and duly
executed by such Holder or his attorney duly authorized in writing, then
the Trustee, as Security Registrar but subject to Clause (b)(vii) below,
shall cancel such Restricted Security (and issue a new Restricted Security
in respect of any untransferred portion thereof) as provided in Section
305(a) and increase the principal amount of the Restricted Global Security
or the Regulation S Global Security, as the case may be, by the specified
principal amount as provided in Section 305(d)(3).
(iv) REGULATION S NON-GLOBAL SECURITY TO RESTRICTED GLOBAL SECURITY OR
REGULATION S GLOBAL SECURITY. If the Holder of a Regulation S Security
(other than a Global Security) wishes at any time to transfer all or any
portion of such Regulation S Security to a Person who wishes to acquire the
same in the form of a beneficial interest in the Restricted Global Security
or the Regulation S Global Security, such transfer may be effected only in
accordance with this Clause (b)(iv) and Clause (b)(vii) below and subject
to the Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) such Regulation S Security as provided in Section 305(a)
and instructions satisfactory to the Trustee directing that a beneficial
interest in the Restricted Global Security or Regulation S Global Security
in a specified principal amount not greater than the principal amount of
such Security be credited to a specified Agent Member's account and (B) if
the transfer is to occur during the Restricted Period and the specified
account is to be credited with a beneficial interest in the Restricted
Global Security, a Restricted Securities Certificate satisfactory to the
Trustee and duly executed by such Holder or his attorney duly authorized in
writing, then the Trustee, as Security Registrar but subject to Clause
(b)(vii) below, shall cancel such Regulation S Security (and issue a new
Regulation S Security in respect of any untransferred portion thereof) as
provided in Section 305(a) and increase the principal amount of the
Restricted Global
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Security or the Regulation S Global Security, as the case may be, by the
specified principal amount as provided in Section 305(d)(3).
(v) NON-GLOBAL SECURITY TO NON-GLOBAL SECURITY. A Security that is not
a Global Security may be transferred, in whole or in part, to a Person who
takes delivery in the form of another Security that is not a Global
Security as provided in Section 305(a), PROVIDED that, if the Security to
be transferred in whole or in part is a Restricted Security, or is a
Regulation S Security and the transfer is to occur during the Restricted
Period, then the Trustee shall have received (A) a Restricted Securities
Certificate, satisfactory to the Trustee and duly executed by the
transferor Holder or his attorney duly authorized in writing, in which case
the transferee Holder shall take delivery in the form of a Restricted
Security, or (B) a Regulation S Certificate, satisfactory to the Trustee
and duly executed by the transferor Holder or his attorney duly authorized
in writing, in which case the transferee Holder shall take delivery in the
form of a Regulation S Security (subject in every case to Section 305(c)).
(vi) EXCHANGES BETWEEN GLOBAL SECURITY AND NON-GLOBAL SECURITY. A
beneficial interest in a Global Security may be exchanged for a Security
that is not a Global Security as provided in Section 305(d), PROVIDED that,
if such interest is a beneficial interest in the Restricted Global
Security, or if such interest is a beneficial interest in the Regulation S
Global Security and such exchange is to occur during the Restricted Period,
then such interest shall be exchanged for a Restricted Security (subject in
each case to Section 305(c)). A Security that is not a Global Security may
be exchanged for a beneficial interest in a Global Security only if (A)
such exchange occurs in connection with a transfer effected in accordance
with Clause (b)(iii) or (iv) above or (B) such Security is a Regulation S
Security and such exchange occurs after the Restricted Period.
(vii) REGULATION S GLOBAL SECURITY TO BE HELD THROUGH EUROCLEAR OR
CEDEL DURING RESTRICTED PERIOD. The Company shall use its best efforts to
cause the Depositary to ensure that, until the expiration of the Restricted
Period, beneficial interests in the Regulation S Global Security may be
held only in or through accounts maintained at the Depositary by Euroclear
or Cedel (or by Agent Members acting for the account thereof), and no
person shall be entitled to
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effect any transfer or exchange that would result in any such interest
being held otherwise than in or through such an account; PROVIDED that this
Clause (b)(vii) shall not prohibit any transfer or exchange of such an
interest in accordance with Clause (b)(ii) or (vi) above.
(c) SECURITIES ACT LEGENDS. Rule 144A Securities, Other Securities and
their respective Successor Securities shall bear a Restricted Securities Legend,
and the Regulation S Securities and their Successor Securities shall bear a
Regulation S Legend, subject to the following:
(i) subject to the following Clauses of this Section 305(c), a
Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Securities Act Legend borne by such Global Security while represented
thereby;
(ii) subject to the following Clauses of this Section 305(c), a new
Security which is not a Global Security and is issued in exchange for
another Security (including a Global Security) or any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by such
other Security, PROVIDED that, if such new Security is required pursuant to
Section 305(b)(v) or (vi) to be issued in the form of a Restricted
Security, it shall bear a Restricted Securities Legend and, if such new
Security is so required to be issued in the form of a Regulation S
Security, it shall bear a Regulation S Legend;
(iii) Registered Securities shall not bear a Securities Act Legend.
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security which
does not bear a Securities Act Legend may be issued in exchange for or in
lieu of a Security (other than a Global Security) or any portion thereof
which bears such a legend if the Trustee has received an Unrestricted
Securities Certificate, satisfactory to the Trustee and duly executed by
the Holder of such legended Security or his attorney duly authorized in
writing, and after such date and receipt of such certificate, the Trustee
shall authenticate and deliver such a new Security in exchange for or in
lieu of such other Security as provided in this Article Three;
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(v) a new Security which does not bear a Securities Act Legend may
be issued in exchange for or in lieu of a Security (other than a Global
Security) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such new Security is not
necessary to ensure compliance with the registration requirements of the
Securities Act, and the Trustee, at the direction of the Company, shall
authenticate and deliver such a new Security as provided in this Article
Three; and
(vi) notwithstanding the foregoing provisions of this Section
305(c), a Successor Security of a Security that does not bear a particular
form of Securities Act Legend shall not bear such form of legend unless the
Company has reasonable cause to believe that such Successor Security is a
"restricted security" within the meaning of Rule 144, in which case the
Trustee, at the direction of the Company, shall authenticate and deliver a
new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article Three."
(d) The provisions of clauses (1), (2), (3), (4) and (5) below shall
apply only to Global Securities.
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated by the Company for such
Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (ii)
has ceased to be a clearing agency registered as such under the Exchange Act,
and in either case (i) or (ii) the Company thereupon fails to appoint a
successor Depositary (B) there shall have occurred and be continuing an Event of
Default or any event which after notice or lapse of time or both would be an
Event of Default with respect to such Global Security or (C) the Company
executes and delivers to the Trustee a Company Order stating that all Global
Securities shall be exchanged in
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whole for Securities that are not Global Securities (in which case such exchange
shall be effected by the Trustee).
(3) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Trustee, as Security Registrar, for exchange or cancellation
as provided in this Article Three. If any Global Security is to be exchanged for
other Securities or cancelled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article Three or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or cancelled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Trustee, as
Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized representative to
make a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Security, the Trustee shall, subject to Section 305(d)(2)
and as otherwise provided in this Article Three, authenticate and deliver any
Securities issuable in exchange for such Global Security (or any portion
thereof) to or upon the order of, and registered in such names as may be
directed by, the Depositary or its authorized representative. Upon the request
of the Trustee in connection with the occurrence of any of the events specified
in the preceding paragraph, the Company shall promptly make available to the
Trustee a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order, direction or
request of the Depositary or its authorized representative which is given or
made pursuant to this Article Three if such order, direction or request is given
or made in accordance with the Applicable Procedures.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Section, Section 304, 306, 906, 1107 or in
accordance with any Offer to Purchase pursuant to Section 1013 or 1016 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.
(5) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global
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Security for all purposes under the Indenture and the Securities and owners of
beneficial interests in a Global Security shall hold such interests pursuant to
the Applicable Procedures. Accordingly, any such owner's beneficial interest in
a Global Security will be shown only on, and the transfer of such interest shall
be effected only through, records maintained by the Depositary or its nominee or
its Agent Members and such owners of beneficial interests in a Global Security
will not be considered the owners or holders of such Global Security for any
purpose of this Indenture or the Securities."
(c) A new section 311 of the Indenture shall be created by adding the
following:
"SECTION 311. CUSIP and ISIN Numbers.
The Company in issuing Securities may use "CUSIP" and "ISIN" numbers
(if then generally in use) in addition to serial numbers; if so, the Trustee
shall use such "CUSIP" and "ISIN" numbers in addition to serial numbers in
notices of redemption and repurchase as a convenience to Holders; PROVIDED that
any such notice may state that no representation is made as to the correctness
of such CUSIP and ISIN numbers either as printed on the Securities 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
Securities, and any such redemption or repurchase shall not be affected by any
defect in or omission of such CUSIP and ISIN numbers.
SECTION 402. Modifications to Remedies Provisions.
------------------------------------
With respect to the Securities of this series:
(a) Section 501(3) of the Indenture shall be deleted in its entirety
and the following shall be substituted therefor: "(3) default in the
payment of principal and interest pursuant to an Offer to Purchase pursuant
to Section 1013 or 1016 when it becomes due and payable; or";
(b) Sections 501(6) and 501(7) of the Indenture shall be modified by
inserting the word "Restricted" before the word "Subsidiary" wherever the
latter appears therein;
(c) Sections 501(8) and 501(9) of the Indenture shall be deleted and
the following shall be substituted therefor:
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"(8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Restricted
Subsidiary of the Company, in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or (B) a decree or order adjudging the Company or
any 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 Restricted Subsidiary of the Company under any applicable
Federal or State law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Company or any Restricted Subsidiary of the Company or of any
substantial part of the property of the Company or a Restricted
Subsidiary of the Company, or ordering the winding up or liquidation
of the affairs of the Company or a 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
(9) the commencement by the Company or any Restricted Subsidiary of
the Company of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree
or order for relief in respect of the Company or any Restricted
Subsidiary of the Company in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any Restricted Subsidiary
of the Company or of any substantial part of the property of the
Company or a Restricted Subsidiary of the Company, or the making by
the Company or any Restricted Subsidiary of the Company of an
assignment for the benefit of creditors, or the admission by the
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Company or any Restricted Subsidiary of the Company in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Restricted Subsidiary of the
Company in furtherance of any such action; or"; and
(d) Section 503(2) of the Indenture shall be modified to insert the
words "or (3) default is made in the payment of principal and interest
pursuant to an Offer to Purchase pursuant to Section 1013 or 1016 when such
principal and interest become due and payable," after the words "the
Maturity thereof."
SECTION 403. Modifications to the Consolidation, Merger,
Conveyance, Transfer or Lease Provisions.
-------------------------------------------
With respect to the Securities of this series, Section 801 of the
Indenture shall be deleted in its entirety and the following shall be
substituted therefor:
"SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not (a) consolidate with or merge with or
into any other Person or permit any other Person to consolidate with or
merge with or into the Company or any Restricted Subsidiary of the Company
(in a transaction in which such Restricted Subsidiary remains a Restricted
Subsidiary of the Company); (b) directly or indirectly transfer, convey,
sell, lease or otherwise dispose of all or substantially all of its assets;
(c) acquire, or permit any Restricted Subsidiary of the Company to acquire,
directly or indirectly, Capital Stock of any other Person such that such
Person becomes a Restricted Subsidiary of the Company; or (d) directly or
indirectly purchase, lease or otherwise acquire, or permit any Restricted
Subsidiary of the Company, directly or indirectly, to purchase, lease or
otherwise acquire, all or substantially all of the assets of any Person or
any existing business (whether existing as a separate entity, subsidiary,
division, unit or otherwise) of any Person, if (with respect to clauses (c)
and (d) of this Section 801) the amount of consideration (including the
fair market value of property other than cash, as determined in good faith
by the Board of Directors evidenced by a Board Resolution) paid for such
Capital Stock or other ownership interests
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and/or properties or assets and the amount of any Debt Incurred in
connection therewith plus the aggregate amount of consideration (including
the fair market value of property other than cash, as determined in good
faith by the Board of Directors evidenced by a Board Resolution) paid by
the Company or its Restricted Subsidiaries for all other such acquisitions
consummated during the twelve-month period immediately preceding the date
of such acquisition and the amount of any Debt Incurred in connection
therewith exceeds 5% of the Consolidated Tangible Assets of the Company
immediately prior to such acquisition; UNLESS, in any such case:
(1) immediately before and after giving effect to such
transaction and treating any Debt Incurred by the Company or a
Restricted Subsidiary of the Company as a result of such transaction
as having been Incurred by the Company or such Restricted Subsidiary
at the time of the transaction, no Event of Default, and no event
which, after notice or lapse of time, or both, would become an Event
of Default, shall have happened and be continuing;
(2) in the case the Company shall consolidate with or merge with
or into another Person in a transaction in which the Company does not
survive, or shall directly or indirectly transfer, convey, sell, lease
or otherwise dispose of all or substantially all of its properties or
assets, the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by transfer,
conveyance, sale, lease or otherwise the assets of the Company (for
purposes of this Section 801, a "Successor Company") shall be a
corporation, partnership, or trust and shall be organized and validly
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of
the principal of (and premium, if any) and interest on all the
Securities and the performance of every covenant of this Indenture on
the part of the Company to be performed or observed; and
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(3) immediately after giving effect to such transaction, the
Company and its Restricted Subsidiaries or, if applicable, the
Successor Company and its Restricted Subsidiaries, would have a ratio
of aggregate principal amount (or Attributable Value, or Accreted
Value in the case of an Original Issue Discount Security, as the case
may be) of Debt outstanding as of the most recent available quarterly
or annual balance sheet to Pro Forma Consolidated Cash Flow for the
next preceding fiscal quarter multiplied by four, determined on a pro
forma basis as if any such transaction had taken place at the
beginning of such fiscal quarter, of less than 6.5 to 1; PROVIDED,
HOWEVER, that the provisions of this Clause (3) shall not apply to
transactions described in clauses (a) through (d) above which are (x)
between the Company and one or more of its Wholly owned Restricted
Subsidiaries or (y) between two or more Wholly owned Restricted
Subsidiaries of the Company."
SECTION 404. Modifications to the Supplemental Indentures with Consent of
Holders Provisions.
------------------------------------------------------------
With respect to the Securities of this series, the references to
Section 1008 of the Indenture in clause (3) of Section 902 thereof shall be
deemed instead to refer to Section 1017 of the Indenture as supplemented by this
Second Supplemental Indenture.
SECTION 405. Modifications to the Defeasance and Covenant Defeasance
Provisions.
------------------------------------------------------------
With respect to the Securities of this series, Section 1303 shall be
deleted in its entirety and the following shall be substituted therefor:
"SECTION 1303. Covenant Defeasance.
-------------------
Upon the Company's exercise of the option provided in
Section 1301 applicable to this Section, (i) the Company shall be
released from its obligations under Sections 1006 through 1016,
inclusive, and Clauses (2) and (3) of Section 801, (ii) the occurrence
of an event specified in Section 501(3), Section 501(4) (with respect
to Clauses (2) and (3) of Section 801), Section 501(5) (with respect
to any of Sections 1006 through 1016,
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inclusive), Section 501(6) and Section 501(7) shall not be deemed to
be an Event of Default and (iii) the provisions of Article Fourteen
shall cease to be effective, on and after the date the conditions set
forth below are satisfied (hereinafter, "Covenant Defeasance"). For
this purpose, such Covenant Defeasance means that the Company may omit
to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or Article,
whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any
other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby."
References to Articles and Sections shall refer to the Indenture as supplemented
by this Second Supplemental Indenture.
SECTION. 406. Additional Covenants; Terms of Subordination.
--------------------------------------------
(a) With respect to the Securities of this series, Section 1008 of the
Indenture shall be deleted in its entirety and the following provisions added
and substituted therefor (Section references contained in these additional
provisions are to the Indenture as supplemented by this Second Supplemental
Indenture):
SECTION 1008. Limitation on Consolidated Debt.
-------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Debt UNLESS, immediately after giving effect to the
Incurrence of such Debt and the receipt and application of the proceeds thereof,
the ratio of the aggregate principal amount (or Attributable Value, or Accreted
Value in the case of an Original Issue Discount Security, as the case may be) of
Debt of the Company and its Restricted Subsidiaries outstanding as of the most
recent available quarterly or annual balance sheet to Pro Forma Consolidated
Cash Flow for the full fiscal quarter next preceding the Incurrence of such Debt
multiplied by four, determined on a pro forma basis as if any such Debt had been
Incurred and the proceeds thereof had been applied at the beginning of such
fiscal quarter, would be not more than 6.5 to 1.
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<PAGE> 51
Notwithstanding the foregoing sentence, the Company and any Restricted
Subsidiary of the Company may Incur the following Debt without regard to the
foregoing limitation:
(i) Debt under a Credit Facility in an aggregate principal amount not
to exceed $100 million at any one time outstanding;
(ii) Debt evidenced by the Securities;
(iii) Debt owed by the Company to any Wholly owned Restricted
Subsidiary of the Company (provided that such Debt is at all times held by
a Person which is a Wholly owned Restricted Subsidiary of the Company) or
Debt owed by a Restricted Subsidiary of the Company to the Company or a
Wholly owned Restricted Subsidiary of the Company (provided that such Debt
is at all times held by the Company or a Person which is a Wholly owned
Restricted Subsidiary of the Company); PROVIDED, HOWEVER, that for purposes
of this Section 1008, upon either (x) the transfer or other disposition by
such Wholly owned Restricted Subsidiary or the Company of any Debt so
permitted to a Person other than the Company or another Wholly owned
Restricted Subsidiary of the Company or (y) the sale, lease, transfer or
other disposition of shares of Capital Stock (including by consolidation or
merger) of such Wholly owned Restricted Subsidiary to a Person other than
the Company or another such Wholly owned Restricted Subsidiary, the
provisions of this Clause (iii) shall no longer be applicable to such Debt
and such Debt shall be deemed to have been Incurred at the time of such
transfer or other disposition;
(iv) Debt Incurred or Incurrable in respect of letters of credit,
bankers' acceptances or similar facilities not to exceed $10 million at any
one time outstanding;
(v) Capital Lease Obligations whose Attributable Value will not exceed
$2 million at any one time outstanding;
(vi) Debt (including trade letters of credit) which (a) constitutes
all or a part of the purchase price of property or (b) is Incurred prior
to, at the time of or within 270 days after the acquisition of such
property for the purpose of financing all or any part of the purchase price
thereof, not to exceed $6 million at any one time outstanding;
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(vii) Debt of a Person guaranteed by the Company or a Restricted
Subsidiary in connection with a transaction which results in such Person
becoming a Restricted Subsidiary of the Company, provided such Debt was not
Incurred in anticipation of, and was outstanding prior to, such
transaction;
(viii) Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, PROVIDED that such
Debt is extinguished within two Business Days of its Incurrence; and
(ix) renewals, refundings or extensions of outstanding Debt, in any
case in an amount not to exceed the principal amount of the Debt so
refinanced plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Debt refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the expenses of the Company incurred in
connection with such refinancing, provided that, (A) in the case of any
refinancing of the Securities or any PARI PASSU Debt, such refinancing Debt
is made PARI PASSU or subordinate in right of payment to the Securities,
(B) in the case of any refinancing of Debt that is subordinate in right of
payment to the Securities, such refinancing Debt is made subordinate in
right of payment to the Securities, and (C) in the case of any refinancing
of PARI PASSU or subordinated Debt, such refinancing Debt does not have an
Average Life less than the Average Life of the Debt being refinanced and
does not have a final scheduled maturity earlier than the final scheduled
maturity, or permit redemption at the option of the holder earlier than the
earliest date of redemption at the option of the holder, of the Debt being
refinanced.
SECTION 1009. Limitation on Certain Debt.
--------------------------
The Company shall not Incur or suffer to exist any Debt that by its
terms would rank subordinate in right of payment to any Senior Debt of the
Company and that is senior in right of payment to the Securities; PROVIDED,
HOWEVER, that the foregoing limitation shall not apply to (i) distinctions
between categories of Debt which exist by reason of any Liens arising or created
in respect of some but not all Debt; (ii) any intercreditor agreements (to which
the Company is not a
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<PAGE> 53
party) among different classes of creditors of the Company and (iii)
distinctions between categories of Senior Debt which permit or require the
application of Net Available Proceeds from Asset Dispositions in the order set
forth in Section 1013(a).
SECTION 1010. Limitation on Restricted Payments.
---------------------------------
The Company (i) shall not, directly or indirectly, declare or pay any
dividend or make any distribution in respect of any class of its Capital Stock
or to the holders of any class of its Capital Stock (including pursuant to a
merger or consolidation of the Company, but excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock)), (ii) shall not, and shall not
permit any of its Restricted Subsidiaries, directly or indirectly, to purchase,
redeem or otherwise acquire or retire for value (a) any Capital Stock of the
Company or any Related Person of the Company or (b) any options, warrants or
rights to purchase or acquire shares of Capital Stock of the Company or any
Related Person of the Company, (iii) shall not make, or permit any Restricted
Subsidiary of the Company to make, any loan, advance, capital contribution to or
investment in, or payment on a Guarantee of any obligation of, any Affiliate or
any Related Person, other than the Company or a Wholly owned Restricted
Subsidiary of the Company, and (iv) shall not, and shall not permit any
Restricted Subsidiary of the Company to, redeem, defease, repurchase, retire or
otherwise acquire or retire for value prior to any scheduled maturity, repayment
or sinking fund payment, Debt of the Company which is subordinate in right of
payment to the Securities (the transactions described in clauses (i) through
(iv) being referred to herein as "Restricted Payments"), if at the time thereof:
(1) an Event of Default, or an event that with the lapse of time or
the giving of notice, or both, would constitute an Event of Default, shall
have occurred and is continuing, or
(2) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments from the date of this Indenture exceeds the sum of:
(a) the remainder of (x) 100% of cumulative Consolidated Cash Flow
after December 31, 1993 through the last day of the last full
fiscal quarter immediately preceding such Restricted Payment for
which quarterly or annual financial
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<PAGE> 54
statements of the Company are available minus (y) the product of
1.4 times cumulative Consolidated Interest Expense after December
31, 1993 through the last day of the last full fiscal quarter
immediately preceding such Restricted Payment for which quarterly
or annual financial statements of the Company are available; and
(b) 100% of the aggregate net proceeds after the date of this
Indenture, including the fair value of property other than cash
(determined in good faith by the Board of Directors and evidenced
by a Board Resolution), from the issuance of Capital Stock (other
than Disqualified Stock) of the Company and options, warrants, or
other rights on Capital Stock (other than Disqualified Stock) and
the principal amount of Debt that has been converted into
Capital Stock (other than Disqualified Stock) of the Company
after the date of this Indenture.
The foregoing provision shall not be violated by reason of (i) the
payment of any dividend within 60 days after declaration thereof if at the
declaration date such payment would have complied with the foregoing provision;
(ii) Restricted Payments consisting of investments in telecommunications
businesses in an aggregate amount not exceeding $50 million; (iii) payment in
redemption of Capital Stock of the Company or options to purchase such Capital
Stock granted to officers or employees of the Company pursuant to the 1982
Incentive Stock Option Plan in connection with the severance or termination of
such officers or employees not to exceed $3 million in the aggregate and (iv)
the making of any other Restricted Payments not in excess of $25 million;
PROVIDED, HOWEVER, that any payment made pursuant to clause (i), (ii), (iii) or
(iv) of this paragraph shall be a Restricted Payment for purposes of calculating
aggregate Restricted Payments under the first paragraph of this Section 1010.
SECTION 1011. Limitations Concerning Distributions by and Transfers to
Restricted Subsidiaries.
----------------------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, suffer to exist any encumbrance or restriction on the ability
of any Restricted Subsidiary of the Company to: (i) pay, directly or indirectly,
dividends or make any other distributions in
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<PAGE> 55
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) make loans or
advances to the Company or any Restricted Subsidiary of the Company; or (iii)
transfer any of its property or assets to the Company. Notwithstanding the
foregoing, the Company may, and may permit any Restricted Subsidiary of the
Company to, suffer to exist any such encumbrance or restriction on the ability
of any Restricted Subsidiary of the Company if and to the extent (i) subject to
the provisions of Article Eight, such encumbrance or restriction existed prior
to the time any Person became a Restricted Subsidiary of the Company and such
restriction or encumbrance was not Incurred in anticipation of such acquisition
of such Person by the Company; (ii) subject to the provisions of Article Eight,
Section 1013 and Section 1014, such encumbrance or restriction exists by reason
of a customary merger or acquisition agreement for the purchase or acquisition
of the stock or assets of the Company or any of its Restricted Subsidiaries by
another Person; (iii) such encumbrance or restriction is contained in an
operating lease for real property and is effective only upon the occurrence and
during the continuance of a default in the payment of rent; and (iv) such
encumbrance or restriction is the result of applicable corporate law or
regulation relating to the payment of dividends or distributions.
SECTION 1012. Limitation on Transactions with Affiliates and Related Persons.
--------------------------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, directly or indirectly, enter into any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property, the rendering of any service or the making of any loan or advance, but
excluding transactions between the Company and Wholly owned Restricted
Subsidiaries of the Company or between Wholly owned Restricted Subsidiaries of
the Company), with any Affiliate or Related Person, UNLESS
(1) a majority of the disinterested members of the Board of Directors
shall determine in its good faith judgment and which determination shall be
evidenced by a Board Resolution that the terms of such transaction are in
the best interests of the Company or such Restricted Subsidiary; and
(2) such transaction is, in the good faith judgment of the Board of
Directors evidenced by a Board Resolution, on terms no less favorable to
the Company or such Restricted Subsidiary than those that could be
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<PAGE> 56
obtained in a comparable arm's length transaction with an entity that is
not an Affiliate or Related Person.
SECTION 1013. Limitation on Certain Asset Dispositions.
----------------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any Asset Disposition in one or more transactions unless
(i) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such sale or other disposition at least equal to
the fair market value for the assets sold or otherwise disposed of (which shall
be as determined in good faith by the Board of Directors, evidenced by a Board
Resolution), (ii) the consideration for such disposition shall consist of cash
or readily marketable cash equivalents or the assumption of Debt of the Company
or other obligations relating to such assets and release from all liability on
the Debt or other obligations assumed, and (iii) 100% of the Net Available
Proceeds from such Asset Disposition, less any amounts invested in accordance
with the next paragraph, below, within 180 days of such disposition in assets
related to the business of the Company, as evidenced by an Officers'
Certificate, and from the sale of any marketable cash equivalents received in
connection therewith are applied by the Company (or the Restricted Subsidiary,
as the case may be) within 180 days following such disposition (A) first to the
permanent reduction of any Debt then outstanding under a Credit Facility to the
extent the terms of such agreement or facility require such application or
prohibit prepayment of the Securities or other Debt to be prepaid as provided in
this paragraph, (B) second, to the repayment of any other Senior Debt to the
extent the terms of such Debt require such application or prohibit prepayment of
the Securities or other Debt to be prepaid as provided in this paragraph, (C)
third, to the extent remaining Net Available Proceeds exceed $5 million, to make
an offer to purchase the Company's outstanding 11.75% Senior Subordinated Notes
Due May 15, 2002, and (D) fourth, to the extent remaining Net Available Proceeds
exceed $5 million, to make an Offer to Purchase the Company's outstanding 8.875%
Senior Subordinated Notes due February 1, 2006, the Company's outstanding
10.125% Senior Subordinated Notes due August 1, 2007, the Outstanding Securities
and other PARI PASSU Debt, on a pro rata basis according to their respective
principal amounts then outstanding (or Accreted Value in the case of an Original
Issue Discount Security), at 100% of their principal amount plus accrued
interest to the date of the purchase.
Notwithstanding the foregoing, the Company shall not be required to
repurchase or to redeem securities or to repay
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other Debt pursuant to Clause (iii) above, if the Net Available Proceeds from
any Asset Disposition, less any amounts invested within 180 days of such
disposition in assets related to the business of the Company (evidenced by an
Officers' Certificate), are less than $5 million (such lesser amount to be
carried forward on a cumulative basis for any fiscal year).
(b) The Company will mail the Offer for an Offer to Purchase required
pursuant to Section 1013(a) not more than 180 days after consummation of the
disposition referred to in Section 1013(a). The aggregate principal amount of
the securities and other PARI PASSU Debt to be offered to be purchased pursuant
to the Offer to Purchase shall equal the Net Available Proceeds available
therefor pursuant to Clause (iii)(D) of Section 1013(a) (rounded down to the
next lowest integral multiple of $1,000). Each Holder shall be entitled to
tender all or any portion of the Securities owned by such Holder pursuant to the
Offer to Purchase, subject to the requirement that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal amount.
The Company shall not be entitled to any credit against its
obligations under this Section 1013 for the principal amount of any Securities
acquired by the Company otherwise than pursuant to the Offer to Purchase
pursuant to this Section 1013.
(c) Not later than the date of the Offer with respect to an Offer to
Purchase pursuant to this Section 1013, the Company shall deliver to the Trustee
an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of
the Net Available Proceeds from the Asset Disposition pursuant to which such
Offer is being made, including, if amounts are invested in assets related to the
business, the actual assets acquired and (iii) the compliance of such allocation
with the provisions of Section 1013(a).
The Company and the Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. On or prior to the Purchase
Date, the Company shall (i) accept for payment (on a pro rata basis, if
necessary, as provided in the definition of "Offer to Purchase") securities or
portions thereof tendered pursuant to the Offer, (ii) deposit with the Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1003) money sufficient to pay the Purchase Price
of all securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee all securities so accepted together with an
Officers' Certificate stating the securities or portions thereof accepted for
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payment by the Company. The Paying Agent (or the Company, if so acting) shall
promptly mail or deliver to holders of securities so accepted payment in an
amount equal to the Purchase Price, and the Trustee shall promptly authenticate
and mail or deliver to Holders of Securities issued under this Indenture a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any security not accepted for payment shall be promptly mailed or
delivered by the Company to the Holder thereof.
(d) Notwithstanding the foregoing, this Section 1013 shall not apply
to any Asset Disposition which constitutes a transfer, conveyance, sale, lease
or other disposition of all or substantially all of the Company's properties or
assets within the meaning of Section 801 hereof.
SECTION 1014. Limitation on Issuances and Sales of Capital Stock of Wholly
owned Restricted Subsidiaries.
-------------------------------------------------------------
The Company (i) shall not and shall not permit any of its Wholly owned
Restricted Subsidiaries to transfer, convey, sell, lease or otherwise dispose of
Capital Stock of such or any other Wholly owned Restricted Subsidiary to any
Person (other than the Company or a Wholly owned Restricted Subsidiary of the
Company) unless such transfer, conveyance, sale, lease or other disposition is
of all the Capital Stock of such Wholly owned Restricted Subsidiary and the Net
Available Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 1013 and (ii) will not permit
any of its Wholly owned Restricted Subsidiaries to issue shares of Capital Stock
(other than directors' qualifying shares), or securities convertible into, or
warrants, rights or options to subscribe for or purchase shares of, its Capital
Stock to any Person other than to the Company or a Wholly owned Restricted
Subsidiary of the Company.
SECTION 1015. Provision of Financial Statements.
---------------------------------
So long as any of the Securities are Outstanding, and in addition to
and without limitation of the Company's obligations pursuant to Section 704,
whether or not the Company is subject to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (referred to as the "Exchange Act"),
the Company shall file with the Commission the annual reports, quarterly reports
and other documents which the Company would have been required to file with the
Commission pursuant to such Sections 13(a) and 15(d) if the Company were
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so subject, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company shall also in any event (x) 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 which the
Company would have been required to file with the Commission pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) 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 to any prospective Holder.
SECTION 1016. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control (as defined below),
each Holder of a Security shall have the right to have such Security repurchased
by the Company on the terms and conditions precedent set forth in this Section
1016 and this Indenture. The Company shall, within 30 days following the date of
the consummation of a transaction resulting in a Change of Control, mail an
Offer with respect to an Offer to Purchase all Outstanding Securities at a
purchase price equal to 101% of their aggregate principal amount plus accrued
interest to the Purchase Date; PROVIDED, HOWEVER, that installments of interest
whose Stated Maturity is on or prior to the Purchase Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307. Each Holder shall be
entitled to tender all or any portion of the Securities owned by such Holder
pursuant to the Offer to Purchase, subject to the requirement that any portion
of a Security tendered must be tendered in an integral multiple of $1,000
principal amount.
(b) The Company and Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. Prior to the Purchase Date,
the Company shall (i) accept for payment Securities or portions thereof tendered
pursuant to the Offer, (ii) deposit with the Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) money sufficient to pay the Purchase Price of all Securities or
portions thereof so accepted and (iii) deliver or cause to be delivered to the
Trustee all Securities so accepted together
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<PAGE> 60
with an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to Holders of Securities so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof.
(c) A "Change of Control" shall be deemed to have occurred in the
event that, after the date of this Indenture, either (A) any Person or any
Persons (other than the Golder Thoma Fund or any of its officers) acting
together which would constitute a "group" (a "Group") for purposes of Section
13(d) of the Exchange Act, or any successor provision thereto, together with any
Affiliates or Related Persons thereof, shall beneficially own (as defined in
Rule 13d-3 of the Exchange Act or any successor provision thereto) at least 50%
of the aggregate voting power of all classes of Voting Stock of the Company; or
(B) any Person or Group, together with any Affiliates or Related Persons
thereof, shall succeed in having sufficient of its or their nominees elected to
the Board of Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company after such
election who is an Affiliate or Related Person of such Person or Group, shall
constitute a majority of the Board of Directors of the Company; PROVIDED,
HOWEVER, that this Section 1016(c)(B) shall not apply to any Person or Group, or
the Affiliates or Related Persons thereof, who shall have succeeded, on or prior
to the date of this Indenture, in electing directors which constitute a majority
of the Board of Directors of the Company.
(d) Prior to the time required for the mailing of an Offer with
respect to an Offer to Purchase pursuant to paragraph (a), the Company will in
good faith (i) seek to obtain any required consent of the holders of the Senior
Debt so as to permit the making of the Offer to Purchase and the purchase of
Securities pursuant to this Section 1016, or (ii) repay all or a portion of the
holders of the Senior Debt to the extent necessary (including, if necessary,
payment in full of such Debt and payment of any prepayment premiums, fees,
expenses or penalties) to permit the making of the Offer to Purchase and the
purchase of Securities pursuant to this Section 1016 without such consent or
(iii) if such Debt is not then prepayable to such extent, make an offer to the
holders of the Senior Debt from which consent is required and cannot be obtained
to repay such Debt in full for an amount equal to the outstanding principal
balance thereof and accrued interest
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to the date of repayment, and repay any holder who accepts such Offer. Following
compliance by the Company with the requirements of the foregoing sentence, the
Company shall, within the time required for the mailing of an Offer with respect
to an Offer to Purchase pursuant to paragraph (a), mail such Offer.
SECTION 1017. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1004 to 1016, inclusive, if before
the time for such compliance the Holders of at least a majority in principal
amount of the Outstanding Securities shall, by Act of such Holders, either waive
such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant 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 covenant or condition shall remain in full
force and effect."
(b) With respect to the Securities of this series, Article Fourteen
of the Indenture shall be deleted in its entirety and the following provisions
added and substituted therefor (Section references contained in these additional
provisions are to the Indenture as supplemented by this Second Supplemental
Indenture):
SECTION 1018. Compliance with Rule 144A.
-------------------------
Until the third anniversary of the later of the last date of original
issuance of the Securities and the last date on which any Security was acquired
from an Affiliate of the Company, the Company will use its best efforts to be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act. At any time during such period when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will furnish to any holder of such
a Security (or a beneficial interest therein), or to any prospective purchaser
designated by such holder, upon the request of such holder, such financial and
other information as may be required to be delivered under paragraph (d)(4) of
Rule 144A to permit such resales.
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<PAGE> 62
SECTION 1019. Resale of Certain Securities.
----------------------------
Until the third anniversary of the last date of original issuance of
the Securities, the Company will not, and will use its best efforts not to
permit any of its "affiliates" (as defined under Rule 144) to, resell any
Securities which constitute "restricted securities" under Rule 144 that have
been reacquired by any of them.
"ARTICLE FOURTEEN
Subordination of Securities
SECTION 1401. Securities Subordinate to Senior Debt.
-------------------------------------
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of (and premium,
if any) and interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Debt.
SECTION 1402. Payment Over of Proceeds Upon Dissolution, Etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Debt shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Debt, or provision shall be made for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt, before the Holders of the Securities are entitled to receive any
payment on account of principal of (or premium, if any) or interest on the
Securities or on account of purchase or redemption or other acquisition of
Securities by the Company or any Subsidiary of the Company (individually and
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<PAGE> 63
collectively, a "Securities Payment"), and to that end the holders of Senior
Debt shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
securities which may be payable or deliverable in respect of the Securities in
any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, before all Senior Debt is paid in full
or payment thereof provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt, and if such fact shall, at or
prior to the time of such payment or distribution, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Debt remaining unpaid, to the extent necessary to
pay all Senior Debt in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, cash, property or securities" shall not
be deemed to include a payment or distribution of stock or securities of the
Company provided for by a plan of reorganization or readjustment or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are subordinated in right of payment to all then outstanding
Senior Debt to substantially the same extent as the Securities are so
subordinated as provided in this Article. The consolidation of the Company with,
or the merger of the Company into, another Person or the liquidation or
dissolution of the Company following the conveyance or transfer of its
properties and assets substantially as an entirety to another Person upon the
terms and conditions set forth in Article Eight shall not be deemed a Proceeding
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
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<PAGE> 64
SECTION 1403. No Payment When Senior Debt in Default.
--------------------------------------
In the event that any Senior Payment Default (as defined below) shall
have occurred and be continuing, then no Securities Payment shall be made unless
and until such Senior Payment Default shall have been cured or waived or shall
have ceased to exist or all amounts then due and payable in respect of Senior
Debt shall have been paid in full, or provision shall have been made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt. "Senior Payment Default" means any default in the
payment of principal of (or premium, if any) or interest on Senior Debt, the
payment of commitment or facility fees, letter of credit fees and agency fees
under a Credit Facility, and payments with respect to letter of credit
reimbursement arrangements with one or more lenders under a Credit Facility,
when due, whether at the Stated Maturity of any such payment or by declaration
of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined below)
shall have occurred and be continuing, then, upon the receipt by the Company and
the Trustee of written notice of such Senior Nonmonetary Default from the Agent
Bank or from an authorized Person on behalf of Designated Senior Debt, no
Securities Payment shall be made during the period (the "Payment Blockage
Period") commencing on the date of such receipt of such written notice and
ending on the earlier of (i) the date on which such Senior Nonmonetary Default
shall have been cured or waived or shall have ceased to exist and any
acceleration of Senior Debt shall have been rescinded or annulled or the Senior
Debt to which such Senior Nonmonetary Default relates shall have been discharged
or (ii) the 179th day after the date of such receipt of such written notice;
PROVIDED, HOWEVER, that no more than one Payment Blockage Period may be
commenced with respect to the Securities during any period of 360 consecutive
days and there shall be a period of at least 181 consecutive days in each period
of 360 consecutive days when no Payment Blockage Period is in effect. For the
purposes hereof, "Designated Senior Debt" means any Senior Debt (other than
under a Credit Facility which has an Agent Bank) in an original principal amount
of not less than $75 million where (x) the instrument governing such Senior Debt
expressly states that such Debt is "Designated Senior Debt" for the purposes of
this Indenture and (y) a Board Resolution setting forth such designation by the
Company has been filed with the Trustee. For all purposes of this paragraph, no
Senior Nonmonetary Default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Senior Debt
initiating such
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<PAGE> 65
blockage period shall be, or be made, the basis for the commencement of a
subsequent Payment Blockage Period unless such Senior Nonmonetary Default shall
have been cured or waived for a period of not less than 90 consecutive days.
"Senior Nonmonetary Default" means the occurrence or existence of any event,
circumstance, condition or state of facts that, by the terms of any instrument
pursuant to which any Senior Debt is outstanding, permits one or more holders of
such Senior Debt (or a trustee or agent on behalf of the holders thereof) to
declare such Senior Debt due and payable prior to the date on which it would
otherwise become due and payable, other than a Senior Payment Default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such payment, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment shall be paid over and delivered
forthwith to the holders of the Senior Debt remaining unpaid, to the extent
necessary to pay in full all the Senior Debt.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 would be applicable.
SECTION 1404. Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or
in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 1402 or under the
conditions described in Section 1403, from making Securities Payments, or (b)
the application by the Trustee of any money deposited with it hereunder to
Securities Payments or the retention of such payment by the Holders, if, at the
time of such application by the Trustee, it did not have knowledge that such
payment would have been prohibited by the provisions of this Article.
SECTION 1405. Subrogation to Rights of Holders of Senior Debt.
-----------------------------------------------
Subject to the payment in full of all amounts due or to become due on
or in respect of Senior Debt, or provision shall be made for such payment in
cash or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt, the Holders of the Securities shall be subrogated to the rights of
the holders of such Senior Debt to receive payments
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<PAGE> 66
and distributions of cash, property and securities applicable to the Senior Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 1406. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Debt on the other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as among the Company, its creditors other than holders of Senior Debt
and the Holders of the Securities, the obligation of the Company, which is
absolute and unconditional (and which, subject to the rights under this Article
of the holders of Senior Debt, is intended to rank equally with all other
general obligations of the Company) to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders of the Securities
and creditors of the Company other than the holders of Senior Debt; or (c)
prevent the Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article of the holders of Senior Debt to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 1407. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
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<PAGE> 67
SECTION 1408. No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Trustee or the Holders of the Securities and
without impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Securities to the holders of Senior
Debt, do any one or more of the following: (i) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter, Senior Debt, or
otherwise amend or supplement in any manner Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in
any manner for the collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 1409. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities and of any subsequent cure or waiver
thereof. Notwithstanding the provisions of this Article or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the Securities, unless and until the Trustee shall
have received written notice thereof from the Company or a holder of Senior Debt
or from any trustee therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of Section 601, shall be entitled
in all respects to assume that no such facts exist.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a
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<PAGE> 68
written notice by a Person representing himself to be a holder of Senior Debt
(or a trustee therefor) to establish that such notice has been given by a holder
of Senior Debt (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Debt to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article, and if such evidence is not furnished,
the Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
SECTION 1410. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in such Proceeding, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 1411. Trustee Not Fiduciary for Holders of Senior Debt.
------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders if it shall
in good faith mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
The Trustee's duties with respect to holders of Senior Debt are limited to those
specifically set forth in this Indenture, and no implied covenants or
obligations shall be construed by any provision hereof.
-62-
<PAGE> 69
SECTION 1412. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
-----------------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1413. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that Section 1412 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1414. Defeasance of this Article Fourteen.
-----------------------------------
The subordination of the Securities provided by this Article Fourteen
is expressly made subject to the provisions for defeasance or covenant
defeasance in Article Thirteen hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such defeasance or covenant
defeasance, the Securities then outstanding shall thereupon cease to be
subordinated pursuant to this Article Fourteen."
ARTICLE FIVE
Miscellaneous
SECTION 501. Miscellaneous.
-------------
(a) The Trustee accepts the trusts created by the Indenture, as
supplemented by this Second Supplemental Indenture, and agrees to perform the
same upon the terms and conditions of the Indenture, as supplemented by this
Second Supplemental Indenture.
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<PAGE> 70
(b) The recitals contained herein shall be taken as 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
Second Supplemental Indenture.
(c) All provisions of this Second Supplemental Indenture shall be
deemed to be incorporated in, and made a part of, the Indenture; and the
Indenture, as supplemented by this Second Supplemental Indenture, shall be read,
taken and construed as one and the same instrument.
(d) Each of the Company and the Trustee makes and reaffirms as of the
date of execution of this Second Supplemental Indenture all of its respective
representations, covenants and agreements set forth in the Indenture.
(e) All covenants and agreements in this Second Supplemental Indenture
by the Company or the Trustee shall bind its respective successors and assigns,
whether so expressed or not.
(f) In case any provisions in this Second Supplemental Indenture 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.
(g) Nothing in this Second Supplemental Indenture express or implied,
shall give to any Person, other than as specifically provided herein and other
than the parties hereto and their successors under the Indenture and the Holders
of the series of Securities created hereby, any benefit or any legal or
equitable right, remedy or claim under the Indenture.
(h) If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act of 1939, as may be amended for time to
time, that is required under such Act to be a part of and govern this Second
Supplemental Indenture, the latter provision shall control. If any provision
hereof modifies or excludes any provision of such Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Second
Supplemental Indenture as so modified or excluded, as the case may be.
(I) THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
-64-
<PAGE> 71
(j) All amendments to the Indenture made hereby shall have effect only
with respect to the series of Securities created hereby.
--------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-65-
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
Paging Network, Inc.
By /s/ Kenneth W. Sanders
------------------------------
(SEAL) Name: Kenneth W. Sanders
Title: Senior Vice President-
Finance
Attest:
/s/ Roger D. Feldman
- ----------------------------
Roger D. Feldman
Secretary
Fleet National Bank
as Trustee
(SEAL)
By /s/ Gerald P. Beezley
------------------------------
Authorized Officer
Attest:
/s/ Lee E. MacDonald
- ----------------------------
-66-
<PAGE> 73
STATE OF TEXAS )
) ss.:
COUNTY OF COLLIN )
On the 11th day of October, 1996, before me personally came Kenneth W.
Sanders, to me known, who, being by me duly sworn, did depose and say that he is
the Senior Vice President-Finance of Paging Network, Inc., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
/s/ Karen M. Wade
--------------------------------
Notary Public, State of Texas
My Comm. Expires 09/11/99
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
On the 15th day of October, 1996, before me personally came Gerald P.
Beezley, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of Fleet National Bank, one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Christine DiFranco
------------------------------------
Notary Public
My Commission Expires August 3, 2001
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<PAGE> 74
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to [Sections] 305(b)(i), (iii) and (v)
of the Indenture)
Fleet National Bank,
as Trustee
One Federal Street
Boston, MA 02110
Re: 10% Senior Subordinated Notes due October 15,
2008 of Paging Network, Inc. (the "Securities")
-----------------------------------------------
Reference is made to the Indenture, dated as of July 15, 1995,
as supplemented by the Second Supplemental Indenture, dated as of October 15,
1996 (as so supplemented, the "Indenture"), between Paging Network, Inc. (the
"Company") and Fleet National Bank, as Trustee. Terms used herein and defined in
the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of
1933, as amended (the "Securities Act"), are used herein as so defined.
This certificate relates to U.S. $____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 904 or Rule 144
A-1
<PAGE> 75
under the Securities Act and with all applicable securities laws of the states
of the United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as follows:
(1) RULE 904 TRANSFERS. If the transfer is being
effected in accordance with Rule 904:
(A) the Owner is not a distributor of the Securities,
an affiliate of the Company or any such distributor or a
person acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made
to a person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and
any person acting on its behalf reasonably believed that
the Transferee was outside the United States, or
(ii) the transaction is being executed in, on or
through the facilities of the Eurobond market, as
regulated by the Association of International Bond
Dealers, or another designated offshore securities market
and neither the Owner nor any person acting on its behalf
knows that the transaction has been prearranged with a
buyer in the United States;
(D) no directed selling efforts have been made in the
United States by or on behalf of the Owner or any affiliate
thereof;
(E) if the Owner is a dealer in securities or has
received a selling concession, fee or other remuneration in
respect of the Specified Securities, and the transfer is to
occur during the Restricted Period, then the requirements of
Rule 904(c)(1) have been satisfied; and
(F) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
(2) RULE 144 TRANSFERS. If the transfer is being effected
pursuant to Rule 144:
A-2
<PAGE> 76
(A) the transfer is occurring after a holding period
of at least two years (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Company or from an affiliate of
the Company, whichever is later, and is being effected in
accordance with the applicable amount, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period
of at least three years has elapsed since the Specified
Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is
not, and during the preceding three months has not been, an
affiliate of the Company.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Purchasers.
Dated:
---------------------------------------
(Print the name of the Undersigned,
as such term is defined in the second
paragraph of this certificate.)
By:
------------------------------------
Name:
Title:
---------------------------------------
(If the Undersigned is a corporation,
partnership or fiduciary, the title
of the person signing on behalf of
the Undersigned must be stated.)
A-3
<PAGE> 77
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to [Sections] 305(b)(ii), (iii), (iv) and (v)
of the Indenture)
Fleet National Bank,
as Trustee
One Federal Street
Boston, MA 02110
Re: 10% Senior Subordinated Notes due October 15,
2008 of Paging Network, Inc. (the "Securities")
-----------------------------------------------
Reference is made to the Indenture, dated as of July 15, 1995,
as supplemented by the Second Supplement Indenture, dated as of October 15, 1996
(as so supplemented, the "Indenture"), between Paging Network, Inc. (the
"Company") and Fleet National Bank, as Trustee. Terms used herein and defined in
the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of
1933, as amended (the "Securities Act"), are used herein as so defined.
This certificate relates to U.S. $_____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an
B-1
<PAGE> 78
effective registration statement under the Securities Act, it is being effected
in accordance with Rule 144A or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) RULE 144A TRANSFERS. If the transfer is being effected
in accordance with Rule 144A:
(A) the Specified Securities are being transferred to
a person that the Owner and any person acting on its behalf
reasonably believe is a "qualified institutional buyer" within
the meaning of Rule 144A, acquiring for its own account or for
the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf
have taken reasonable steps to ensure that the Transferee is
aware that the Owner may be relying on Rule 144A in connection
with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period
of at least two years (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Company or from an affiliate of
the Company, whichever is later, and is being effected in
accordance with the applicable amount, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period
of at least three years has elapsed since the Specified
Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is
not, and during the preceding three months has not been, an
affiliate of the Company.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Purchasers.
B-2
<PAGE> 79
Dated:
---------------------------------------
(Print the name of the Undersigned,
as such term is defined in the second
paragraph of this certificate.)
By:
------------------------------------
Name:
Title:
---------------------------------------
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
B-3
<PAGE> 80
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to [Sections] 305(c))
Fleet National Bank,
as Trustee
One Federal Street
Boston, MA 02110
Re: 10% Senior Subordinated Notes due October 15,
2008 of Paging Network, Inc. (the "Securities")
-----------------------------------------------
Reference is made to the Indenture, dated as of October 15,
1996 (the "Indenture"), between Paging Network, Inc. (the "Company") and Fleet
National Bank, as Trustee. Terms used herein and defined in the Indenture or in
Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), are used herein as so defined.
This certificate relates to U.S. $_____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Securities Act Legend pursuant to Section
305(c) of the Indenture. In connection with such exchange, the Owner hereby
certifies that the exchange is occurring after a holding period of at least
three years (computed in accordance with paragraph (d) of Rule 144) has elapsed
since the Specified Securities were last
C-1
<PAGE> 81
acquired from the Company or from an affiliate of the Company, whichever is
later, and the Owner is not, and during the preceding three months has not been,
an affiliate of the Company. The Owner also acknowledges that any future
transfers of the Specified Securities must comply with all applicable securities
laws of the states of the United States and other jurisdictions.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Purchasers.
Dated:
---------------------------------------
(Print the name of the Undersigned,
as such term is defined in the second
paragraph of this certificate.)
By:
------------------------------------
Name:
Title:
---------------------------------------
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
C-2
<PAGE> 1
EXHIBIT 4.3
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of October 16, 1996,
between Paging Network, Inc., a Delaware corporation (the "Company"), and
Goldman, Sachs & Co., Salomon Brothers Inc and Bear, Stearns & Co. Inc., as
purchasers (collectively, the "Purchasers") of the 10% Senior Subordinated Notes
due October 15, 2008, of the Company.
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
(a) "Closing Date" shall mean the date on which the Securities are
initially issued.
(b) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.
(c) "Effective Time", in the case of (i) an Exchange Offer, shall mean
the time and date as of which the Commission declares the Exchange Offer
registration statement effective or as of which such registration statement
otherwise becomes effective and (ii) a Shelf Registration, shall mean the
time and date as of which the Commission declares the Shelf Registration
effective or as of which the Shelf Registration otherwise becomes
effective.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
(e) "Exchange Offer" shall have the meaning assigned thereto in
Section 2(a) hereof.
(f) "Exchange Registration" shall have the meaning assigned thereto in
Section 3(g) hereof.
(g) "Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
(h) The term "holder" shall mean each of the Purchasers and other
persons who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
(i) "Indenture" shall mean the Indenture, dated as of July 15, 1995,
as supplemented by the Second Supplemental Indenture dated as of October
16, 1996, between the Company and Fleet National Bank, as Trustee, as the
same shall be amended from time to time.
(j) The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
(k) "Registrable Securities" shall mean the Securities; provided,
however, that such Securities shall cease to be Registrable Securities when
(i) in the circumstances contemplated
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by Section 2(a) hereof, such Securities have been exchanged for Exchange
Securities in an Exchange Offer as contemplated in Section 2(a) (PROVIDED
that any Exchange Security received by a broker-dealer in an Exchange Offer
in exchange for a Registrable Security that was not acquired by the
broker-dealer directly from the Company will also be a Registrable Security
through and including the earlier of the 90th day after the Exchange Offer
is completed or such time as such broker-dealer no longer owns such
Security); (ii) in the circumstances contemplated by Section 2(b) hereof, a
registration statement registering such Securities under the Securities Act
has been declared or becomes effective and such Securities have been sold
or otherwise transferred by the holder thereof pursuant to such effective
registration statement; (iii) such Securities are sold pursuant to Rule 144
under circumstances in which any legend borne by such Securities relating
to restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture or such
Securities are eligible to be sold pursuant to paragraph (k) of Rule 144;
or (iv) such Securities shall cease to be outstanding.
(l) "Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
(m) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
(n) "Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
(o) "Restricted Holder" shall mean (i) a holder that is an affiliate
of the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business
or (iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Securities.
(p) "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case,
such rule promulgated under the Securities Act (or any successor
provision), as the same shall be amended from time to time.
(q) "Securities" shall mean, collectively, the 10% Senior Subordinated
Notes due October 15, 2008 of the Company to be issued and sold to the
Purchasers, and securities issued in exchange therefor or in lieu thereof
pursuant to the Indenture.
(r) "Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
(s) "Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
(t) "Special Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
(u) "Trust Indenture Act" shall mean the Trust Indenture Act of 1939,
or any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
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Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
under the Securities Act, as soon as practicable, but no later than 30 days
after the Closing Date, a registration statement relating to an offer to
exchange (the "Exchange Offer") any and all of the Securities for a like
aggregate principal amount of debt securities issued by the Company which are
substantially identical to the Securities (and are entitled to the benefits of a
trust indenture which is substantially identical to the Indenture or is the
Indenture and which has been qualified under the Trust Indenture Act) except
that they have been registered pursuant to an effective registration statement
under the Securities Act and do not contain provisions for the additional
interest contemplated in Section 2(c) below (such new debt securities
hereinafter called "Exchange Securities"). The Company agrees to use its best
efforts to cause such registration statement to become effective under the
Securities Act as soon as practicable, but no later than 75 days after the
Closing Date. The Exchange Offer will be registered under the Securities Act on
the appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its best
efforts to commence and complete the Exchange Offer promptly after such
registration statement has become effective, hold the Exchange Offer open for at
least 30 days and issue Exchange Securities for all Registrable Securities that
have been properly tendered and not withdrawn on or prior to the expiration of
the Exchange Offer. The Exchange Offer will be deemed to have been completed
only if the Exchange Securities received by holders other than Restricted
Holders in the Exchange Offer for Registrable Securities are, upon receipt,
transferable by each such holder without restriction under the Securities Act
and the Exchange Act and without material restrictions under the blue sky or
securities laws of a substantial majority of the States of the United States of
America. The Exchange Offer shall be deemed to have been completed upon the
earlier to occur of (i) the Company having exchanged the Exchange Securities for
all outstanding Registrable Securities pursuant to the Exchange Offer and (ii)
the Company having exchanged, pursuant to the Exchange Offer, Exchange
Securities for all Registrable Securities that have been properly tendered and
not withdrawn before the expiration of the Exchange Offer, which shall be on a
date that is at least 30 days following the commencement of the Exchange Offer.
The Company agrees (x) to include in the registration statement a prospectus for
use in connection with any resales of Exchange Securities by a broker-dealer,
other than resales of Exchange Securities received by a broker-dealer pursuant
to an Exchange Offer in exchange for Registrable Securities acquired by the
broker-dealer directly from the issuer, and (y) to keep such registration
statement effective for a period (the "Resale Period") beginning when Exchange
Securities are first issued in the Exchange Offer and ending upon the earlier of
the expiration of the 90th day after the Exchange Offer has been completed or
such time as such broker-dealers no longer own any Registrable Securities. With
respect to such registration statement, each broker-dealer that holds Exchange
Securities received in an Exchange Offer in exchange for Registerable Securities
not acquired by it directly from the Company shall have the benefit of the
rights of indemnification and contribution set forth in Sections 6(a), (c), (d)
and (e) hereof.
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(b) If prior to the consummation of the Exchange Offer existing Commission
interpretations are changed such that the Exchange Securities received by
holders other than Restricted Holders in the Exchange Offer for Registrable
Securities are not or would not be, upon receipt, transferable by each such
holder without restriction under the Securities Act, in lieu of conducting the
Exchange Offer contemplated by Section 2(a) the Company shall file under the
Securities Act as soon as practicable a "shelf" registration statement providing
for the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (the "Shelf Registration").
In addition, in the event that the Purchasers shall not have resold all of the
Securities initially purchased by them pursuant to the Purchase Agreement prior
to the consummation of the Exchange Offer, the Company shall file under the
Securities Act as soon as practicable a Shelf Registration. The Company agrees
to use its best efforts to cause the Shelf Registration to become or be declared
effective no later than 75 days after the Closing Date and to keep such Shelf
Registration continuously effective for a period ending on the earlier of the
third anniversary of the Effective Time or such time as there are no longer any
Registrable Securities outstanding. The Company further agrees to supplement or
make amendments to the Shelf Registration, as and when required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration or by the Securities Act or rules and
regulations thereunder for shelf registration, and the Company agrees to furnish
to the holders of the Registrable Securities copies of any such supplement or
amendment prior to its being used or promptly following its filing with the
Commission.
(c) In the event that (i) the Company has not filed the registration
statement relating to the Exchange Offer (or, if applicable, the Shelf
Registration) on or before the 30th day after the Closing Date, or (ii) such
registration statement relating to the Exchange Offer (or, if applicable, the
Shelf Registration) has not become effective or been declared effective by the
Commission on or before the 75th day after the Closing Date, or (iii) the
Exchange Offer has not been completed within 45 days after the initial effective
date of the registration statement relating to the Exchange Offer (if the
Exchange Offer is then required to be made) or (iv) any registration statement
required by Section 2(a) or 2(b) hereof is filed and declared effective but
shall thereafter cease to be effective (except as specifically permitted herein)
without being succeeded immediately by an additional registration statement
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"), then, as liquidated damages for such
Registration Default, subject to the provisions of Section 9(b), the per annum
interest rate on the Securities shall be increased by adding 0.5% thereto (e.g.,
such interest rate, if initially 10.00%, would be increased to 10.50%) for the
period from the first day on which the Registration Default occurs to the first
day on which no Registration Default is in effect (at which time the interest
rate on the Securities will be reduced by such additional amount). In addition,
in the event that the Exchange Offer has not been completed or, if applicable,
the Shelf Registration has not become effective or been declared effective by
the Commission on or before the 120th day after the Closing Date, then, as
liquidated damages for such event, subject to the provisions of Section 9(b),
the per annum interest rate on the Securities then in effect (after taking
account of any applicable increase pursuant to the preceding sentence) shall be
increased by adding 0.5% thereto (e.g., such interest rate, if initially 10.00%
and not previously increased pursuant to the preceding sentence (or if so
increased but thereafter restored to the initial rate without being so increased
thereafter), would be increased to 10.50% and, if previously so increased to
10.50% and not thereafter restored to the initial rate, would be further
increased to
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<PAGE> 5
11.00%) for the period from such 120th day to the day on which the Company
completes the Exchange Offer or, if applicable, the Shelf Registration has
become or been declared effective (at which time the interest rate on the
Securities will be reduced by such additional amount).
(d) Any reference herein to a registration statement shall be deemed to
include any document incorporated therein by reference as of the applicable
Effective Time and any reference herein to any post-effective amendment to a
registration statement shall be deemed to include any document incorporated
therein by reference as of a time after such Effective Time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its best efforts to cause the
Shelf Registration to permit the disposition of the Registrable Securities by
the holders thereof in accordance with the intended method or methods of
disposition thereof provided for in the Shelf Registration. In connection
therewith, the Company shall, as soon as reasonably possible (or as otherwise
specified):
(i) prepare and file with the Commission, as soon as practicable, a
registration statement with respect to the Shelf Registration on any form
which may be utilized by the Company and which shall permit the disposition
of the Registrable Securities in accordance with the intended method or
methods thereof, as specified in writing by the holders of the Registrable
Securities, and use its best efforts to cause such registration statement
to become effective as soon as practicable thereafter;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such registration statement for the period specified in
Section 2(b) hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the form
of such registration statement, and furnish to the holders of the
Registrable Securities copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
(iii) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the intended methods of
disposition by the holders thereof provided for in such registration
statement;
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(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which term,
for purposes of this Exchange and Registration Rights Agreement, shall
include a person deemed to be an underwriter within the meaning of Section
2(11) of the Securities Act), if any, thereof, (C) the sales or placement
agent, if any, therefor, (D) counsel for such underwriters or agent and (E)
not more than one counsel for all the holders of such Registrable
Securities the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified in Section 2(b), make
available at reasonable times at the Company's principal place of business
or such other reasonable place for inspection by the persons referred to in
Section 3(c)(iv) who shall certify to the Company that they have a current
intention to sell the Registrable Securities pursuant to the Shelf
Registration such financial and other information and books and records of
the Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; provided, however, that
each such party shall be required to maintain in confidence and not to
disclose to any other person any information or records reasonably
designated by the Company as being confidential, until such time as (A)
such information becomes a matter of public record (whether by virtue of
its inclusion in such registration statement or otherwise), or (B) such
person shall be required so to disclose such information pursuant to a
subpoena or order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such order,
and only after such person shall have given the Company prompt prior
written notice of such requirement), or (C) such information is required to
be set forth in such registration statement or the prospectus included
therein or in an amendment to such registration statement or an amendment
or supplement to such prospectus in order that such registration statement,
prospectus, amendment or supplement, as the case may be, does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(vi) promptly notify the selling holders of Registrable Securities,
the sales or placement agent, if any, therefor and the managing underwriter
or underwriters, if any, thereof and confirm such advice in writing, (A)
when such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the Blue Sky or securities commissioner
or regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 3(c)(xv) or Section 5 cease to be true
and correct in all material respects, (E) of the receipt by the Company of
any notification
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<PAGE> 7
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, or (F) at any time when a prospectus is
required to be delivered under the Securities Act, that such registration
statement, prospectus, prospectus amendment or supplement or post-effective
amendment does not conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(vii) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including information with respect
to the principal amount of Registrable Securities being sold by such holder
or agent or to any underwriters, the name and description of such holder,
agent or underwriter, the offering price of such Registrable Securities and
any discount, commission or other compensation payable in respect thereof,
the purchase price being paid therefor by such underwriters and with
respect to any other terms of the offering of the Registrable Securities to
be sold by such holder or agent or to such underwriters; and make all
required filings of such prospectus supplement or post-effective amendment
promptly after notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(c)(iv) an executed copy (or, in
the case of a holder of Registrable Securities, a conformed copy) of such
registration statement, each such amendment and supplement thereto (in each
case including all exhibits thereto (in the case of a holder of Registrable
Securities, upon request) and documents incorporated by reference therein)
and such number of copies of such registration statement (excluding
exhibits thereto and documents incorporated by reference therein unless
specifically so requested by such holder, agent or underwriter, as the case
may be) and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity in all material respects with the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder, and such other documents, as such holder, agent,
if any, and underwriter, if any, may reasonably request in order to
facilitate the offering and disposition of the Registrable Securities owned
by such holder, offered or sold by such agent or underwritten by such
underwriter and to permit such holder, agent and underwriter to satisfy the
prospectus delivery requirements of the Securities Act; and the Company
hereby consents to the use of such prospectus (including such preliminary
and summary prospectus) and any amendment or supplement thereto by each
such holder and by
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<PAGE> 8
any such agent and underwriter, in each case in the form most recently
provided to such person by the Company, in connection with the offering and
sale of the Registrable Securities covered by the prospectus (including
such preliminary and summary prospectus) or any supplement or amendment
thereto;
(x) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such registration statement under such
securities laws or blue sky laws of such jurisdictions as any holder of
such Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request, (B)
keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers, sales and dealings therein
in such jurisdictions during the period the Shelf Registration is required
to remain effective under Section 2(b) above and for so long as may be
necessary to enable any such holder, agent or underwriter to complete its
distribution of Securities pursuant to such registration statement and (C)
take any and all other actions as may be reasonably necessary or advisable
to enable each such holder, agent, if any, and underwriter, if any, to
consummate the disposition in such jurisdictions of such Registrable
Securities; provided, however, that the Company shall not be required for
any such purpose to (1) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(c)(x), (2) consent to general service of
process in any such jurisdiction or (3) make any changes to its certificate
of incorporation or by-laws or any agreement between it and its
stockholders;
(xi) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer,
or to consummate the disposition of, their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, and which shall not bear any
restrictive legends; and, in the case of an underwritten offering, enable
such Registrable Securities to be in such denominations and registered in
such names as the managing underwriters may request at least two business
days prior to any sale of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as any holders of Registrable Securities aggregating
at least 25% in aggregate principal amount of the Registrable Securities at
the time outstanding shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities; provided, that
the Company shall not be required to enter into any such agreement more
than once with respect to all of the Registrable Securities and may delay
entering into
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such agreement until the consummation of any underwritten public offering
which the Company shall have then undertaken;
(xv) whether or not an agreement of the type referred to in Section
(3)(c)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of debt securities pursuant
to any appropriate agreement or to a registration statement filed on the
form applicable to the Shelf Registration; (B) obtain an opinion of counsel
to the Company in customary form and covering such matters, of the type
customarily covered by such an opinion, as the managing underwriters, if
any, or as any holders of at least 25% in aggregate principal amount of the
Registrable Securities at the time outstanding may reasonably request,
addressed to such holder or holders and the placement or sales agent, if
any, therefor and the underwriters, if any, thereof and dated the effective
date of such registration statement (and if such registration statement
contemplates an underwritten offering of a part or all of the Registrable
Securities, dated the date of the closing under the underwriting agreement
relating thereto) (it being agreed that the matters to be covered by such
opinion shall include the due incorporation and good standing of the
Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section (3)(c)(xiv) hereof; the due authorization,
execution, authentication and issuance, and the validity and
enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the absence of a breach by
the Company or any of its subsidiaries of, or a default under, material
agreements binding upon the Company or any subsidiary of the Company; the
absence of governmental approvals required to be obtained in connection
with the Shelf Registration, the offering and sale of the Registrable
Securities, this Exchange and Registration Rights Agreement or any
agreement of the type referred to in Section (3)(c)(xiv) hereof, except
such approvals as may be required under state securities or blue sky laws;
the material compliance as to form of such registration statement and any
documents incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and, as
of the date of the opinion and of the registration statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
registration statement and the prospectus included therein, as then amended
or supplemented, and from the documents incorporated by reference therein
(in each case other than the financial statements and other financial
information contained therein) of an untrue statement of a material fact or
the omission to state therein a material fact necessary to make the
statements therein not misleading (in the case of such documents, in the
light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act)); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling holders of Registrable
Securities, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such
registration statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such registration statement or
post-effective amendment to such registration statement which
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includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included in such
prospectus (and, if such registration statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such registration statement or post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by any holders of at least 25% in aggregate principal
amount of the Registrable Securities at the time outstanding or the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in Section
5(a) hereof and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are provided in
Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Exchange
and Registration Rights Agreement pursuant to Section 9(h) hereof and of
any amendment or waiver effected pursuant thereto, each of which notices
shall contain the text of the amendment or waiver proposed or effected, as
the case may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or
any successor thereto, as amended from time to time) thereof, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and
By-Laws, including by (A) if such Rules or By-Laws, including Schedule E
thereto (or any successor thereto), shall so require, engaging a "qualified
independent underwriter" (as defined in such Schedule (or any successor
thereto)) to participate in the preparation of the registration statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such registration statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 6 hereof (or to such other customary extent as may be requested
by such underwriter), and (C) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Rules of Fair Practice of the NASD; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but in any event not later than eighteen months after the
effective date of such registration statement, an earning statement
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<PAGE> 11
of the Company and its subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158
thereunder).
(d) In the event that the Company would be required, pursuant to Section
3(c)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each such underwriter,
if any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall conform in all material respects to the applicable requirements
of the Securities Act and the Trust Indenture Act and the rules and regulations
of the Commission thereunder and shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Each holder of Registrable Securities agrees that
upon receipt of any notice from the Company pursuant to Section 3(c)(vi)(F)
hereof, such holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the registration statement applicable to such Registrable
Securities until such holder shall have received copies of such amended or
supplemented prospectus, and if so directed by the Company, such holder shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
covering such Registrable Securities at the time of receipt of such notice.
(e) The Company may require each holder of Registrable Securities as to
which any registration pursuant to Section 2(b) is being effected to furnish to
the Company such information regarding such holder and such holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Securities Act. Each such
holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such holder to the Company or
of the occurrence of any event in either case as a result of which any
prospectus relating to such registration contains or would contain an untrue
statement of a material fact regarding such holder or such holder's intended
method of disposition of such Registrable Securities or omits to state any
material fact regarding such holder or such holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such holder or the disposition of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(f) Until the expiration of three years after the Closing Date, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Act.
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<PAGE> 12
(g) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
reasonably possible (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
no later than 30 days after the Closing Date, a registration statement with
respect to the Exchange Registration on any form which may be utilized by
the Company and which shall permit the Exchange Offer and resales of
Exchange Securities by broker-dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to cause
such registration statement to become effective as soon as practicable
thereafter, but no later than 75 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such registration statement for the periods and purposes
contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the instructions
applicable to the form of such registration statement, and promptly provide
each broker-dealer holding Exchange Securities with such number of copies
of the prospectus included therein (as then amended or supplemented), in
conformity in all material respects with the requirements of the Securities
Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request prior
to the expiration of the Resale Period, for use in connection with resales
of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration statement,
and confirm such advice in writing, (A) when such registration statement or
the prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has
become effective, (B) of any comments by the Commission and by the Blue Sky
or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
registration statement or prospectus or for additional information, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (D) if at any time the
representations and warranties of the Company contemplated by Section 5
cease to be true and correct in all material respects, (E) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Exchange Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (F) at
any time during the Resale Period when a prospectus is required to be
delivered under the Securities Act, that such registration statement,
prospectus, prospectus amendment or supplement or post-effective amendment
does not conform in all material respects to the applicable requirements of
the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder or contains an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
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<PAGE> 13
(iv) in the event that the Company would be required, pursuant to
Section 3(d)(iii)(F) above, to notify any broker-dealers holding Exchange
Securities, without delay prepare and furnish to each such holder a
reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of such Exchange Securities
during the Resale Period, such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing.
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers, sales and
dealings therein in such jurisdictions until the expiration of the Resale
Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding Exchange
Securities to consummate the disposition thereof in such jurisdictions;
provided, however, that the Company shall not be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements of
this Section 3(g)(vi), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its stockholders;
(vii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Exchange Registration, the Exchange Offer and
the offering and sale of Exchange Securities by broker-dealers during the
Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not later
than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but no later than eighteen months after the effective date of
such registration statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including,
at the option of the Company, Rule 158 thereunder).
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly upon
request being made therefor all expenses incident to the Company's performance
of or compliance with this Exchange and Registration Rights Agreement, including
(a) all Commission and any NASD registration and filing fees and expenses, (b)
all fees and expenses in connection with the qualifi-
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<PAGE> 14
cation of the Securities for offering and sale under the State securities and
blue sky laws referred to in Section 3(c)(x) hereof, including reasonable fees
and disbursements of counsel for the placement or sales agent or underwriters in
connection with such qualifications, (c) all expenses relating to the
preparation, printing, distribution and reproduction of each registration
statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Securities and all other documents
relating hereto, (d) messenger and delivery expenses relating to the documents
referred in clause (c) above, (e) fees and expenses of the Trustee under the
Indenture and of any escrow agent or custodian, (f) internal expenses (including
all salaries and expenses of the Company's officers and employees performing
legal or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) reasonable fees, disbursements and expenses of
any "qualified independent underwriter" engaged pursuant to Section 3(c)(xvii)
hereof, (i) fees, disbursements and expenses of one counsel for the holders of
Registrable Securities retained in connection with a Shelf Registration, as
selected by the holders of at least a majority in aggregate principal amount of
the Registrable Securities being registered, and fees, expenses and
disbursements of any other persons, including special experts, retained by the
Company in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities and the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser and
each of the holders from time to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c) or Section 3(g) hereof and
any further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as
the case may be, and, in the case of an underwritten offering of
Registrable Securities, at the time of the closing under the underwriting
agreement relating thereto, will conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at all times subsequent to the Effective Time
when a prospectus would be required to be delivered under the Securities
Act, other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(c)(vi)(F) or Section
3(g)(iii)(F) hereof until (ii) such time as the Company furnishes an
amended or supplemented prospectus pursuant to
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<PAGE> 15
Section 3(d) or Section 3(g)(iv) hereof, each such registration statement,
and each prospectus (including any summary prospectus) contained therein or
furnished pursuant to Section 3(c) or Section 3(g) hereof, as then amended
or supplemented, will conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any subsidiary of the Company is a
party or by which the Company or any subsidiary of the Company is bound or
to which any of the property or assets of the Company or any subsidiary of
the Company is subject, nor will such action result in any violation of the
provisions of the certificate of incorporation, as amended, or the by-laws
of the Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
subsidiary of the Company or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the
consummation by the Company of the transactions contemplated by this
Exchange and Registration Rights Agreement, except the registration under
the Securities Act of the Securities, qualification of the Indenture under
the Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities
or blue sky laws in connection with the offering and distribution of the
Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2(a) or 2(b) hereof, and in
consideration of the agreements of the Purchasers
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<PAGE> 16
contained herein, and as an inducement to the Purchasers to purchase the
Securities, the Company shall, and it hereby agrees to, indemnify and hold
harmless each of the holders of Registrable Securities to be included in such
registration, and each person who participates as a placement or sales agent or
as an underwriter in any offering or sale of such Registrable Securities against
any losses, claims, damages or liabilities, joint or several, to which such
holder, agent or underwriter may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Registrable Securities were registered under the Securities
Act, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company shall, and it hereby agrees to, reimburse such holder, such agent and
such underwriter for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
to any such person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, or preliminary, final or summary prospectus, or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by holders of Registrable Securities
expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the holder of
such Registrable Securities and from each underwriter named in any such
underwriting agreement, severally and not jointly, to (i) indemnify and hold
harmless the Company, and all other holders of Registrable Securities, against
any losses, claims, damages or liabilities to which the Company or such other
holders of Registrable Securities may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such holder
or underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such holder shall be required to undertake
liability to any person under this Section 6(b) for any amounts in excess of the
dollar amount of the proceeds to be received by such holder from the sale of
such holder's Registrable Securities pursuant to such registration.
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<PAGE> 17
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess
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<PAGE> 18
of the amount by which the dollar amount of the proceeds received by such holder
from the sale of any Registrable Securities (after deducting any fees, discounts
and commissions applicable thereto) exceeds the amount of any damages which such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, and no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The holders' and any underwriters'
obligations in this Section 6(d) to contribute shall be several in proportion to
the principal amount of Registrable Securities registered or underwritten, as
the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder, agent and underwriter and each person, if any, who controls any
holder, agent or underwriter within the meaning of the Securities Act; and the
obligations of the holders and any agents or underwriters contemplated by this
Section 6 shall be in addition to any liability which the respective holder,
agent or underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company (including any
person who, with his consent, is named in any registration statement as about to
become a director of the Company) and to each person, if any, who controls the
Company within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered
by the Shelf Registration are to be sold pursuant to an underwritten offering,
the managing underwriter or underwriters thereof shall be designated by the
holders of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Company.
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
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<PAGE> 19
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Exchange
and Registration Rights Agreement in accordance with the terms and conditions of
this Exchange and Registration Rights Agreement, in any court of the United
States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 4965 Preston Park Boulevard, Suite 600, Plano, Texas 75093, Attention: Senior
Vice President - Finance, with a copy to Bingham, Dana & Gould LLP, 150 Federal
Street, Boston, MA 02110, Attention: Roger D. Feldman and if to a holder, to the
address of such holder set forth in the security register or other records of
the Company, or to such other address as the Company or any such holder may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the respective successors and assigns of the
parties hereto. In the event that any transferee of any holder of Registrable
Securities shall acquire Registrable Securities, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall, without
any further writing or action of any kind, be deemed a party hereto for all
purposes and such Registrable Securities shall be held subject to all of the
terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to receive
the benefits of, and be conclusively deemed to have agreed to be bound by and to
perform, all of the applicable terms and provisions of this Exchange and
Registration Rights Agreement. If the Company shall so request, any such
successor, assign or transferee shall agree
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<PAGE> 20
in writing to acquire and hold the Registrable Securities subject to all of the
applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least 66-2/3 percent in aggregate principal amount of the
Registrable Securities at the time outstanding. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any amendment
or waiver effected pursuant to this Section 9(h), whether or not any notice,
writing or marking indicating such amendment or waiver appears on such
Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities for proper purposes only
-20-
<PAGE> 21
(which shall include any purpose related to the rights of the holders of
Registrable Securities under the Securities, the Indenture and this Agreement)
at the offices of the Company at the address thereof set forth in Section 9(c)
above or at the office of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
Agreed to and accepted as of the date referred to above.
PAGING NETWORK, INC.
By:
---------------------------------
Name: Kenneth W. Sanders
Title: Chief Financial Officer
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
By:
---------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
-21-
<PAGE> 1
Exhibit 4.4
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PAGING NETWORK, INC.
10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
No. ___ U.S. $_______________
CUSIP NO. _______________
Paging Network, Inc., a corporation duly organized and existing under the
laws of Delaware (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 registered assigns, the principal sum of
____________________ Dollars on October 15, 2008, and to pay interest thereon
from October 16, 1996 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on April 15 and
October 15 in each year, commencing April 15, 1997, at the rate of 10% per
annum,
<PAGE> 2
-2-
until the principal hereof is paid or made available for payment. 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 Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be the
April 1 or October 1 (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 will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) 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 Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities 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) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in Boston, Massachusetts or in the Borough of Manhattan, The City of New
York, New York, and at any other office or agency maintained by the Company 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 at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security 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 executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE> 3
-3-
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: __________, 1996
PAGING NETWORK, INC.
By___________________________
Kenneth W. Sanders
Senior Vice President-
Finance
Attest:
___________________________
Roger D. Feldman
Secretary
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
FLEET NATIONAL BANK
As Trustee
By_______________________
Authorized Officer
<PAGE> 4
-4-
[FORM OF REVERSE]
This Security is one of a duly authorized issue of Securities of the
Company designated as its 10% Senior Subordinated Notes due October 15, 2008
(herein called the "Securities"), limited in aggregate principal amount to
$500,000,000, issued and to be issued under an Indenture, dated as of July 15,
1995, as supplemented by the Second Supplemental Indenture, dated as of October
15, 1996 (collectively, herein called the "Indenture"), between the Company and
Fleet National Bank, Boston, Massachusetts, 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 and
immunities thereunder of the Company, the Trustee, the holders of Senior Debt
and the Holders of the Securities and of the terms upon which the Securities
are, and are to be, authenticated and delivered.
<TABLE>
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail, at any time on or after October 15, 2001, as a
whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount): If redeemed during
the 12-month period beginning October 15 of the years indicated,
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2001 105.000%
2002 103.333%
2003 101.667%
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Regular Record Dates referred to on the face hereof, all as provided in
the Indenture.
The Securities do not have the benefit of any sinking fund obligations.
<PAGE> 5
-5-
The Indenture provides that, subject to certain conditions, if (i) a Change
of Control (as defined in the Indenture) occurs or (ii) certain amounts of Net
Available Proceeds are available to the Company as a result of certain Asset
Dispositions, the Company shall be required to make an Offer to Purchase
Outstanding Securities at a Purchase Price equal to 101% of the principal amount
of the Securities, in the case of a Change of Control, and 100% of the principal
amount of the Securities so purchased, in the case of certain Asset
Dispositions, together in each case with accrued and unpaid interest to the
Purchase Date.
In the event of a deposit or withdrawal of an interest in this Security
(including upon an exchange, transfer, redemption or repurchase of this Security
in part only) effected in accordance with the Applicable Procedures, the
Security Registrar, upon receipt of notice of such event from the Depositary's
custodian for this Security, shall make an adjustment on its records to reflect
an increase or decrease of the Outstanding principal amount of this Security
resulting from such deposit or withdrawal, as the case may be.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness evidenced by this Security or (ii) certain restrictive
covenants and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
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 of the Securities 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 of the Securities at the time
Outstanding. The Indenture also contains
<PAGE> 6
-6-
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, 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 the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security 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 Security 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 Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the Corporate
Trust Office of the Trustee, as Security Registrar, in Boston, Massachusetts or
in the Borough of Manhattan, The City of New York, New York, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities 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, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made to the Holder for any such registration of
transfer or exchange, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security 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 Security is registered as
<PAGE> 7
-7-
the owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
Interest on this Security shall be computed on the basis of a 360-day year
of twelve 30-day months.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety by the
Company pursuant to Section 1013 or 1016 of the Indenture, check the box:
/ /
If you want to elect to have only a part of this Security purchased by the
Company pursuant to Section 1013 or 1016 of the Indenture, state the amount:
$___________
<PAGE> 8
Dated: Your Signature:
------------------- -----------------------------------
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:
------------------------------------------------
(Signature must be guaranteed by
a participant in a recognized signature guaranty
medallion program)
<PAGE> 1
Exhibit 5.1
BINGHAM, DANA & GOULD LLP
150 Federal Street
Boston, MA 02110-1726
November 1, 1996
Paging Network, Inc.
4965 Preston Park Boulevard
Plano, Texas 75093
Re: Paging Network, Inc.
Registration of $500,000,000 Aggregate Principal Amount of
10% Senior Subordinated Notes on Form S-4
----------------------------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the registration, pursuant to
a Registration Statement on Form S-4 under the Securities Act of 1933, as
amended (the "Act"), to be filed with the Securities and Exchange Commission on
or about November 1, 1996 (the "Registration Statement"), of $500,000,000
aggregate principal amount of 10% Senior Subordinated Notes due October 15, 2008
(the "Exchange Notes") of Paging Network, Inc., a Delaware corporation (the
"Company"). The Exchange Notes are being offered in exchange for the outstanding
10% Senior Subordinated Notes due October 15, 2008, issued by the Company on
October 16, 1996 in a transaction exempt from the registration requirements of
the Act (the "Original Notes").
We have acted as counsel to the Company in connection with the foregoing
registration of the Exchange Notes. We have examined and relied upon the
originals or copies, certified or otherwise identified to our satisfaction, of
such records, instruments, certificates, memoranda and other documents as we
have deemed necessary or advisable for purposes of this opinion and have
assumed, without independent inquiry, the accuracy of those documents. In that
examination, we have assumed the genuineness of all signatures, the conformity
to the originals of all documents reviewed by us as copies, the authenticity and
completeness
<PAGE> 2
Paging Network, Inc.
November 1, 1996
Page 2
of all original documents reviewed by us in original or copy form and the legal
competence of each individual executing such documents.
The opinion set forth below relating to the binding effect of the Exchange
Notes is subject to the following general qualifications:
(i) we assume that the Indenture, dated as of July 15, 1995, as
supplemented by the Second Supplemental Indenture, dated as of October
15, 1996, pursuant to which the Exchange Notes are issued
(collectively, herein called the "Indenture"), is the binding
obligation of Fleet National Bank;
(ii) the enforceability of any obligation of the Company may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, marshaling or other laws and rules of law affecting the
enforcement generally of creditors' rights and remedies (including
such as may deny giving effect to waivers of debtors' or guarantors'
rights);
(iii) no opinion is given herein as to the enforceability of any particular
provision of the Exchange Notes relating to remedies after default or
as to the availability of any specific or equitable relief of any
kind; and
(iv) the enforcement of any rights may in all cases be subject to an
implied duty of good faith and to general principles of equity
(regardless of whether such enforcement is considered in a proceeding
at law or in equity).
This opinion is limited to the laws of The Commonwealth of Massachusetts as
applied by courts located in Massachusetts and the General Corporation Law of
the State of Delaware as applied by courts located in Delaware. Pursuant to its
terms, the Indenture is governed by the laws of the State of New York; for the
purposes of this opinion we have assumed, without independent investigation,
that the laws of the State of New York governing the Indenture are the same as
those which would govern the Indenture if the Indenture were governed by the
laws of The Commonwealth of Massachusetts. No opinion is given herein as to
<PAGE> 3
Paging Network, Inc.
November 1, 1996
Page 3
the choice of law or internal substantive rules of law which any tribunal may
apply to the transactions referred to herein. We express no opinion as to, and
assume compliance with, any applicable federal or state securities laws.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon the foregoing, we are of the opinion that the Exchange Notes,
when issued by the Company in accordance with the terms of the Indenture and the
Registration Statement against receipt of the Original Notes being exchanged
therefor, will be legally issued, fully paid and non-assessable, and will be
binding obligations of the Company.
We consent to the filing of a copy of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement under the caption "Legal Matters."
Very truly yours,
Bingham, Dana & Gould LLP
BINGHAM, DANA & GOULD LLP
<PAGE> 1
Exhibit 8.1
BINGHAM, DANA & GOULD LLP
150 Federal Street
Boston, MA 02110-1726
November 4, 1996
Paging Network, Inc.
4965 Preston Park Blvd.
Suite 600
Plano, TX 75093
Re: Paging Network, Inc. - Registration of
$500,000,000 Aggregate Principal Amount of
10% Senior Subordinated Notes Due
October 15, 2008, on Form S-4
------------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the registration, pursuant to
a Registration Statement on Form S-4 under the Securities Act of 1933, as
amended (the "Act"), filed with the Securities and Exchange Commission on
November 4, 1996 (the "Registration Statement"), of $500,000,000 aggregate
principal amount of 10% Senior Subordinated Notes due October 15, 2008, (the
"Exchange Notes") of Paging Network, Inc. (the "Company").
The Exchange Notes will be offered in exchange for the Company's
outstanding 10% Senior Subordinated Notes due October 15, 2008 (the "Outstanding
Notes") pursuant to the terms of the exchange offer (the "Exchange Offer") set
forth in the form of Prospectus included in the Registration Statement (the
"Prospectus").
In connection with this opinion, we have examined the Prospectus, the
Second Supplemental Indenture dated as of October 15, 1996 between the Company
and Fleet National Bank, as Trustee, the form of Exchange Note filed as an
Exhibit to the Registration Statement, and other related documents as we have
deemed necessary or advisable for purposes of this opinion and have assumed,
without independent inquiry, the accuracy of those documents (collectively, the
"Documents"). In that examination, we have assumed the genuineness of all
signatures, the conformity to the originals of all documents reviewed by us as
copies, the authenticity and completeness of all original documents reviewed by
us in original or copy form and the legal competence of each individual
executing such documents. Our opinion is
<PAGE> 2
Paging Network, Inc.
November 4, 1996
Page 2
based on the assumption that the Exchange Offer has been carried out and will be
carried out only in conformity with the provisions of the Documents.
We express no opinion as to the application to the Outstanding Notes or
Exchange Notes or to the exchange of the Exchange Notes for the Outstanding
Notes of any laws of any jurisdiction, other than the laws of the United States
as presently in effect, or as to the application of the laws of any jurisdiction
to any transaction or to any person other than those specifically addressed in
the Prospectus.
Based upon and subject to the foregoing, we hereby confirm that we have
reviewed the statements in the Prospectus under the caption "United States
Federal Income Tax Consequences of the Exchange of Notes," and confirm that
insofar as they are, or refer to, statements of United States federal laws or
legal conclusions thereunder, they are correct as of the date hereof.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the section
entitled "United States Federal Income Tax Consequences of the Exchange of
Notes" in the Prospectus.
Very truly yours,
Bingham, Dana & Gould LLP
BINGHAM, DANA & GOULD LLP
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated February 16, 1996, with respect to the financial
statements of Paging Network, Inc. included in the Registration Statement (Form
S-4) and related Prospectus of Paging Network, Inc., for the registration of
$500,000,000 of 10% Senior Subordinated Notes and to the incorporation by
reference therein of our reports dated February 16, 1996, with respect to the
consolidated financial statements and schedule of Paging Network, Inc. included
in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Dallas, Texas
October 29, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in this Registration
Statement on form S-4 of our report dated February 8, 1995, on our audits of the
financial statements of Comtech, Inc.-Paging Division as of December 31, 1994
and 1993, and for the years then ended, which appears in Form 8-K/A of Paging
Network, Inc., dated April 3, 1995. We also consent to the reference to our Firm
under the caption "Experts" in this Registration Statement.
McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
Schaumburg, Illinois
October 30, 1996
<PAGE> 1
EXHIBIT 23.4
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-4 to be filed on November 4, 1996, of our report dated
February 19, 1993, except for the third paragraph of Note 1 and Note 14 and the
twelfth paragraph of Note 11 as to which the date is June 30, 1993, on our
audits of the financial statements of TNI Associates as of December 31, 1992
and 1991 and for the years then ended, which appears in Form 8-K/A of Paging
Network Inc., dated April 3, 1995. We also consent to the reference of our Firm
under the caption "Experts" in this Registration Statement.
COOPERS & LYBRAND L.L.P.
New Haven, Connecticut
November 1, 1996
<PAGE> 1
Exhibit 23.5
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-4 to be filed on November 4, 1996, of our report dated
February 13, 1995, on our audits of the consolidated financial statements of
SNET Paging, Inc., as of December 31, 1994 and 1993 and for the years then
ended, which appears in Form 8-K/A of Paging Network, Inc., dated April 3,
1995. We also consent to the reference of our Firm under the caption "Experts"
in this Registration Statement.
COOPERS & LYBRAND L.L.P.
New Haven, Connecticut
November 1, 1996
<PAGE> 1
Exhibit 23.6
PRICE WATERHOUSE
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-4 of Paging Network, Inc. of our report dated
July 14, 1995 relating to the financial statements of Celpage, Inc. (Atlanta
Branch), which appears on page A-1 of the Current Report on Form 8-K of Paging
Network, Inc., dated October 31, 1995. We also consent to the reference to us
under the heading "Experts" in this Registration Statement.
PRICE WATERHOUSE
Price Waterhouse
San Juan, Puerto Rico
October 31, 1996
<PAGE> 1
Exhibit 23.7
REED SMITH SHAW & MCCLAY
1301 K STREET, N.W.
SUITE 1100-EAST TOWER
WASHINGTON, D.C. 20005-3317
202-414-9200
FAX 202-414-9299
CONSENT OF REED SMITH SHAW & MCCLAY
The undersigned hereby consents to the reference to our firm under the
caption "Experts," solely in connection with the section captioned "Business -
Regulation" in the Paging Network, Inc. Prospectus relating to the Exchange
Offer for 10% Senior Subordinated Notes due October 15, 2008.
REED SMITH SHAW & MCCLAY
Reed Smith Shaw & McClay
Dated: October 31, 1996 By: Judith St. Ledger Roty
---------------------------
<PAGE> 1
Exhibit 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) X
---
-------------------------
FLEET NATIONAL BANK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
U.S. NATIONAL BANK
(JURISDICTION OF INCORPORATION OR ORGANIZATION
IF NOT A U.S. NATIONAL BANK)
06-0850628
(I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE MONARCH PLACE, SPRINGFIELD, MASSACHUSETTS 01102
(ADDRESS OF TRUSTEE'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
NOT APPLICABLE
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-------------------------
PAGING NETWORK, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2740516
(STATE OR OTHER JURISDICTION) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4965 PRESTON PARK BLVD., SUITE 600
PLANO, TEXAS 75093
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
10% SENIOR SUBORDINATED NOTES DUE 2008
(TITLE OF THE INDENTURE SECURITIES)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and Address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and have been omitted pursuant to
General Instruction B.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1.* A copy of the articles of association of the trustee as now in effect. (See
Exhibit 25B to Registration Statement No. 22-22241).
2.* A copy of the certificate of authority to the trustee to commence business.
(See Exhibit 25B to Registration Statement No. 22-22241).
3.* A copy of the authorization of the trustee to exercise corporate trust
powers. (See Exhibit 25B to Registration Statement No. 22-22241).
4.* A copy of the bylaws of the trustee as now in effect. (See Exhibit 25B to
Registration Statement No. 22-22241).
-1-
<PAGE> 3
5. Not applicable.
6. Consent of the trustee required by Section 321 (b) of the Trust Indenture
Act of 1939.
7.* A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority. (See
Exhibit 25B to Registration Statement No. 22-22241).
- ------------------
* The Exhibits thus designated are incorporated herein by reference.
Following the description of such Exhibits is a reference to the copy of the
Exhibit heretofore filed with the Securities and Exchange Commission, to which
there have been no amendments or changes.
-2-
<PAGE> 4
NOTES
1. Inasmuch of this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the answers
to said Item are based on incomplete information.
2. Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
Fleet National Bank, a national banking association incorporated and existing
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized all in the City of Boston, and Commonwealth of Massachusetts on the
28th day of October, 1996.
FLEET NATIONAL BANK
By: /s/ Gerald P. Beezley
-----------------------
Name: Gerald P. Beezley
Title: Vice President
-4-
<PAGE> 6
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321 (b) of the Trust Indenture
Act of 1939 in connection with the 10% Senior Subordinated Notes due 2008 of
Paging Network, Inc., Fleet National Bank, hereby consents that reports of
examinations of federal, state, territorial or district authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
FLEET NATIONAL BANK
By: /s/ Gerald P. Beezley
--------------------------
Name: Gerald P. Beezley
Title: Vice President
Dated: October 28, 1996
-5-
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF 10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
IN EXCHANGE FOR
10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
PAGING NETWORK, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON _______________,
199_, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. NEW YORK TIME,
ON THE EXPIRATION DATE.
<TABLE>
Deliver To The Exchange Agent: Fleet National Bank
<CAPTION>
By Mail/Overnight Courier: By Hand: By Facsimile:
- -------------------------- -------- -------------
<S> <C> <C>
Corporate Trust Operations Fleet National Bank (860) 986-7908
777 Main Street, MSN 224 c/o First Chicago Trust Co. Confirm by Telphone: (860)986-1271
Hartford, CT 06115 14 Wall Street, 8th Floor Attn: Patricia Williams
Attn: Patricia Williams Window No. 2 (For Eligible Institutions Only)
New York, NY 10005
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated _________________, 1996 (the "Prospectus") of Paging Network, Inc. (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange" Offer") to exchange its
10% Senior Subordinated Notes due October 15, 2008 (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for a like principal amount of its issued and outstanding 10% Senior
Subordinated Notes due October 15, 2008 (the "Outstanding Notes"). Capitalized
terms used but not defined herein have the respective meanings given to them in
the Prospectus.
The Company reserves the right, at any time and from time to time, to
extend the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean 5:00 P.M. on the latest date to which the Exchange Offer is
extended. The Exchange Offer will in no event, however, be extended to a date
beyond _________________, 1997. The Company shall notify the Exchange Agent of
any extension by oral or written notice and will mail to the Holders of the
Outstanding Notes an announcement thereof, each prior to 9:00 A.M., New York
time, on the next Business Day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Outstanding Notes
either if original Outstanding Notes are to be forwarded herewith or if delivery
of Outstanding Notes, if available, is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Book-Entry Transfer." Holders
of Outstanding Notes whose Outstanding Notes are not immediately available, or
who are unable to deliver their Outstanding Notes and all other documents
required by this Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date, or who are unable to complete the procedure for book-entry
transfer on a timely basis, must tender their Outstanding Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
<PAGE> 2
The term "Holder" with respect to the Exchange Offer means any person in
whose name Outstanding Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Outstanding
Notes must complete this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<TABLE>
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
<CAPTION>
- -------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- -------------------------------------------------------------------------------------
Aggregate* Registered
Name(s) and Address(es) of Registered Holder(s) Principal Amount Numbers**
- -------------------------------------------------------------------------------------
<S> <C> <C>
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
- -------------------------------------------------------------------------------------
Attach separate schedule if necessary
- -------------------------------------------------------------------------------------
<FN>
* Unless otherwise indicated, any tendering Holder of Outstanding Notes will be
deemed to have tendered the entire aggregate principal amount represented by
such Outstanding Notes. All tenders must be in integral multiples of $1,000.
** Need not be completed by book-entry Holders.
</TABLE>
/ / CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.
-2-
<PAGE> 3
/ / CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:
Account Number:
Transaction Code Number:
/ / CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Outstanding Notes: __________________________
Date of Execution Notice of Guaranteed Delivery: ______________________________
Window Ticket Number (if available): __________________________________________
Name of Eligible Institution that Guaranteed Delivery:_________________________
Account Number (if delivered by book-entry transfer): _________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name: ___________________________________
Address: ___________________________________
___________________________________
SIGNATURES MUST BE PROVIDED BELOW;
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount of
Outstanding Notes indicated above. Subject to and effective upon the acceptance
for exchange of the principal amount of Outstanding Notes tendered in
accordance with this Letter of Transmittal, the undersigned hereby exchanges,
assigns and transfers to the Company all right, title and interest in and to
the Outstanding Notes tendered for exchange hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange
Agent also acts as the agent of the Company in connection with the Exchange
Offer) with respect to the tendered Outstanding Notes with full power of
substitution to (i) deliver such Outstanding Notes, or transfer ownership of
such Outstanding Notes on the account books maintained by the Book-Entry
Transfer Facility, to the Company and deliver all accompanying evidences of
transfer and authenticity, and (ii) present such Outstanding Notes for transfer
on the books of the Company and receive all benefits and otherwise exercise
all rights of beneficial ownership of such Outstanding Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
-3-
<PAGE> 4
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the
Outstanding Notes tendered hereby and to acquire the Exchange Notes issuable
upon the the exchange of such tendered Outstanding Notes, and that the Company
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim,
when the same are accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made
in reliance upon positions taken by the staff of the Securities and Exchange
Commission (the "Commission") that have been enunciated in no-action letters
issued to Exxon Capital Holdings Corp. and Morgan Stanley & Co. Inc., among
others, that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Outstanding Notes may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder which is (i) an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, or (ii) a broker-dealer who acquired Outstanding Notes for resale pursuant
to an exemption from the registration requirements of the Securities Act)
without compliance with the registration and prospectus delivery provisions
under the Securities Act provided that (A) such Exchange Notes are acquired in
the ordinary course of such Holders' business, (B) such Holders are not engaged
in, and do not intend to engage in, and have no arrangement or understanding
with any person to participate in, a distribution of such Exchange Notes, and
(C) as provided in the next paragraph certain broker-dealers will be subject to
a prospectus delivery requirement with respect to resales of such Exchange
Notes. The undersigned hereby further represent(s) to the Company that (i) any
Exchange Notes acquired in exchange for Outstanding Notes tendered hereby are
being acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not the undersigned is such person, (ii) neither the
undersigned nor any such other person is engaging in or intends to engage in a
distribution of the Exchange Notes, (iii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes, and (iv) neither the Holder nor any
such other person is an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company or, if it is an affiliate, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account in exchange
for Outstanding Notes that were acquired as a result of market-making activities
or other trading activities, the undersigned acknowledges that it or such other
person will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that the undersigned or such other
person is an "underwriter" within the meaning of the Securities Act. The
undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the Commission in
certain no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the Exchange
Notes, in which case the registration statement must contain the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (ii) failure to comply with such
requirements in such instance could result in the undersigned incurring
liability under the Securities Act for which the undersigned is not indemnified
by the Company.
If the undersigned or the person receiving the Exchange Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the undersigned
represents to the Company that the undersigned understands and acknowledges that
the Exchange Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Outstanding
Notes tendered hereby, including the transfer of such Outstanding Notes on the
account books maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Outstanding Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Outstanding Notes that are not accepted for exchange pursuant to the Exchange
Offer for any reason will be returned, without expense, to the undersigned at
the address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
-4-
<PAGE> 5
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Outstanding Notes pursuant to the procedures described under the
caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and
in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the Exchange Notes issued in exchange for the Outstanding Notes
accepted for exchange and return any Outstanding Notes not tendered or not
exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail or deliver the
Exchange Notes issued in exchange for the Outstanding Notes accepted for
exchange and any Outstanding Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the Exchange Notes issued in exchange for the Outstanding Notes accepted for
exchange in the name(s) of, and return any Outstanding Notes not tendered or
not exchanged to, the person(s) so indicated. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance Instructions"
and "Special Delivery Instructions" to transfer any Outstanding Notes from the
name of the registered Holder(s) thereof if the Company does not accept for
exchange any of the Outstanding Notes so tendered for exchange.
-5-
<PAGE> 6
- --------------------------------------------------------------------------------
SIGN HERE
(Complete Substitute Form W-9 on Reverse)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------
Signature(s) of Owner(s)
(See Guarantee Requirement Below)
Date:
----------------------------
(Must be signed by the registered Holder(s) exactly as name(s) appear(s) on
Outstanding Notes or on a security position listing or by person(s) authorized
to become registered Holder(s) by a properly completed bond power from the
registered Holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If Outstanding Notes to which this Letter of Transmittal relate
are held of record by two or more joint Holders, then all such Holders must sign
this Letter of Transmittal. If signing is by an executor, administrator,
trustee, guardian, attorney-in-fact, agent or other person acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 6.)
Names(s)
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please Print)
Capacity (full title)
-----------------------------------------------------
Address
-----------------------------------------------------------
-----------------------------------------------------------
(Print Address, Including Zip Code)
Area Code and Telephone Number
-------------------------------------------
Tax Identification or Social Security No.
---------------------------------
(Complete Substitute Form W-9 on Reverse)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signatures(s) Guaranteed by an Eligible Institution:
--------------------------
(Authorized Signature)
- -------------------------------------------------------------------------------
(Title)
- -------------------------------------------------------------------------------
(Name of Firm)
- -------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1996
---------------------------------------
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
<TABLE>
SPECIAL INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
<CAPTION>
- ----------------------------------------------------- -------------------------------------------------------------
Box A: SPECIAL ISSUANCE Box B: SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
<S> <C>
To be completed ONLY if Outstanding Notes To be completed ONLY if Outstanding Notes in a
in a principal amount not tendered, or Exchange Notes principal amount not tendered, or Exchange Notes issued in
issued in exchange for Outstanding Notes accepted exchange for Outstanding Notes accepted for exchange, are to
for exchange, are to be issued in the name of be mailed or delivered to someone other than the undersigned,
someone other than the undersigned. or to the undersigned at an address other than that shown
below the undersigned's signature
Issue Exchange Notes and/or Outstanding Notes to: Mail to:
Name: Name:
----------------------------------------------- -------------------------------------------------------
(Print Name) (Print Name)
Address: Address:
-------------------------------------------- ---------------------------------------------------
-------------------------------------------- ---------------------------------------------------
(Print Address, Including Zip Code) (Print Address, Including Zip Code)
-------------------------------------------- / / Check ONLY if the address above is a new permanent
(Tax Identification or Social Security Number) address.
(Complete Substitute Form W-9)
(Attach Separate Signed Schedule if Necessary)
(Attach Separate Signed Schedule if Necessary)
- ----------------------------------------------------- -------------------------------------------------------------
</TABLE>
/ / Credit unexchanged Outstanding Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility set forth below:
------------------------------------------------------------
(Book-Entry Transfer Facility Account Number, if applicable)
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER.
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES OR BOOK-
ENTRY CONFIRMATIONS. All physically delivered Outstanding Notes or any
confirmation of a book-entry transfer to the Exchange Agent's account at the
Book-Entry Transfer Facility of Outstanding Notes tendered by book-entry
transfer (a "Book-Entry Confirmation"), as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m. New York time,
on the Expiration Date. The method of delivery of the tendered Outstanding
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the Holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the Exchange
Agent before the Expiration Date. No Letter of Transmittal or Outstanding
Notes should be sent to the Company.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Outstanding Notes and (a) whose Outstanding Notes are not immediately available,
or (b) who cannot deliver their Outstanding Notes, this Letter of Transmittal or
any other documents required hereby to the Exchange Agent prior to the
Expiration Date, or (c) who are unable to complete
-7-
<PAGE> 8
the procedure for book-entry transfer on a timely basis, may effect a tender of
Outstanding Notes according to the guaranteed delivery procedures set forth in
the Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member firm of a registered national securities
exchange or of the National Association of Securities Dealers Inc., a commercial
bank or a trust company having an office or correspondent in the United States
or an "eligible institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, which is a member of a
recognized signature guarantee program (an "Eligible Institution"); (ii) prior
to the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Outstanding Notes, the registration number(s) of
such Outstanding Notes and the principal amount of Outstanding Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three (3) New York Stock Exchange, Inc. ("NYSE") trading days after the
Expiration Date, this Letter of Transmittal (or facsimile thereof), together
with the Outstanding Notes in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter of Transmittal will be deposited with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal (or facsimile thereof),
the certificates for all physically tendered shares of Outstanding Notes, in
proper form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter must be deposited with the Exchange
Agent within three (3) NYSE trading days after the Expiration Date.
Any Holder of Outstanding Notes who wishes to tender Outstanding Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00
p.m., New York time, on the Expiration Date. Upon request of the Exchange Agent,
a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their
Outstanding Notes according to the guaranteed delivery procedures set forth
above. See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. TENDER BY HOLDER. Only a Holder of Outstanding Notes may tender such
Outstanding Notes in the Exchange Offer. Any beneficial Holder of Outstanding
Notes who is not the registered Holder and who wishes to tender should arrange
with the registered Holder to execute and deliver this Letter of Transmittal on
his behalf or must, prior to completing and executing this Letter of Transmittal
and delivering its Outstanding Notes, either make appropriate arrangements to
register ownership of the Outstanding Notes in such Holder's name or obtain a
properly completed bond power from the registered Holder.
4. PARTIAL TENDERS. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Outstanding Notes is tendered, the tendering Holder should fill in the principal
amount tendered in the second column of the box entitled "Description of
Outstanding Notes Tendered" above. The entire principal amount of Outstanding
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Outstanding
Notes is not tendered, then Outstanding Notes for the principal amount of
Outstanding Notes not tendered and Exchange Notes issued in exchange for any
Outstanding Notes accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Outstanding Notes are accepted for
exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile
hereof) is signed by the record Holder(s) of the Outstanding Notes tendered
hereby, the signature must correspond with the name(s) as written on the face of
the Outstanding Notes without alternation, enlargement or any change whatsoever.
If this Letter of Transmittal is signed by a participant in the Book-Entry
Transfer Facility, the signature must correspond with the name as it appears on
the security position listing as the Holder of the Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Outstanding Notes listed and tendered hereby and
the Exchange Note(s) issued in exchange therefor are to be issued (or any
untendered principal amount of Outstanding Notes is to be reissued) to the
registered Holder, the said Holder need not and should not endorse any tendered
Outstanding Notes, nor provide a separate bond power. In any other case, such
Holder must either properly endorse the Outstanding Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
-8-
<PAGE> 9
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Outstanding Notes listed,
such Outstanding Notes must be endorsed or accompanied by appropriate bond
powers, in each case signed by the registered Holder or Holders as the name
of the registered Holder or Holders appears on the Outstanding Notes with the
signature thereon guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) or any Outstanding
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in
a fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Outstanding Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered Holder(s) of the Outstanding Notes tendered herewith
(or by a participant in the Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of the tendered Outstanding Notes) and
the issuance of Exchange Notes (and any Outstanding Notes not tendered or not
accepted) are to be issued directly to such registered Holder(s) (or, if signed
by a participant in the Book-Entry Transfer Facility, any Exchange Notes or
Outstanding Notes not tendered or not accepted are to be deposited to such
participant's account at such Book-Entry Transfer Facility) and neither the box
entitled "Special Delivery Instructions" nor the box entitled "Special Issuance
Instructions" has been completed, or (ii) such Outstanding Notes are tendered
for the account of an Eligible Institution. In all other cases, all signatures
on this Letter of Transmittal must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which Exchange Notes or substitute
Outstanding Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer.
If, however, Exchange Notes or Outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Outstanding Notes tendered hereby, or if tendered Outstanding Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Outstanding Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered Holder or any other
persons) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING NOTES LISTED IN THIS LETTER
OF TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a Holder
of any Outstanding Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a Holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the Holder
may be subject to a $50 penalty imposed by Internal Revenue Service.
Certain Holders (including, among others, all corporations and certain foreign
individuals) are not subject to backup withholding and reporting requirements.
See the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering Holder must provide such
holder's correct TIN by completing the Substitute W-9 set forth herein,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN), and that (i) the
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<PAGE> 10
Holder has not been notified by the Internal Revenue Service that such Holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified the Holder that such
Holder is no longer subject to backup withholding. If the Outstanding Notes are
registered in more than one name or are not in the name of the actual owner, see
the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding. If withholding results in an over-payment of taxes, a refund may
be obtained.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance of tendered Outstanding Notes and
withdrawal of tendered Outstanding Notes will be determined by the Company, in
its sole discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Outstanding Notes not
properly tendered or any Outstanding Notes, the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Outstanding Notes. The interpretation of the terms and
conditions of the Exchange Offer (which includes this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes must be cured within such time as the Company
shall determine. Although the Company intends to notify Holders of defects or
irregularities with respect to tenders of Outstanding Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the right, in its reasonable
discretion, to waive any defects, irregularities or conditions of tender as to
particular Outstanding Notes, as set forth herein and in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Outstanding Notes on transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OUTSTANDING NOTES. Any Holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF EXCHANGE
NOTES; RETURN OF OUTSTANDING NOTES. In all cases, issuance of Exchange Notes
for Outstanding Notes that are accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of
Outstanding Notes or a timely Book-Entry Confirmation of such Outstanding Notes
into the Exchange Agent's account at the Book Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted tendered Outstanding Notes when, as and if the Company
has given written and oral notice thereof to the Exchange Agent. If any
tendered Outstanding Notes are not exchanged pursuant to the Exchange Offer for
any reason, or if Outstanding Notes are submitted for a greater principal
amount than the Holder desires to exchange, such unaccepted or non-exchanged
Outstanding Notes will be returned, without expense, to the undersigned at the
address shown above (or credited to the undersigned's account at the Book-Entry
Transfer Facility designated above) or at a different address as may be
indicated under the box entitled "Special Delivery Instructions,"
as promptly as practicable after the expiration or termination of the
Exchange Offer.
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
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<PAGE> 11
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OUTSTANDING NOTES WHICH MUST BE DELIVERED BY BOOK-ENTRY
TRANSFER OR IN ORIGINAL HARD COPY FORM) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M. ON THE EXPIRATION
DATE.
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<PAGE> 12
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: PAGING NETWORK, INC.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND Social security number
CERTIFY BY SIGNING AND DATING BELOW.
OR
SUBSTITUTE ------------------------------
Employer Identification Number
---------------------------------------------------------------------------------------------------
PART 2 - Check the box if you are NOT subject to backup withholding under the provisions of Section
3406(a)(i)(C) of the Internal Revenue Code because (1) you have not been notified that you are
Form W-9 subject to backup withholding as a result of failure to report all interest or dividends, or (2) the
Department of the Treasury Internal Revenue Service has notified you that you are no longer subject to backup withholding.
Internal Revenue Service / /
---------------------------------------------------------------------------------------------------
Payer's Request for Taxpayer CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I PART 3 -
Identification Number CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
("TIN") TRUE, CORRECT AND COMPLETE Awaiting TIN -- / /
SIGNATURE DATE
------------------------------ ----------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Part 1 - Taxpayer Identification No. - For All Accounts. Enter your taxpayer
identification number in the appropriate box. For most individuals and sole
proprietors, this is your social security number. For other entities, it is your
Employer Identification Number. If you do not have a number, see How to Obtain
a TIN in the enclosed Guidelines. Note: If the account is in more than one name,
see the chart on page 2 of the enclosed Guidelines to determine what number to
enter.
Part 2 - For Payees Exempt from Backup Withholding (see enclosed Guidelines).
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE EXCHANGE
NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (b) I intend to
mail or deliver an application in the near future. I understand that if I do
not provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
SIGNATURE DATE
----------------------------------------- -------------------------
- --------------------------------------------------------------------------------
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<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF 10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15,2008
IN EXCHANGE FOR
10% SENIOR SUBORDINATED NOTES DUE OCTOBER 15, 2008
PAGING NETWORK, INC.
This form or one substantially equivalent hereto must be used by a Holder
to accept the Exchange Offer of Paging Network, Inc., a Delaware corporation
(the "Company"), who wishes to tender 10% Senior Subordinated Notes due October
15, 2008 (the "Outstanding Notes") to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated _____________, 1996 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
Holder who wishes to tender Outstanding Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery and a duly executed Letter of Transmittal prior to 5:00
p.m., New York time, on the Expiration Date (as defined below) of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings ascribed
to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON __________,
199-, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED IN
THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK
TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is: Fleet National Bank
<TABLE>
<CAPTION>
By Mail/Overnight Courier: By Hand: By Facsimile:
- ------------------------- ------- ------------
<S> <C> <C>
Corporate Trust Operations Fleet National Bank (860) 986-7908
777 Main Street, MSN224 c/o First Chicago Trust Co. Confirm by Telephone: (860) 986-1271
Hartford, CT 06115 14 Wall Street, 8th Floor Attn: Patricia Williams
Attn: Patricia Williams Window No. 2 (For Eligible Institutions Only)
New York, NY 10005
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER
OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Outstanding Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Outstanding Notes listed below:
- -------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- -------------------------------------------------------------------------------
Aggregate Certificate
Names(s) and Address(es) of Registered Holders(s) Principal Amount Numbers
- -------------------------------------------------------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
- -------------------------------------------------------------------------------
Attach separate schedule if necessary
- -------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
Date:
Signature(s) of Registered Holders(s) ---------------------------
or Authorized Signatory: Name(s) of Registered Holders(s)
- ------------------------------------- --------------------------------
- ------------------------------------- --------------------------------
- ------------------------------------- --------------------------------
Address:
- ------------------------------------- Area Code and Telephone No:
- -------------------------------------
- ------------------------------------- --------------------------------
(Include Zip Code)
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Outstanding Notes or on a security
position listing as the owner of Outstanding Notes, or by a person(s)
authorized to become a Holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
Names:(s): Capacity:
- ------------------------------------- --------------------------------
- ------------------------------------- --------------------------------
- ------------------------------------- --------------------------------
(Please print name(s) and address(es))
Address(es):
- -------------------------------------
- -------------------------------------
- -------------------------------------
(Include Zip Code)
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<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member firm of registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Outstanding Notes in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal, within three (3) New York Stock
Exchange trading days after the Expiration Date.
Name of Firm:
---------------------------------------
Authorized Signature:
-------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
(Please type or print)
Address:
--------------------------------------------
--------------------------------------------
--------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
---------------------
Date:------------------------, 1996
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER OF
OUTSTANDING NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York time, on the
Expiration Date. The method of delivery of this Notice of Guaranteed Delivery
and any other required documents to the Exchange Agent is at the election and
sole risk of the Holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the Holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
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<PAGE> 4
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered Holder(s) of the Outstanding
Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Outstanding Notes without alteration, enlargement or
any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the Outstanding Notes, the signature
must correspond with the name shown on the security position listing as the
owner of the Outstanding Notes. If this Notice of Guaranteed Delivery is signed
by a person other than the registered Holder(s) of any Outstanding Notes listed
or a participant of the Book-Entry Transfer Facility, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name of
the registered Holder(s) appears on the Outstanding Notes or signed as the name
of the participant shown on the Book-Entry Transfer Facility's security
position listing. If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal,
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies, Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company
or other nominee for assistance concerning the Exchange Offer.
-4-
